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Young Lawyers: Things Every Young Lawyers Should Know About Bankruptcy

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Nevada Lawyer Magazine
practice, you will inevitably cross paths with an issue that touches upon the ever-elusive Bankruptcy Code.”
“Regardless of the area of law in which you
Young Lawyers
Bankruptcy is not only the theme of this month’s issue, but – in recent years – seems to be a recurring theme of the day. Regardless of the area of law in which you practice, you will inevitably cross paths with an issue that touches upon the ever-elusive Bankruptcy Code. To that end, I have attempted to compile some of the common issues that we should all be looking out for; of course, the list is not exhaustive and, in the interest of full disclosure, you should know that I am NOT a bankruptcy lawyer.1 With that said, consider the following: 1) The Automatic Stay (11 U.S.C. § 362): From the moment a debtor files a petition for bankruptcy, an injunction known as the “automatic stay” arises. With very limited exceptions, the automatic stay prevents creditors from taking any action against the debtor or the debtor’s property. Failure to strictly adhere to the automatic stay could subject a creditor, and counsel, to serious consequences. While a creditor may petition a bankruptcy court for relief from the automatic stay, it is important to understand that no action may be taken unless, and until, a court orders that the stay be lifted. 2) The Notice of Bankruptcy: After you receive notice of the bankruptcy case, immediately stop (or advise your client to stop) further collection 38 Nevada Lawyer March 2014 or litigation efforts. Next, calendar the meeting of creditors and the deadline for filing a proof of claim, regardless of whether the case is an asset or no-asset case. 3) Proof of Claim: Generally, a creditor wishing to share in the recovery on a debt owed by a debtor’s estate must file a proof of claim. Proofs of claim must be filed on the official form, and include the amount of the claim and sufficient backup documentation to prove up the claim.2 Failure to timely file a proof of claim may result in the debtor’s estate barring recovery. 4) Meeting of Creditors:3 The debtor and/or a representative of the debtor is required to attend. Creditors may attend and ask questions of the debtor with respect to claims against the bankruptcy estate and the debtor’s ability to pay. This is the first opportunity for the creditor to learn more about their claim and the debtor’s intentions regarding treatment of that claim. Strategically, this is a quick and convenient opportunity for the creditor to “depose” the debtor without conducting a formal examination. 5) Consumer Bankruptcy versus Corporate Bankruptcy: Corporate bankruptcy petitioners may file under Chapter 7 or Chapter 11. Chapter 7 is intended to facilitate an orderly liquidation
while Chapter 11 is intended for reorganization and restructuring. Consumer or individual bankruptcy petitioners generally file under Chapter 7 or Chapter 13 (although they sometimes file under Chapter 11). While Chapter 7 allows for liquidation and the discharge of individual debt,4 Chapter 13 requires reorganization and the repayment of certain individual debts (typically over the course of a three to five year period).5 6) Know what you don’t know! This is probably the most important advice that I can offer. The Bankruptcy Code is exceedingly complex. Bankruptcy constitutes an area of law unlike any other, and it often takes years (or decades) to master. In addition to the Bankruptcy Code itself, most districts have a set of local rules governing specific filing, notice and hearing requirements (among others). Many bankruptcy practitioners will tell you that the rules in Bankruptcy Court are more strictly enforced than in other areas. Although it is valuable to have a general working knowledge of the basics, it is not wise to navigate the Bankruptcy Code on your own. The best piece of advice you may give to a client with a potential bankruptcy issue is to consult a bankruptcy practitioner.
1. My husband, however, is a bankruptcy lawyer, who may have been consulted during the composition of this article. 2. A proof of claim form may be accessed online at 3. 11 U.S.C. § 341. 4. 11 U.S.C. § 727. 5. 11 U.S.C. § 1328.
March 2014
Nevada Lawyer 39

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