Bankruptcy: Don’t Get Home-Towned

The US Constitution grants Congress the power to establish uniform laws on Bankruptcy. Our bankruptcy law is a Federal law administered by the US courts.

But, does that make it the same from state to state? It certainly does not. Although the main framework of the law applies across the country, the specifics of many provisions vary greatly from state to state and even from District to District within a state.

Some states are more pro-chapter 13’s than others. For example, in the Eastern District of California, where I practice, we file about 2 to 3 times as many chapter 7 cases as Chapter 13s. But in Tennessee, the opposite occurs (so I’m told).

Each court seems to have its share of local customs. These can include the following:
1. specifics for how the general bankruptcy law is interpreted;
2. what the role of the trustee is in the bankruptcy process is; and
3. how the US Bankruptcy rules are actually administered.

Many districts have their own form of Chapter 13 plan. In Sacramento, where I practice, we use a form for all Chapter 13s, which is considerably different from the plan used 60 miles away in the Northern District of California (San Francisco). There is a move to use a standard form for all Chapter 13s in the country, but it’s still in the “talking” stage. My guess is that it will still be interpreted differently depending on district.

The rule here is obvious: if you’re going to file bankruptcy, hire someone in your area who knows the local customs. It’s far easier to walk into a bankruptcy hearing (even the first meeting of creditors) with someone that knows the bankruptcy trustee and is familiar with him, then to go into the hearing with a representative who, like you, has never been there before.

Don’t get home-towned: hire local counsel.

image credit:  Wikopedia