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Consumer Bankruptcy Law and Practice: 2014 Advisory Committee Note on Form 17C

This form is new. When the length of a brief is calculated by the maximum number of words or lines of text rather than by number of pages, Rules 8015(a)(7)(C) and 8016(d)(3) require an attorney or unrepresented party to certify that the brief complies with the applicable type-volume limitation. Completion of this form satisfies that certification requirement. This form is not needed if the brief meets the applicable page limitation under Rule 8015(a)(7)(A) or 8016(d)(1).

The form does not include a caption because it is included in the brief.

Consumer Bankruptcy Law and Practice: 2.1 A Definition

In essence, a voluntary1 bankruptcy case is a legal proceeding, brought by a debtor, that seeks relief specifically provided for by a federal statute, the Bankruptcy Code.2 The bankruptcy case must be brought in the United States District Court, which has jurisdiction over all bankruptcy cases, but bankruptcy cases are normally automatically referred to the bankruptcy court for the district, a unit of the district court.3 Therefore, the actual bankruptcy petit

Consumer Bankruptcy Law and Practice: 2.2 Relief Available in Bankruptcy

For individuals, there are two types of relief that are usually used. The first is liquidation under chapter 7 of the Code. In a liquidation case, sometimes referred to as a straight bankruptcy, any substantial nonexempt4 assets of the debtor are converted to cash and distributed to creditors according to certain statutory rules. The individual debtor ordinarily receives a discharge, which absolves them from any responsibility to pay most debts and also provides various other protections.5

Consumer Bankruptcy Law and Practice: 2.3 Purposes of Bankruptcy

The purposes of bankruptcy are usually described as twofold: (1) a fresh start for the debtor and (2) equity among creditors. In most cases involving consumer debtors, the first is by far the more significant, because there are typically few assets to be distributed, equitably or otherwise, to the creditors involved.

Consumer Bankruptcy Law and Practice: 2.4.3 Appeals

There are several possible avenues for appeals from the bankruptcy court. The path to be taken depends upon the wishes of the parties, the practice adopted by the federal district court and judicial circuit where the bankruptcy court is located and, in some cases, the consent of an appellate court.

Consumer Bankruptcy Law and Practice: 9.3.3.6 Filings in Violation of Section 109(g) or a Prior Court Order—Section 362(b)(21)

Another provision of the 2005 Act affects the automatic stay for two subcategories of repeat filers, but only as to the enforcement of real property liens. Section 362(b)(21) of the Code renders the automatic stay inapplicable to enforcement of a lien on, or a security interest in, real property when the debtor is ineligible for relief under section 109(g) of the Code or has filed the case in violation of a prior court order limiting new bankruptcy case filings.

Consumer Bankruptcy Law and Practice: 9.4.2 Legal Proceedings

The stay bars “the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case . . .

Consumer Bankruptcy Law and Practice: 8.4 The Meeting of Creditors

8.4.1 Preparation

In many a routine chapter 7 bankruptcy, the only event of any real importance between filing and discharge is the meeting of creditors, sometimes colloquially called the “first meeting of creditors” or the “section 341(a) meeting” in honor of the relevant statutory provision. While it may pose occasional problems, this proceeding is usually routine and uneventful.

Consumer Bankruptcy Law and Practice: 9.6.7 Procedural Issues

One further issue is the best way to go forward procedurally in seeking a remedy for a violation of the stay. Although several courts have held that relief under section 362(k) is available by motion,374 it may be preferable to proceed by complaint pursuant to the adversary proceeding rules, especially if injunctive relief or a contempt remedy is sought.375 This procedure will eliminate any potential issues about the due process rights of the defending party.

Consumer Bankruptcy Law and Practice: 9.7.1 Proceedings Must Be Commenced by Motion

While the scope of the stay is broad and the sanctions to enforce it are powerful, the duration of its protections may be short-lived. A common creditor response to the bankruptcy petition is to file a proceeding seeking relief from the automatic stay. The court may grant relief, upon motion of a party, terminating, annulling,380 modifying, or conditioning the stay. Only the bankruptcy court has the power to grant relief from the automatic stay.381

Consumer Bankruptcy Law and Practice: 9.7.3.1.1 Parties

Normally, any proceeding must include as parties all persons who will be ordered by the court to do something or whose interests will be seriously affected if the action is successful. Thus, both Federal Rule of Civil Procedure 19 and Federal Rule of Bankruptcy Procedure 7019 generally provide that such indispensable parties must be joined. While these rules are not specifically incorporated in Federal Rule of Bankruptcy Procedure 9014, that rule does provide that notice shall be given to the party against whom relief is sought.405

Consumer Bankruptcy Law and Practice: 9.7.3.1.2 Discovery

Either party may take discovery in connection with a motion for relief from stay.417 Although the full range of federal discovery opportunities is available, the short time limits require that discovery be completed with great speed to be meaningful. The normal time period allowed by the rules to provide discovery is in every case too long a period to wait unless the parties agree that the stay can continue pending discovery.

Consumer Bankruptcy Law and Practice: 9.7.3.1.3 Defenses and counterclaims

To the extent there are defenses or counterclaims that reduce or eliminate the right of the party seeking relief from the stay to proceed after the stay is lifted, they should be relevant to stay litigation and raised therein.418 For example, if a debtor claims that a lien does not exist because it was rescinded under the Truth in Lending Act, the stay should not be lifted to permit enforcement of that lien.419 Or, if a debtor’s defenses and counterclaims reduce the balance owing on an automobil

Consumer Bankruptcy Law and Practice: 9.7.3.1.4 Burden of proof

The Code provides that the burden of proof in stay litigation is on the party seeking relief from the stay as to the issue of the debtor’s equity in property and on the party opposing relief on all other issues.426 While this provision is not as clear as it might be, it apparently means that whenever equity is at issue, the party seeking relief must prove it.

Consumer Bankruptcy Law and Practice: 7.3.12 The Chapter 13 Plan

7.3.12.1 Generally

The most important document filed in a chapter 13 case is usually the debtor’s proposed plan. This plan, which only the debtor can propose, sets out how the debtor wishes to reorganize their financial situation. Its purpose, then, is to make clear how the debtor desires payments and distributions to be made in the case. The plan may be modified as of right before confirmation and also, with the court’s permission, after confirmation in certain circumstances.242

Consumer Bankruptcy Law and Practice: 28 C.F.R. § 58.18 Mandatory duty of approved agencies to obtain prior consent of the United States Trustee before taking certain actions.

(a) By accepting the designation to act as an approved agency, an agency agrees to obtain approval from the United States Trustee, prior to making any of the following changes:

(1) Cancellation or change in the amount of the surety bond or employee fidelity bond or insurance;

(2) The engagement of an independent contractor to provide counseling services or to have access to, possession of, or control over client funds;