Bankruptcies

NFC responds to two types of bankruptcies as identified below.

Chapter 7 - Filing the petition under Chapter 7 of the Bankruptcy Code provides for liquidation - the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors. NFC receives notification of a discharge of debts, the debts are written off or if NFC receives a dismissal, collection actions are reinstated.

Chapter 13 - Filing the petition under Chapter 13 automatically stays (stops) most collection actions against the debtor or the debtor's property. Filing the petition does not stay certain types of actions listed under Chapter 11 United States Code (U.S.C.) Section 362(b), and the stay may be effective only for a short time in some situations. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. If there is a Chapter 13 plan in place, all garnishments are stopped unless authorized by the Bankruptcy Court. For additional detailed information, go to www.uscourts.gov, Chapter 11, U.S.C. Section 362.

Note: The individual has the right to amend the bankruptcy filing to include additional debts. If the bankruptcy filing is not amended, collection efforts on new or additional debts can be pursued.

Agency Responsibilities

Agencies should forward copies to NFC, via CSP or through NCC as soon as possible. NFC may also receive paperwork from Bankruptcy Courts and FedDebt.

When individuals file a Chapter 13 Bankruptcy, they supply a list of who should be made aware of the Bankruptcy, (e. g. payroll office and creditors). When an employee presents a Chapter 13 Bankruptcy, it is the Agency’s responsibility to determine whether they want the bill to be placed on hold or not and if the debt(s) in question are included in the bankruptcy plan filing. NFC will assist with gathering information from the court, but the decision on a course of action ultimately is the Agency’s decision.

NFC Responsibilities

Upon request NFC files a proof of claim for all debts when requested by the Courts.

When debt(s) are included in the bankruptcy, NFC will place the debt(s) on hold awaiting disposition from the Court.

When the bankruptcy has been approved the following process will commence:

• If the receivable is not delinquent, Claims Status of N, a transfer batch will be processed changing the receivable Claims Status to Y and the TOP Status will be coded B (Bankruptcy), to indicate collection activity is then suspended.
• If the receivable is delinquent with a Claims Status of Y, the TOP Status will be coded B, to indicate collection activity is suspended.
• If a notice of discharge is received, the debt is written off. The TOP Status remains a B.

When the bankruptcy has not been approved, the following process will commence:

• If a notice of dismissal is received, collection efforts on the debt will be pursued. The Top Status code of B is removed and will be replaced with the appropriate TOP Status code, collection activity is resumed.

  Note: The status code of B can be found in the ABCO Claims Information Inquiry Screens AR00665, TOP STATUS field.

Monthly reports are used to monitor debts with a Claims Status of Y and Top Status coded B. NFC periodically uses the Voice Case Information System (VCIS) to follow up on the status of bankruptcies in process. The VCIS is a system available through the Public Access to Court Electronic Records (Pacer). It uses an automated voice response system to read a limited amount of bankruptcy case information directly from the court's database in response to touch-tone telephone inquiries. Additional information about the system can be found at www.pacer.gov Web and Graphics Section.