Understanding Skeleton Petitions

Skeleton or Ghost Bankruptcy Petitions

Homeowners facing foreclosure are sometimes advised to file a "skeleton" or "ghost" bankruptcy petition. If you are considering a skeleton bankruptcy petition, you should carefully read the information below.

What Is a Skeleton Petition?

A skeleton petition is a bare-bones document filed with the bankruptcy court. A complete bankruptcy petition includes 10 schedules, a "Statement of Financial Affairs" and a "Statement of Current Monthly Income"- which, all together, usually add up to 20 to 30 pages. But a skeleton petition usually is only 3 to 4 pages.

Why Do Consumers File Skeleton Petitions?

Often, consumers are advised by non-attorneys, or sometimes, inexperienced attorneys, to file a Skeleton Petition. Consumers are usually told that filing a Skeleton Petition will stop a foreclosure, and that because the Skeleton Petition is an incomplete document, the bankruptcy case will get dismissed on its own, and the consumer will not have to "go through" with the whole bankruptcy. Consumers are also usually told that the Skeleton Petition will not have any negative consequences, or that it will have no negative effect on their credit.

What Happens in the Skeleton Petition Process?

Consumers are often asked to pay several hundred or even thousands of dollars (usually to a non-attorney) for this "service." In most cases, the Skeleton Petition is drafted, but no attorney name appears on the documents. The consumer is expected to represent himself. The filing of the petition will usually stop a foreclosure, but the bankruptcy is usually dismissed within weeks.

The truth about Skeleton Petitions

Filing a Skeleton Petition is usually a very bad idea.

  • Even if the petition is dismissed, the consumer will still have the bankruptcy on their credit report.
  • Filing a Skeleton Petition may affect a consumer's ability to discharge certain taxes if she files a legitimate bankruptcy in the future.

Additionally, a Skeleton Petition is not a long term solution to a foreclosure problem. Although filing a Skeleton Petition usually stops a foreclosure sale, this is only a temporary "band-aid" remedy. It is not a long term solution. The bankruptcy case will typically get dismissed within a few weeks. After that, the bank is free to start foreclosure.

In some cases, consumers are encouraged to file a second Skeleton Petition. But if a debtor has had a bankruptcy case dismissed within one year, the second bankruptcy petition will only protect her for 30 days, unless the consumer files a series of documents with the bankruptcy court in order to show that the second petition is filed "in good faith." If the judge finds that the second petition is filed in good faith, the judge can extend the protection beyond 30 days. But the paperwork requirements are far too complicated for most consumers. The result is that, even if the bankruptcy does not get dismissed, after 30 days, there is no protection against foreclosure.

Sometimes, consumers are encouraged to file a third time. Unfortunately, if a debtor has had two bankruptcy cases dismissed within a year, the third petition will not protect her. The consumer has to immediately file a series of documents with the bankruptcy court in order to show that the third petition is filed "in good faith." If, within 30 days, the judge finds that the third petition is filed in good faith, the judge can extend the protection beyond 30 days. But until the judge signs an order, the bankruptcy gives no protection to the debtor! Stop worrying. Call today for a free initial consultation.

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