It’s not surprising that many people worry that they might be treated harshly by a bankruptcy judge if they file for bankruptcy. Not only can admitting to financial issues be embarrassing, but most people are intimidated by going to court. If this is true for you, you might be comforted to know the chances are you’ll never have to testify in a courtroom before a bankruptcy judge. If you do, you’ll find the judge, court personnel, and most likely even your creditors to be professional and polite.
What You Can Expect In Bankruptcy Court
Even though most individual filers never go before the judge, all filers must attend one official meeting. Beyond that meeting, you’ll only have to testify in court if certain issues come up in your case, and many of these matters get resolved before a trip to the courthouse is necessary. Hearings in Chapter 7 bankruptcy cases are relatively rare. Most cases are straightforward and take about four to six months to complete. By contrast, Chapter 13 bankruptcy cases are more involved, require that the court approve a repayment plan, and last from three to five years. Many things can and do happen during the period.
Here are some of the matters that might require a court hearing.
• Meeting of creditors: When you file a Chapter 7 or a Chapter 13 bankruptcy, the court assigns a trustee to administer your case. About a month after filing, you’ll meet with the trustee (or a staff member). The trustee uses the meeting to clarify information disclosed in the bankruptcy paperwork you filed with your case. The meeting of creditors usually lasts about ten minutes, and while creditors can attend, they rarely do.
• Motion to extend the automatic stay: If you’re filing a new case shortly after the court dismissed a prior case, you’ll need to motion (ask) the court to extend the automatic stay the order that prevents creditors from collecting from you beyond the initial 30 days. The judge will want you to explain why the court dismissed your prior case, what circumstances have changed between the old case and the new one, what you hope the bankruptcy will accomplish, and how you intend to ensure that the new case will be a success.
• Confirmation of your Chapter 13 plan: The bankruptcy judge must approve any repayment plan you propose. If the plan is in order, the judge will approve it on the recommendation of the trustee. But issues can crop up. You’ll have to show that you can afford the payments and that you’re paying all your disposable income into the plan. If there’s any question about that, you may have to appear at a confirmation hearing and give testimony to support your plan.
• Motion to lift the automatic stay: The automatic stay prevents a creditor from taking collection action during your bankruptcy case. If you have a secured debt like a car loan or mortgage loan, you must continue making payments on that loan during your bankruptcy if you want to keep the property serving as collateral. If you stop paying, the creditor has the right to repossess or foreclose on the collateral after getting permission from the court. The creditor makes the request by filing a motion to lift the automatic stay. If you oppose the motion, you might have to testify before the judge to show how you’ll be able to make the payments in the future.
• Motion to dismiss your case: If you miss your plan payments in a Chapter 13 case, the trustee might file a motion to dismiss your matter. You could explain to the judge why you got behind with your payments and how you plan to avoid that in the future.
• Motion to approve additional debt: As a rule, you can’t take on additional debt when you’re in a Chapter 13 case. Considering the three- to five-year length of a Chapter 13 plan, it’s not unusual for cars to break down and other emergencies too. Some Chapter 13 debtors also take advantage of mortgage modification programs. Some judges must approve such motions at a hearing. Other judges give the Chapter 13 trustee the authority to approve a request for new debt.
• Adversary proceedings: You, the trustee, or a creditor could have reason to file an adversary proceeding (lawsuit) in the bankruptcy case. Two of the most common suit types in a consumer (non-business) case challenge either your right to a general discharge or the dischargeability of a particular debt. Just like lawsuits filed in other civil courts, the participants conduct discovery, argue motions, and try the case before the judge, if it gets that far.
Meeting with an Attorney
Most bankruptcy cases proceed straightforwardly without the need for court appearances other than the meeting of creditors. But that’s not always what happens. A simple way to learn what to expect in your bankruptcy is to consult with a knowledgeable bankruptcy lawyer. After reviewing your case, the lawyer will likely be able to predict the course of your matter with a high degree of accuracy.
Bankruptcies laws go all the way back to the U.S. Constitution and have seen many changes over the years. Article 1, Section 8, Clause 4, of the Constitution authorizes Congress to create “uniform laws on the subject of Bankruptcies throughout the United States.” The latest law dealing with bankruptcy courts passed in 1978 and established a bankruptcy court in each of the country’s 94 federal jurisdictions. The Bankruptcy Reform Act revised and codified the Bankruptcy Code, under which most bankruptcies are filed. Personal bankruptcies are covered under Chapter 7 and Chapter 13; business bankruptcies fall under Chapter 11. All bankruptcies must be filed in federal court; they cannot be filed in state court. Each case is heard by a bankruptcy judge, who is appointed to a 14-year term by the U.S. Court of Appeals for that district.
A bankruptcy case normally begins with the debtor filing a petition with the appropriate bankruptcy court. The debtor is required to list assets, income, liabilities, and the names and addresses of all creditors and how much they are owed. The filing of the petition prevents, or stays, any debt collection activity against the debtor and his or her property. Creditors then receive notice from the court clerk that the debtor has filed. If the court decides that there is little money available from the debtor’s estate the legal and equitable interests, tangible assets and intangible rights to repay creditors, and there are no outstanding issues or disputes, the judge may grant a discharge of most debts without objection. This means that the debtor will no longer be liable to his creditors, and they can no longer contact him about the debt or try to recoup it. (A discharge does not apply to secured debt such as a car; some debts are not dischargeable.)
How Bankruptcy Disputes are Settled
If disputes arise over who owns certain property, what the property is worth, which debts should be discharged, and how much money should be paid to whom, a trustee reviews the petition. The trustee who may be a private individual or a corporation can bring action against the debtor or creditors, make distributions to creditors, supervise the liquidation of property, and oversee repayment plans. Trustees are appointed by the Utah. Trustee or a bankruptcy administrator and serve as officers of the Utah. Department of Justice. The role of the trustee was expanded by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. The trustee now must consider whether the debtor is required to repay his or her debt under Chapter 13; the trustee also must require the debtor to receive credit counseling and financial education. Decisions by bankruptcy judges are subject to appeal in district court, or to the Bankruptcy Appellate Panel (BAP) for the judicial circuit. Bankruptcy is a complex process with long-lasting consequences. Debtors are strongly encouraged to seek legal advice before entering a bankruptcy petition. Websites for individual bankruptcy court districts offer valuable information about bankruptcy laws and procedures, and the debtors’ rights and responsibilities within the system.
Where are Bankruptcy Cases Heard?
Bankruptcy cases can only be heard in federal courts. Although there are proceedings under the laws of various states called “receivership,” the unified bankruptcy courts are all federal, whose system is divided into levels:
• Trial courts
• Appellate courts
• Supreme Court
There are also various administrative law courts like the immigration court.
The basic trial court is called the district court. Bankruptcy courts are specialized courts that are, in essence, a division of the district courts. District courts can hear all matters that come within their jurisdiction, plus they can hear bankruptcy matters. As a matter of course, they refer all bankruptcy matters to the specialized bankruptcy courts. Understanding the system of bankruptcy courts is essential to a clear picture of possible the avenues that your bankruptcy case may take.
Jurisdiction Of Bankruptcy Courts
Unlike other federal courts (such as the district courts), bankruptcy courts are created at the legislative level. This means the courts were established by Congress under its legislative authority to create courts under Article I, Section 8 of the Constitution. Under the federal statute 28 U.S.C. 1334, bankruptcy courts have exclusive jurisdiction over bankruptcy cases. This means a bankruptcy case cannot be filed in state court. That’s because a uniform bankruptcy system requires cases to be filed in a uniform federal system instead of in different state courts, which may have different rules and regulations. Some matters in a bankruptcy case are so central to the bankruptcy process; they are designated as core matters. Core matters can include interpreting the bankruptcy code itself, how claims are handled, what debts are discharged, Chapter 13 repayment plans and how Chapter 11 debtors are reorganized. A core matter is decided by the bankruptcy judge. Appeals can be filed in the district or appellate court with special permission. With non-core matters, the parties can decide if the bankruptcy judge has the final say (at least at the trial court level), or whether the district judge has to put his stamp of approval (or disapproval) on the decision. A bankruptcy judge may also be called on to decide non-bankruptcy matters. These are issues that could be decided by the district court or even state courts, but arise in the context of a bankruptcy case. For instance, a bankruptcy judge may be called on to interpret the terms of a contract so the parties can determine the amount of a claim.
Utah Bankruptcy Judges
Bankruptcy judges are appointed for 14-year terms by the Court of Appeals for the particular federal circuit in which the bankruptcy court resides. Thus, unlike federal district court and appellate judges, who are appointed for life, the term of a bankruptcy judge must be renewed every 14 years by the appellate court. It is quite possible for an appellate court not to renew a bankruptcy judge’s term if it is unhappy with his or her performance. Likewise, the bankruptcy judge can choose to decline a 14 year appointment.
System of Appeals
Although all initial bankruptcy matters are handled by a bankruptcy court, appeals of orders, decisions, and judgments are usually handled by district courts and, in some cases, by appellate courts. Some circuits have what is known as a bankruptcy appellate panel (BAP). BAPs have been convened in the First, Sixth, Eighth, Ninth and Tenth Circuits. The appellate panel consists of bankruptcy judges from the same circuit who hear bankruptcy appeals. Even in circuits which have a bankruptcy appellate panel, an appellant may choose to have his appeal heard by the local federal district court. The next level of appeal is the United States Court of Appeals for the particular circuit in which the bankruptcy court sits. The final level of appellate review is the Supreme Court of the United States.
Federal Rules of Bankruptcy Procedure
The proceedings in bankruptcy courts are governed by the Federal Rules of Bankruptcy Procedure. As the name suggests, these rules govern the procedural aspects of bankruptcy proceedings and trials, such as the time within which you must file your bankruptcy schedules. In large part, the bankruptcy rules of procedure mirror and incorporate the Federal Rules of Civil Procedure, which govern litigation in other federal courts. Thus, litigation in bankruptcy courts is very similar to litigation in federal district courts.
Filing Bankruptcy Courts
If you are considering filing for bankruptcy, it is important to identify and locate the appropriate bankruptcy court. According to federal statute, you must file your bankruptcy case in the federal district in which you had your primary residence, had a principal place of business, or principal assets in Utah within the 180 days prior to filing.
Proof of Claim in Bankruptcy
A proof of claim is the paperwork that a creditor must file before getting paid in a bankruptcy case. Under the bankruptcy payment system, some debts—like income tax and domestic support obligations—have “priority” status and are paid before other claims. The proof of claim tells the bankruptcy trustee about the type of claim, as well as how much a creditor is owed, so the trustee can determine the amount to pay the creditor if anything. Read on to learn who can file a proof of claim, filing procedures, and how to object to a proof of claim.
Who Must File a Proof of Claim?
All creditors who wish to be paid out of bankruptcy funds must file a proof of claim. On December 1, 2017, the law was amended to make clear that in Chapters 7, 12 and 13 bankruptcy cases, a secured, unsecured, or equity secured creditor (with a few exceptions) must file a proof of claim to receive money from the bankruptcy estate. Of course, if funds aren’t available for distribution such as in a Chapter 7 “no-asset” case a creditor won’t be told to file a proof of claim. That status will change if the trustee finds undisclosed assets during the review period. Then the trustee will instruct creditors to file a proof of claim.
Secured Creditors and Liens
Like all creditors, a secured creditor such as a mortgage or vehicle lender must file a claim in order to receive money through the bankruptcy estate (with a few exceptions). However, even if the secured creditor doesn’t file a proof of claim, the creditor won’t lose its lien. This rule can be problematic for a debtor in a Chapter 12 or 13 cases. Why? When a lien is in place, the debtor can keep the property securing the debt only if the debtor remains current on the loan. If the debtor doesn’t pay as agreed, the creditor will be able to take back the property, sell it at auction, and use the funds to pay down the loan. As a practical matter, if a secured lender doesn’t file a proof of claim in a Chapter 12 or 13 case (and won’t receive monthly plan payments), a debtor who wants to keep the property securing the claim (such as a house or car) has a couple of options.
• Pay outside of the plan. The debtor can make the payments directly to the creditor (instead of through the plan). However, if the debtor arranged to make the payment directly, it likely won’t be possible. Most of the debtor’s funds go into the plan leaving nothing left for a hefty payment.
• File a proof of claim for the creditor. The debtor can file a proof of claim on behalf of the creditor. Doing so will allow the trustee to use bankruptcy plan payments to maintain the secured payment.
Utah Bankruptcy Attorney
When you need to file bankruptcy because of a writ of garnishment, eviction, foreclosure, or judgement against you, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506