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Most bankruptcy cases are administered by the cases' trustee without the debtor even meeting the bankruptcy judge. There are many bankruptcy proceedings, however,  that involve the court.  Here are some frequently asked questions about court processes.

1. DOES BANKRUPTCY FILING REQUIRE COURT APPEARANCES?

Straight bankruptcy often does not, but does require an appearance in front of the trustee. Any reorganization requires at least one trip to court for the judge to confirm a proposed plan. Every contested matter and all adversary matters are presided over by the bankruptcy court judge.

 

2. WHEN DOES THE BANKRUPTCY JUDGE BECOME INVOLVED?

Contested matters and adversary matters require judges. Normal estate administration is accomplished, since 1979, without the judge being involved.

 

3. WHO SERVES AS BANKRUPTCY JUDGE?

Bankruptcy judges are appointed by the judicial counsel in each circuit court district. Currently they are appointed for fourteen year terms and serve in basically a federal civil service position. They have a separate retirement system, but are not afforded tenure for life nor many of the other comforts of Article III constitutional federal judges. As a result, they have less than Article III jurisdiction. Many fine judges serve across the country in the bankruptcy system. As with any system, though, judges vary from district to district over a whole spectrum of skill, authority, and compassion levels.

 

4. ARE THERE ADVANTAGES TO LITIGATING IN A BANKRUPTCY COURT?

There are instances when it is the only court that has jurisdiction to hear certain matters. Several controversies cannot be litigated in bankruptcy court. There are a few instances where concurrent jurisdiction occurs, and a plaintiff has the opportunity to choose forums. In those few instances this may be an important choice. The advice of competent counsel is a real advantage here.

 

5. HOW DOES THE BANKRUPTCY COURT SYSTEM FUNCTION?

Bankruptcy courts are similar to other courts. The judge wears a black robe, people stand up when the judge enters the courtroom, and there are esoteric rules that have been adopted by the United States Supreme Court that apply only to the bankruptcy court.

 

6. OVER WHAT MATTERS DOES THE BANKRUPTCY COURT HAVE THE POWER TO ACT?

Bankruptcy court jurisdiction flows from Congressional authority given to the United States Federal District Court, which has in turn delegated that authority to a division of that court set up to handle cases arising under Title 11 of the U. S. Code.

 

7. DO BANKRUPTCY COURTS ENTERTAIN BROAD JURISDICTION WILLINGLY?

No. After the current Code became law, there was a controversy over bankruptcy jurisdiction and the Supreme Court held portions of it were unconstitutional. An amendment to the bankruptcy code in 1984 limited the bankruptcy court system's 1979 jurisdiction.

 

8. WHAT IS A CONTESTED MATTER?

The bankruptcy court rules define a contested matter as any contest that is not an adversary proceeding. Basically, motions are heard as contested matters.

 

9. WHAT IS AN ADVERSARY PROCEEDING?

A lawsuit filed in the bankruptcy court is called an adversary proceeding and is given a special file number as such. The main distinction between contested matters and adversaries is that adversary proceedings are more formal. They are commenced by filing a summons and complaint, responded to by motions, answers, counterclaims, and could go to trial where the Federal Rules of Evidence apply.

 

10. WHAT DOES IT COST TO FILE AN ADVERSARY PROCEEDING?

In addition to the costs of representation and processing the case, there is a court filing fee. In 2001 it is $250.

 

11. WHAT COURT RULES APPLY?

The Federal Bankruptcy Court Rules, local court rules, and general orders of the bankruptcy court apply.

 

12. WHAT ARE CORE PROCEEDINGS?

The current bankruptcy court jurisdiction is defined to include power to act on certain matters basic to the bankruptcy process. The bankruptcy court has power to act thoroughly in "core matters". These include but are not limited to:

     a. matters concerning the administration of the estate;

     b. allowance or disallowance of claims against the estate or exemptions from property of the estate, and estimation of claims or interests for the purposes of confirming a plan under Chapter 11, 12, or 13 of Title 11 but not the liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims against the estate for purposes of distribution in a case under Title 11;

     c. counterclaims by the estate against persons filing claims against the estate;

     d. orders in respect to obtaining credit;

     e. orders to turn over property of the estate;

     f. proceedings to determine, avoid, or recover preferences;

     g. motions to terminate, annul, or modify the automatic stay;

     h. proceedings to determine, avoid, or recover fraudulent conveyances;

     i. determinations as to the dischargeability of particular debts;

     j. objections to discharges;

     k. determinations of validity, extent, or priority of liens;

     l. confirmation of plans;

    m. orders approving the use or lease of property, including the use of cash collateral;

     n. orders approving the sale of property other than property resulting from claims brought by the estate against persons who have not filed claims against the estate.(1)

 

13. WHAT ARE NOT CORE PROCEEDINGS?

Under certain circumstances, matters that fall within the purview of the bankruptcy case that are not core matters may be tried by consent of the parties to the bankruptcy judge, who can certify findings to the federal district judge in his district for approval.

 

14. ARE THERE WAYS A DEBTOR MAY BE DENIED A DISCHARGE?

A challenge to the debtor's receipt of a discharge must be brought by an adversary proceeding. It can result in the debtor being denied that ultimate relief. It requires substantial misconduct on the debtor's part to lose the privilege of a discharge. The complainant's burden of proof in a case of this sort is higher than most civil cases where a clear preponderance of proof will suffice. It is not quite as high as the criminal standard of "beyond a reasonable doubt". Examples of grounds for denial of a discharge include:

    1 the debtor is not an individual (partnership and corporations do not receive discharges),

    2. the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed:

          a. property of the debtor, within one year before the date of the filing of the petition; or

          b. property of the estate after the date of the filing of the petition;

    3. the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;

     4. the debtor knowingly and fraudulently, in or in connection with the case:

          a. made a false oath or account;

          b. presented or used a false claim;

          c. gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or

          d. withheld from an officer of the estate entitled to possession under this title, any recorded information including books, documents, records, and papers, relating to the debtor's property or financial affairs;

     5. the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities;

     6. the debtor has refused, in the case:

           a. to obey any lawful order of the court, other than an order to respond to a material question or to testify; 

           b. on the ground of privilege against self-incrimination, to respond to a material question approved by the court or to testify, after the debtor has been granted immunity with respect to the matter concerning which such privilege was invoked; or

           c. on a ground other than the properly invoked privilege against self-incrimination, to respond to a material question approved by the court or to testify;

      7. the debtor has committed any act specified in paragraph (2), (3), (4), (5), or (6) of this subsection, on or within one year before the date of the filing of the petition, or during the case, in connection with another case, under this title or under the Bankruptcy Act, concerning an insider;

     8. the debtor has been granted a discharge under this section, under Chapter 11, or under the old Bankruptcy Act, in a case commenced within six years before the date of the filing of the petition;

     9. the debtor has been granted a discharge under Chapter 13 of this title, or under Chapter 7, in a case commenced within six years before the date of the filing of the petition, unless payments under the plan in such case totaled at least:

        a. 100 percent of the allowed unsecured claims in such case; or

        b. 70 percent of such claims; and

        c. the plan was proposed by the debtor in good faith, and was the debtor's best effort; or

     10. the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter.(2)

 

15. ARE THERE GROUNDS FOR AN ACTION TO DETERMINE THE DISCHARGEABILITY OF A PARTICULAR DEBT?

A challenge to the dischargeability of a particular debt can be had pursuant to an adversary proceeding. The burden of proof parallels that of a challenge to discharge. Grounds for the denial

include:

        1.  Certain taxes.

        2. Credit obtained under false pretenses or actual fraud.

        3. Credit card charges for cash advances and luxury goods made to close to the bankruptcy filing date.

        4.  Those not listed on the petition a who did not receive notice of the petition.

        5.  For fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.

        6.  Willful or malicious injury.

        7.  Certain fines and penalties.

        8.  Student loans.

        9.  For death or personal injury while operating a vehicle under the influence.

        10.  Creditors from a prior case.

        11.  Domestic court support orders.

        12.  Failed commitments to a Federal depository institution.

        13.  Criminal restitiution.

        14.  Credit incurred to pay certain taxes covered in paragraph number 1, fines covered  under Federal election laws.

        15.  Obligations arising in a divorce.

        16.  Home owners dues that come due after filing.

        17.  Fees incurred by prisoners incurred while they litigate.

        18.  Debt to a 401k plan.

        19.  Debt based on the violation of federal security laws.

 

This list can be found in much greater detail at 11 USC 523(a).

 

         

 

Do you have a question about litigation or any aspect of bankruptcy?

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1. 1See 28 USC 157

2. 2See 11 USC 727

 

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