Gimme 5: What Every Lawyer Should Know about Bankruptcy Law
by Catherine E. Bauer
(County Bar Update, April 2005, Vol. 25, No. 4)

Gimme 5: What Every Lawyer Should Know about Bankruptcy Law

By Catherine E. Bauer, Assistant United States Attorney, Los Angeles, and Executive Committee Member, LACBA Commercial Law and Bankruptcy Section. The views expressed are those of the author only and do not reflect the views of the United States Attorney's Office for the Central District of California or the Department of Justice.

County Bar Update thanks the Commercial Law and Bankruptcy Section for its assistance.

1. Know a good bankruptcy lawyer.
Reason #1: Bankruptcy is a specialized area of the law. If you are not yourself a bankruptcy lawyer, you should keep the name of a good bankruptcy lawyer around for those bankruptcies that are sure to pop up during your career. Maybe you'll obtain a judgment, the enforcement of which will be thwarted by a bankruptcy filing. Or maybe one of your clients will have a bankruptcy-related concern and seek your advice. Whatever the circumstances, don't be afraid to admit that bankruptcy is a world unto itself and refer the problem to someone who lives in (or at least has frequently visited) this world.

Reason #2: Someone someday will ask you for the name of a bankruptcy lawyer "for a friend."

(All of the remaining tips can be almost completely forgotten if you take Tip #1 to heart.)

2. The Bankruptcy Court has a Web site with lots of great information.
The Web site for the Bankruptcy Court for the Central District of California is www.cacb.uscourts.gov. This Web site is great. It has loads of useful bankruptcy information, forms, and links. Here is a partial list of what can be found on the site: a brief explanation of the different bankruptcy chapters, Bankruptcy Petition forms, Proof of Claim form, Federal Rules of Bankruptcy Procedure, Local Bankruptcy Rules, Local Bankruptcy Rules forms, links to webPACER and E-Filing, court addresses, and a self-calendaring system.

Please note this disclaimer as to Tips #3, #4 and #5, which follow: These are oversimplifications -- Best to stick to Tips #1 and #2!

3. Do not continue trying to collect a debt after a bankruptcy filing.
The automatic stay provided for by Bankruptcy Code Sec. 362 prevents a creditor from attempting to enforce or collect a pre-petition debt once a bankruptcy is filed. This "stay" goes into effect as soon as the bankruptcy petition is filed, and it is the most important initial benefit provided to a bankruptcy debtor.

It can take many days for the formal written notice of the bankruptcy filing to be received. If a creditor receives a more informal notice of the bankruptcy during the interim period (usually a phone call from the debtor or the debtor's attorney), the creditor should halt collection activities while awaiting or seeking confirmation of the filing. The webPACER system can give quick access to bankruptcy filing information for a fee.

Violating the stay can lead to sanctions, and a debtor can bring suit against the creditor to boot.

4. Always file a Proof of Claim by the deadline.
If a Proof of Claim can be filed, file it by the deadline indicated on the notices from the Bankruptcy Court. This really is a drop-dead date.

But don't worry if you can't find the deadline for filing a POC in a no asset Chapter 7 case -- There isn't one. In fact, a POC won't be accepted in these cases. The concept here is that, since there are no assets that can be distributed to creditors, there is no need for POCs. If the case later turns into a case with assets, a notice will be sent indicating that POCs can be filed and the deadline for filing them.

If a POC is filed late, an opposition to allowance of the claim probably will be filed and probably will succeed.

5. Do not violate the discharge injunction.
A discharge is what most debtors want at the end of the day. It relieves them of personal liability for dischargeable debts (e.g., credit card debts, deficiency claims, unsecured loans).

The official discharge notice is sent out approximately three months after a Chapter 7 filing. Creditors with dischargeable debts are then permanently enjoined (the discharge injunction) from trying to collect from the debtor personally. This is true in a no asset Chapter 7 case even if the debtor did not list the debt in the debtor's bankruptcy schedules.

Ignoring the discharge injunction can lead to sanctions and civil contempt charges.

Tip #5 1/2: Review Tip #1 again!

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