Unlike many lawyers who avoid complex bankruptcy issues, the attorneys at Cohen & Cohen, P.C., regularly litigate in the bankruptcy courts and have experienced first-hand the myriad of issues that arise.  We have represented and defended against bankruptcy trustees, creditors, and debtors in all types of actions.  Despite the fact that the vast majority of our regular cases go off without a hitch, our clients benefit immeasurably when the hire us because we have seen it go wrong, very wrong.  In fact, because of this our clients have a better chance to have their case move smoothly through the system.

So what is bankruptcy litigation?  The answer is difficult to state because it comprises an incredibly broad spectrum of dispute resolution.  This is because, put simply, anything that money touches, so does bankruptcy.  It is important to keep in mind that there are material exceptions to what can and cannot be decided in bankruptcy court.  Injury in tort like wrongful death is off limits.  So are entering divorce decrees, criminal matters, social security benefits, and all sorts of practice areas for which the bankruptcy court doesn’t have jurisdiction.  However, in instances such as these bankruptcy courts could handle the question of whether an obligation stemming from a divorce was meant to be child support or an allocation of property.  They can decide in what order to pay a criminal restitution victim and how much in relation to their creditors.  They can decide whether or not social security benefits are exempt or non-exempt.

In fact bankruptcy litigation is very similar to civil litigation because oftentimes determining the answer is largely, if not completely, dependent on state law.  However there are some very important differences.  There is the Bankruptcy Code itself.  A tome of specific statutes as implemented in 1979 Bankruptcy by Congress.  All bankruptcy litigation is controlled by the Code.  Next, the litigant should remember that bankruptcy courts are a division of the federal district courts.  That means this is federal litigation and subject to federal court rules.  To get even more technical, the federal courts actually have original jurisdiction for bankruptcy matters but they automatically refer bankruptcy matters to the bankruptcy courts.  In some instances a litigant can move to withdraw that reference depending on the circumstances.

There are also specialized rules of bankruptcy procedure.  The federal rules of bankruptcy procedure largely mirror the federal rules of civil procedure but there are oftentimes vast and unique differences between the two.  Not only that, almost all bankruptcy courts will have Local Rules.  Local Rules can vary quite a bit from jurisdiction to jurisdiction although there is a slow push to standardize as many practices as possible (see Colorado’s Local Rules).  Even the individual judges will sometimes have practice standards and general guidelines for how they run their cases.

In short there is virtually no limitation of the factual scenarios, types of law, and controlling authority that can end up before a bankruptcy court.  The breadth of bankruptcy litigation is vast and possibly encompasses the broadest spectrum of legal issues which can be dealt with in any legal venue.  We will try to identify the most common and interesting areas on our web-site but as you can probably guess there is no way to get them all.

If you have an issue that involves bankruptcy litigation – Call Us Today!

Bankruptcy Litigation FAQ

Who are the parties involved in bankruptcy litigation?

Pretty much anyone. The debtor (the entity filing for bankruptcy), creditors, trustees, and other interested parties. Creditors might dispute the amount they are owed or challenge the priority of their claims. Trustees could initiate litigation to recover assets that may have been fraudulently transferred or to investigate any misconduct by the debtor. Interested parties can also include other stakeholders who have a vested interest in the bankruptcy case’s outcome.

What is the process for bankruptcy litigation?

It is very similar to other forms of litigation. It will begin with the filing of a complaint by the party initiating the lawsuit. The defendant then responds to the complaint, and both parties engage in discovery, gathering evidence and information to support their claims. Mediation or settlement discussions may occur to resolve the dispute outside of court. But this isn’t mandory in most bankruptcy courts. If a settlement isn’t reached, the case proceeds to trial, where both sides present their arguments and evidence. The court then makes a decision, which can be appealed if either party disagrees.

Bankruptcy litigation can be complex and involve specialized bankruptcy laws and procedures. For example, “bankruptcy litigation” doesn’t have to be a separate adversary proceeding. It can also be a “contested matter” for things like plan objections, objections to exemptions, turnover of property motions, determination of lien rights, and many more.

Can parties involved in bankruptcy litigation appeal a court’s decision?

Yes, if either party disagrees with the court’s decision in bankruptcy litigation, they can usually file an appeal with a higher court to have the decision reviewed. In bankruptcy though you can choose to appeal to the Bankruptcy Appellate Panel (a voluntary group of judges from outside of the district) or to the District Court. Tactically, it is important to know your issue and where you should go if you are going to file an appeal. You can get very different outcomes from the BAP vs the District Court.