BANKRUPTCY CASES Flashcards
Bankruptcy Cases
Federal courts, in their exclusive jurisdiction over bankruptcy cases, give people and businesses a fresh start when they can no longer pay their debts.
Bankruptcy Courts oversee a process where:
a debtor repays creditors in a fair and orderly manner to the extent that the debtor has property available for payment;
a failing business reorganizes by restructuring debt or the business entity itself, or, alternatively, to provide a framework for the orderly liquidation of the failed enterprise; and
a potentially dishonest action is deterred that would undermine the purposes of bankruptcy law.
A bankruptcy case normally begins by the debtor filing a petition with the bankruptcy court. A petition may be filed by an individual, by spouses together, or by a corporation or other entity. The debtor is also required to file statements listing assets, income, liabilities, and the names and addresses of all creditors and how much they are owed. The filing of the petition automatically prevents, or “stays,” debt collection actions against the debtor and the debtor’s property. As long as the stay remains in effect, creditors cannot bring or continue lawsuits, make wage garnishments or other collection efforts including making telephone calls demanding payment.
Creditors receive notice from the clerk of court that the debtor has filed a bankruptcy petition. Some bankruptcy cases are filed to allow a debtor to reorganize and establish a plan to repay creditors, while other cases involve liquidation of the debtor’s property. In many bankruptcy cases involving liquidation of the property of individual consumers, there is little or no money available from the debtor’s estate to pay creditors. As a result, in these cases there are few issues or disputes, and the debtor is normally granted a “discharge” of most debts without objection. This means that the debtor will no longer be personally liable for repaying the debts.
In other cases, however, disputes may give rise to litigation in a bankruptcy case over such matters as who owns certain property, how it should be used, what the property is worth, how much is owed on a debt, whether the debtor should be discharged from certain debts, or how much money should be paid to lawyers, accountants, auctioneers, or other professionals. Litigation in the bankruptcy court is conducted in much the same way that civil cases are handled in the district court. There may be discovery, pretrial proceedings, settlement efforts, and a trial.
Civil Cases
A federal civil case involves a legal dispute between two or more parties. A civil action begins when a party to a dispute files a complaint, and pays a filing fee required by statute. A plaintiff who is unable to pay the fee may file a request to proceed in forma pauperis. If the request is granted, the fee is waived.
The Process:
To begin a civil lawsuit in federal court, the plaintiff files a complaint with the court and “serves” a copy of the complaint on the defendant. The complaint describes the plaintiff’s damages or injury, explains how the defendant caused the harm, shows that the court has jurisdiction, and asks the court to order relief. A plaintiff may seek money to compensate for the damages, or may ask the court to order the defendant to stop the conduct that is causing the harm. The court may also order other types of relief, such as a declaration of the legal rights of the plaintiff in a particular situation.
Case Preparation
There may be “discovery,” where the litigants must provide information to each other about the case, such as the identity of witnesses and copies of any documents related to the case. The purpose of discovery is to prepare for trial by requiring the litigants to assemble their evidence and prepare to call witnesses. Each side also may file requests, or “motions,” with the court seeking rulings on the discovery of evidence, or on the procedures to be followed at trial.
Discovery may include a deposition, requiring a witness to answer questions about the case before the trial. The witness answers questions from the lawyer under oath, in the presence of a court reporter, who produces a word-for-word account called a transcript.
Settling Differences:
To avoid the expense and delay of having a trial, judges encourage the litigants to try to reach an agreement resolving their dispute. The courts encourage the use of mediation, arbitration, and other forms of alternative dispute resolution, designed to produce a resolution of a dispute without the need for trial or other court proceedings. As a result, litigants often agree to a “settlement.” Absent a settlement, the court will schedule a trial. In a wide variety of civil cases, either side is entitled under the Constitution to request a jury trial. If the parties waive their right to a jury, then a judge without a jury will hear the case.
Trial Process
By applying rules of evidence, the judge determines which information may be presented in the courtroom. So that witnesses speak from their own knowledge and do not change their story based on what they hear another witness say, they are kept out of the courtroom until they testify. A court reporter keeps a record of the trial proceedings, and a deputy clerk of court keeps a record of each person who testifies and any documents, photographs, or other items introduced into evidence.
The opposing attorney may object if a question it invites the witness to say something that is not based on the witness’s personal knowledge, is unfairly prejudicial, or is irrelevant to the case. Generally, the judge either overrules or sustains – allows – the objection. If the objection is sustained, the witness does not answer the question, and the attorney must move on to his next question. The court reporter records the objections so that a court of appeals can review the arguments later if necessary.
Closing
After evidence is heard, each side gives a closing argument. In a jury trial, the judge will explain the law that is relevant to the case and the decisions the jury needs to make. The jury generally is asked to determine whether the defendant is responsible for harming the plaintiff in some way, and then to determine the amount of damages that the defendant will be required to pay. If the case is tried before a judge without a jury, known as a “bench” trial, the judge will decide these issues or order some kind of relief to the prevailing party. In a civil case, the plaintiff must convince the jury by a “preponderance of the evidence” (i.e., that it is more likely than not) that the defendant is responsible for the harm the plaintiff has suffered.
