Bankruptcy Litigation Overview From Lansing Bankruptcy Lawyer

 As with any other area of the law, bankruptcy has its share of litigation.  Much of what the Bankruptcy Court handles is administrative in nature.  The meetings of creditors in either chapter 7 or chapter 13 are administrative.  Bankruptcy courts often have motion calls, either weekly or daily, that take care of seemingly mundane matters.  Despite this, bankruptcy does have litigation.

 In less than five percent of all chapter 7 cases, creditors and sometimes trustees initiate litigation.  Pursuant to section 523, a creditor may ask the Bankruptcy Court to except or carve out a particular debt from the debtor’s discharge, holding that it is nondischargeable and therefore still owed.  This is done by filing a complaint alleging certain enumerated grounds for holding the debt to be nondischargeable.  The debtor files an answer to the complaint and discovery begins.  Discovery consists of both written and oral testimony, the latter of which is known better as deposition testimony.  If the parties haven’t resolved their differences after the close of discovery, a trial begins.  Unlike what is seen on television, virtually all bankruptcy trials are bench trials, not jury trials, with the judge hearing all the evidence and rendering a verdict.

 Most chapter 7 trials involve claims of fraud, damages suffered due to reckless or willful behavior or divorce debts.  There are other grounds for which complaints may be brought, but these are the main reasons people seek to have debts excepted from debtors’ discharges.

 In chapter 13 cases, the reasons for complaints are more esoteric.  The complaints filed usually involve cars that were repossessed at the time of the filing of the case, junior mortgages that are unsupported by value in a house that should be stripped away and other things that help debtors reorganize their financial situations.  The same procedures as described above are utilized and the judge again is the sole trier of fact.

 Bankruptcy litigation is typically not covered by the original retainer paid to the attorney.  Most bankruptcy attorneys charge hourly to defend or prosecute lawsuits.  Before you engage an attorney to file a case, it is best that you have a thorough and honest consultation with your attorney so she can advise you of your exposure and perhaps minimize the chances of being sued.

See also Lansing Bankruptcy Lawyer