Last time on the bankruptcy alphabet we covered the letter C, which stood for creditor.  It’s only fair that we now discuss the debtor.  For every yin there must be a yang, and in bankruptcy the debtor is that opposite.

Over the centuries since the word originated in Latin (the first use of the word debere was Luca Pacioli in his 1494 book, Summa de arithmetica, geometria, proportioni et proportionalità) it has become more accepted to be someone who owes money in general, and to be an individual who’s unable to pay those bills overall.  As bankruptcy filings have climbed over the past 20 years and more people have found themselves struggling financially, a debtor has gone from the boogeyman to someone who might be your next-door neighbor.

Beyond the meaning of the word, in the context of bankruptcy it’s important to realize that not everyone may be a debtor.  In fact, the U.S. Bankruptcy Code specifically spells out who may and who may not be a debtor.  We won’t talk about railroads, corporations and stockbrokers – just flesh-and-blood people.

Who Can Be A Debtor In Bankruptcy?

In order to walk into bankruptcy court, you’ve got to have the right to do so.  Under 11 USC 109 you can be a debtor only if you are a person who has a residence, domicile, place of business or property in the United States.

A residence means a residential structure, including incidental property, without regard to whether that structure is attached to real property; and includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer.

Domicile is the status of being a permanent resident in a particular jurisdiction. A person can remain domiciled in a jurisdiction even after they have left it. For example, if you move from New York to California to go to college you are still domiciled in New York.

As for a place of business or property, that can be as little as $1 in a bank account or a cubicle in a shared office. It’s got to be real, though – you can’t open up a bank account with $1 for the purpose of qualifying to be a debtor in bankruptcy court.

Not So Fast!

Even if you pass the residence/domicile requirement, you can’t be a debtor unless you’ve completed a credit counseling certification process within the 180 days immediately prior to filing for bankruptcy.

I’m not talking about one of those late-night TV companies, either. There’s a list of approved credit counseling companies that certify people for bankruptcy, and you’ve got to use one of them.

Yes, there are exceptions. Don’t assume you fall into one of them until you talk with your lawyer.

The Revolving Door Debtor

If you file for bankruptcy and end up getting your case kicked out of court, you may not be able to walk back into bankruptcy for 180 days. The court system is pretty strict with people who use the bankruptcy laws as a disposable matter, so be careful.

Being A Debtor In Bankruptcy Case Be Simple

Follow the rules, listen to your lawyer, and it’s going to be just fine. Do it on your own or try to figure out the laws without background and you’re asking for trouble.

Image credit: Leo Reynolds