Where small business owners can find information on bankruptcy proceedings in general

Where do I need to look in order to find information on filing for bankruptcy? For small to medium business owners and their advisers:

Title 11 of the United States Code, commonly known as the federal Bankruptcy Code, provides an ordered process to administer and settle claims against an insolvent individual, corporation or municipality. The Bankruptcy Code is a statutory scheme that sets forth the relief available to debtors and creditors. The Federal Rules of Bankruptcy Procedure (Bankruptcy Rules) and Federal Rules of Evidence govern bankruptcy proceedings in bankruptcy courts, district courts, and bankruptcy appellate panels. Many, but not all, of the Bankruptcy Rules resemble or include sections of the Federal Rules of Civil Procedure. Note, each jurisdiction has local rules of bankruptcy procedure that supplement or modify the Bankruptcy Rules. As a rule, you must consult the Bankruptcy Rules and the applicable local bankruptcy rules regularly during any proceedings.

Bankruptcy proceedings are filed in the bankruptcy court of the district in which the debtor’s domicile, residence, principal place of business, or principal assets are located, or in any district in which an affiliate of the debtor is a debtor in a pending bankruptcy proceeding. In other words, you need to follow the debtor usually.

A bankruptcy proceeding is not your typical case where a summons is issued, and complaint is filed for the court to resolve the dispute in casu. Instead, in bankruptcy proceedings, the bankruptcy court oversees the administration of the entire bankruptcy estate, approves the distribution of estate assets, monitors negotiations and settlements among the parties, and resolves disputes.

Contested matter vs. jury trial? A contested matter is less formal than a trial, but still must adhere to the rules. Generally, a bankruptcy judge will hear and decide contested matters quickly. A party commences a contested matter by filing a motion or application, along with the required notice to parties in interest. On the other hand, an adversary proceeding is commenced by filing a complaint. A trial is then conducted, similar to a civil law trial in district court. In many cases, a bankruptcy provides the bankrupt entity with a “tabula rasa.” When an individual or corporation files for bankruptcy protection, all its assets as of the filing date become part of the bankruptcy estate. So, you draw a line in the sand from the date of filing.

Often you will see this in the context of an automatic stay that prevents creditors from collecting on their debts while the debtor is under bankruptcy protection. Generally, towards the end of the bankruptcy proceeding, the bankruptcy court confirms a plan of reorganization or liquidation, pursuant to which property of the debtor’s estate will be distributed in accordance with the priority scheme set forth in the Bankruptcy Code (or occasionally as agreed upon by the parties) to satisfy allowed claims in the case.

Chapters of the Bankruptcy Code The Bankruptcy Code contains nine Chapters. Chapters 7, 9, 11, 12, 13 and 15 provide the process for reorganizing or liquidating varying entities. Chapters 1, 3 and 5 of the Bankruptcy Code provide general rules that apply to all cases, regardless of the particular Chapter the petition is filed under.