Consumer Bankruptcy Law and Practice: 14.2.4.2 Core and Non-Core Proceedings
Many of the bankruptcy procedural mechanisms revolve around the distinction between “core” and “non-core” proceedings.
Many of the bankruptcy procedural mechanisms revolve around the distinction between “core” and “non-core” proceedings.
The first question that must be answered in determining jurisdiction over a proceeding is whether there is any federal bankruptcy jurisdiction over the matter at all.52 Some proceedings may be so remote from the bankruptcy that they will have no impact on the bankruptcy case and cannot be considered even to be related to it.53 In such instances, the bankruptcy court may never hear the proceeding, and a district court may hear it only if there is some nonbankruptcy basis for federal jurisdiction.
If a proceeding is determined to be a non-core proceeding, it is still normally initiated in the bankruptcy court pursuant to the district court’s referral.
Regardless of whether a matter is or is not a core proceeding, it may still come to be heard initially in the district court. The bankruptcy jurisdictional provisions provide that after the initial referral to the bankruptcy court a bankruptcy proceeding, or even the bankruptcy case itself in whole or in part, may be withdrawn back to the district court.81 Withdrawal is discretionary in some cases and mandatory in others.
In certain classes of cases or proceedings, including core proceedings, if a party timely86 moves for withdrawal to the district court, that motion must be granted.
The district court may also withdraw any case or proceeding at its discretion, either upon motion of a party or upon its own motion.
A special exception to the broad categories of core proceedings was created by Congress for all personal injury tort and wrongful death claims against the debtor or the estate.98 The 1984 amendments, in a provision probably designed to curb manufacturers seeking refuge in bankruptcy from asbestos and other product liability claims, require all such claims to be tried either in the district court in which the bankruptcy case is pending or the district court where the claim arose, as determined by the district court in which the bankruptcy is pen
Unlike the temporary emergency rule governing bankruptcy jurisdiction from 1982 to 1984, the current jurisdictional statutes contain no prohibition of jury trials conducted by the bankruptcy court.
In Taggart v. Lorenzen,124 the Supreme Court stated, without discussion, that the bankruptcy court could find an entity in contempt of court for violating the discharge injunction under the grant of equitable powers in Bankruptcy Code section 105.
In almost every case in which the debtor’s discharge rights are being violated, it is wise to take some type of protective action. Even though a judgment obtained on a discharged debt is void,1041 that judgment could also cause illegal but harmful garnishment of the debtor’s wages or seizure of the debtor’s property. Thus, it is good practice to assert the protections of discharge as early as possible.
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Depending on the circumstances, the bankruptcy court may be a preferable forum for the litigation of many types of cases that involve consumer debtors. When the debtor is in bankruptcy and has a choice of forums, a number of factors should be considered. But even if a client is not in bankruptcy, the litigation advantages offered by the federal bankruptcy forum may be so great that they justify filing a bankruptcy petition even if it otherwise might not be needed.
In specific cases, a bankruptcy proceeding may offer a way around a difficult procedural problem that could prove fatal in any other forum. Certain provisions governing bankruptcy litigation make it a useful way to avoid such problems.
Another extremely helpful feature of bankruptcy litigation is that nationwide service of process is permitted and can be made by first class mail in most bankruptcy proceedings.142 However, an exception to the general right to serve by first class mail was created by the Bankruptcy Reform Act of 1994,143 which amended Federal Rule of Bankruptcy Procedure 7004 to provide that service of process on an insured depository institution in a contested matter or adversary proceeding must be made by cert
A topic of more than passing interest to private attorneys representing consumer debtors is the matter of attorney fees. While the general factors governing decisions concerning what fees to charge and how to collect them can be very similar to those for other types of legal matters, bankruptcy attorney fees are unusual in several ways. Similarly, while the duties of debtors’ attorneys are generally coextensive with those of attorneys representing other clients, there are special bankruptcy provisions of which they must be aware.
As in any other matter, it is very important for the attorney and client to discuss and have a clear understanding of fee arrangements as early as possible. Normally, this discussion occurs at the first interview with the debtor.
While there are great variations in the amounts charged to cover basic services, the range in chapter 7 cases is usually from $1000 to $2000 and many courts set an informal limit between $1500 and $2500.18 Some attorneys and courts consider it appropriate to add a small increment to this fee in joint cases19 or when other complications make the case more difficult than average to prepare.20 Similarly, in chapter 13 cases, basic fees generally range from
In chapter 7 cases, an attorney usually wants to be paid all or most of the fee in advance of the filing.
One aspect of attorney fees in bankruptcy that is somewhat unusual is the close court supervision of the fees charged. In addition, monitoring and, when appropriate, commenting upon attorney fees applications is one of the primary duties of the United States trustee’s office.53 This supervision of attorney fees in bankruptcy arises mainly from an unfortunate history of abuse and overreaching by the bankruptcy bar.
Hence, both the Code and the Federal Rules of Bankruptcy Procedure have strict requirements for disclosure of all fees. Section 329(a) requires any attorney who represents a debtor in a bankruptcy case, or in connection with a bankruptcy case, to file a statement of all compensation paid or agreed to be paid in connection with services rendered within one year prior to filing, or to be rendered, that are related to the bankruptcy.
The Bankruptcy Code also follows the approach of the prior rules in requiring the court to review all payments or arrangements between the debtor and their attorney.
Regardless of the way the fee request comes to the court’s attention, the matter must be given the same type of careful consideration required by the rules for any other type of proceeding.94 The bankruptcy court must make known its specific concerns about the fee so an attorney may attempt to address them.95 A final (as opposed to interim) order on fees is a final appealable order.96 In cases likely to be appealed, all parties must be careful to ensure
One important feature of chapter 13 not usually present in chapter 7 cases100 is the possibility of paying the debtor’s attorney from the property of the estate. The opportunity for the debtor to pay all or part of the fee in installments is often the only way a financially strapped client can pay the fee at all.
The Bankruptcy Rules provide that an attorney who seeks compensation for services from the estate, that is, through the plan, must file an application for those fees including a detailed statement of services rendered, the time and costs expended,119 and the amounts requested.120 The application must also be transmitted to the United States trustee.121 Some courts require a great deal of specificity in such statements.
An additional source of attorney fees often overlooked by many bankruptcy practitioners is the opposing party.133 Most practitioners are aware of the Bankruptcy Code provisions that provide for or permit attorney fees to be awarded to prevailing debtors in certain circumstances, such as proceedings to enforce the automatic stay,134 to enforce the discharge injunction,135 to enforce the proof of claim and mortgage disclosure rules,