Friday, November 25, 2022
HomeEditor PicksAre Bankruptcy Courts Affected By Government Shutdown

Are Bankruptcy Courts Affected By Government Shutdown

Government Shutdown Forces Chief Judge To Temporarily Delay Many Civil Cases In Us Middle District Court

Court Shutdown, Sbarro, Lehman: Bankruptcy Video

With funding cut off due to the federal governments shutdown, Chief Judge Christopher C. Connor on Thursday ordered a temporary halt to many civil cases in U.S. Middle District Court.

Conners stay order affects most civil cases in which federal lawyers, especially those from the U.S. Attorneys Office, are involved.

U.S. Attorney David Freed sought the stay, citing furloughs of his staff that took effect when the U.S. Justice Departments fiscal appropriation expired Dec. 21.

Conners order does not extend to the federal bankruptcy court or to civil cases involving people who are seeking release from confinement.

Deadlines for civil cases affected by the stay will be adjusted once the shutdown ends, Conner noted. It is not clear when that will be since President Donald Trump and congressional Democrats continue to wrangle over Trumps demand for funding to build a wall on the Mexican border.

If the deadlock lasts through Jan. 16, Freed must provide Conner with a status report to help the judge determine if the stay should be continued.

Middle District Court covers a huge swath of Pennsylvanias midsection between the Maryland and New York borders.

Note to readers: if you purchase something through one of our affiliate links we may earn a commission.

Judiciary Open During Government Shutdown

Despite a government shutdown, the federal Judiciary will remain open and can continue operations for approximately three weeks, through February 9, by using court fee balances and other funds not dependent on a new appropriation.

Most proceedings and deadlines will occur as scheduled. In cases where an attorney from an Executive Branch agency is not working because of the shutdown, hearing and filing dates may be rescheduled.

Case Management/Electronic Case Files also will remain in operation for electronic filing of documents.

If the shutdown were to continue past three weeks, and exhaust the Judiciarys resources, the Judiciary would then operate under the terms of the Anti-Deficiency Act, which allows work to continue during a lapse in appropriations if it is necessary to support the exercise of Article III judicial powers. Under this scenario, each court and federal defenders office would determine the staffing resources necessary to support such work.

Events Leading To The 2013 Shutdown

Government shutdowns have been happening sporadically for nearly four decades, each with their own cause. In 2013, its a matter of funding or the lack thereof. At the basic level, government spending must be approved by the President, as well as by Congress, which consists of the House of Representatives, and the Senate. If the two components of Congress cannot agree on spending this time around, the gridlock pertains to Obamacare they cannot then approve spending. If they cannot approve spending, no spending can occur. If no spending can occur, the government enters a shutdown period while the stalemate struggles to be resolved.

Don’t Miss: How Much Does Credit Score Go Up After Chapter 7 Falls Off

Can Bankruptcy Courts Stay Open During A Government Shut Down

The partial federal government shutdown, which began Dec. 22, is now in its fourth week, the longest shutdown of the modern era, due to a budget impasse between Congress and the President over funding for a border wall. Its understandable that consumers and businesses that have filed bankruptcy petitions or that are considering seeking bankruptcy protection have questions about how the government shutdown affects the bankruptcy courts.

The federal court system, including the U.S. Bankruptcy Court, has continued to operate on a short-term basis using court fees and other limited funds that are not part of the annual appropriations process. Bankruptcy court hearings and meetings of creditors have proceeded according to published notices. It is unlikely that this will change. Courts have been urged to curb non-essential spending by delaying new hires and certain types of travel. Its safe to say that the longer the partial shutdown lasts, the more government services will be affected. The office hours of the bankruptcy clerk of court may be impacted as well.

The partial federal government shut down will not impact a debtors ability to file a bankruptcy case or other pleadings through the electronic filing system.

Stay Ahead Of The Curve

Government shutdown wouldn

In the legal profession, information is the key to success. You have to know whats happening with clients, competitors, practice areas, and industries. Law360 provides the intelligence you need to remain an expert and beat the competition.

  • Access to case data within articles
  • Access to attached documents such as briefs, petitions, complaints, decisions, motions, etc.
  • Create custom alerts for specific article and case topics and so much more!

TRY LAW360 FREE FOR SEVEN DAYS

Hello! I’m Law360’s automated support bot.

  • I forgot my password
  • I took a free trial but didn’t get a verification email
  • How do I sign up for a newsletter?

Also Check: Bankruptcy Petition Preparer Training

Bankruptcy Watchdogs At Us Trustee Office Leashed By Shutdown

Because of the partial government shutdown, U.S. Trustee lawyers are limiting their work in bankruptcy courts to emergency matters, affecting some Chapter 11 cases, court officials said.

Bankruptcy courts will operate under the same limitations as the U.S. District Courts, said Una OBoyle, clerk of court in Wilmington, Del., one of the busiest bankruptcy courts in the U.S.

The U.S. Trustee acts as a watchdog in corporate bankruptcies, putting together official creditor committees and organizing meetings between debt holders and bankrupt companies.

In Houston, Jan. 3, during a hearing in the Westmoreland Coal Co. bankruptcy, an attorney for the U.S. Trustee appeared in court while on furlough saying her work in the case may be slowed by standoff.

In Wilmington, the Department of Justice asked that the bankruptcy case of Promise Healthcare Group be halted temporarily because government lawyers couldnt participate during the shutdown.

The partial government shutdown started on Dec. 22 after President Donald Trump declined to sign spending legislation without $5 billion for the border wall he campaigned on. With the president under pressure from conservatives to fill that promise and Democrats now in control of the House of Representatives, it could drag on.

To contact the reporter on this story: Steven Church in Wilmington, Del., at

To contact the editors responsible for this story: Nikolaj Gammeltoft at Rick Green

We Want To Work: Federal Employees Brace For Hard Times

As the government shutdown drags on, 800,000 federal workers and their families are preparing to miss a paycheck. The Times reached out to some of them to hear their stories.

Under the Constitution, Supreme Court justices, appeals court judges and district judges would continue to be paid, according to the Congressional Research Service.

Court officials are grappling with all sorts of complications that could arise, including the possible effects on court reporters and court interpreters, as well as on jurors who are supposed to be paid for their service and reimbursed for transportation expenses.

In Brooklyn, the Federal District Court for the Eastern District of New York is planning to furlough some court employees, and groups that use courthouse facilities for occasions like bar association meetings or continuing legal education are being told to make other plans.

Theres a lot of angst, I can tell you that, Eugene J. Corcoran, the district executive for the Eastern District, said of the sentiment among workers.

In the United States Court of Appeals for the Ninth Circuit, which covers much of the West, one idea being considered is to close the appellate courthouses to the public for one weekday per week and furlough employees that day.

My chief judge has no intention of canceling court, said Molly Dwyer, the clerk of court for the Court of Appeals for the Ninth Circuit, noting that oral arguments had been scheduled for weeks to come.

Also Check: How To File Bankruptcy In Virginia

Chapter 7 Vs Chapter 1: Key Differences

Like Chapter 7, Chapter 11 requires the appointment of a trustee. However, rather than selling off all assets to pay back creditors, the trustee supervises the assets of the debtor and allows business to continue.

Its important to note that debt is not absolved in Chapter 11. The restructuring only changes the terms of the debt, and the company must continue to pay it back through future earnings.

If a company is successful in Chapter 11, then typically it will be expected to continue operating in an efficient manner with its newly structured debt. If it is not successful, then it will file for Chapter 7 and liquidate.

How Will The Government Shutdown Affect Bankruptcy Proceedings

US pulls back from brink of bankruptcy and ends crippling government shutdown

With parts of the federal government shutdown today, and a compromise is still unsure, lots of federal government employees will be experiencing adverse economic effects. Federal government employees are expecting to sign furlough papers and return home. Nonetheless, many of them are still waiting to see the affects of their departments. About 800,000 workers are expected to be ordered to stay at home on furlough. The government assured it will continue to support programs that are crucial to keeping public security and safeguarding property.

Throughout the furlough, Americans will certainly not receive an income during the closure and might have to deal with bankruptcy. There is a possibility that Congress will certainly compensate them as soon as the furlough ends. Yet there is no assurance. Regrettably, it will certainly be the dedicated federal workers that will surely feel the consequences of the shutdown the most. Many will be compelled to use credit cards through this challenging time. Credit card bills may pile up and lead to impending bankruptcy.

Bankruptcy Courts

If you have questions about your plans to file bankruptcy in New Jersey, please contact NJ bankruptcy attorney, Karina Lucid. She will be more than happy and able to assist you during this challenging time.

You May Like: How Many Times Has Donald Filed For Bankruptcy

What The Shutdown Means For Bankruptcy Proceedings

The 2013 shutdown, like previous shutdowns, does guarantee one thing: the temporary closure of multiple governmental services and bureaus deemed non-essential. A whopping 800,000 public servants have been furloughed placed on leave without pay, for an indeterminate amount of time and the toll on the already struggling American economy has been estimated by IHS, Inc. at a loss of $300 million per day, at least initially.

Where matters of bankruptcy come into play, the effects of the shutdown might be a little more predictable, which is a cold-comfort sort of good news for businesses and consumers already wading through the process.

Reuters reports that on one hand, the Department of Justice which you may recall being deemed non-essential, while the shutdown is in effect will curtail non-critical civil litigation. On the other hand, Federal courthouses will remain open during the shutdown, per the Anti-Deficiency Act.

The courts are expected to be able to tread water for several weeks, drawing on funds from the reserves of long-term appropriations , as well as filing fees. After that brief period, however, non-essential employees would be furloughed, with the Chief Judge of each district deciding on essential versus non-essential personnel.

While nothing is certain during a government shutdown, the official site of the United States Courts has this to say:

Bankruptcy Courts Open During Government Shutdown

The federal court system, including the United States Bankruptcy Courts, will remain open during the government shutdown as a result of congressional infighting. Bankruptcy dates, including 341 meetings, bankruptcy deadlines, and court hearings will proceed without interruption or alteration.

In a memorandum sent from the Administrative Office of the U.S. Courts, the federal courts will keep their doors open for two weeks by using revenue from filing fees and long-term appropriations that are not part of the annual budget. This money will be used to pay staffers as normal. If the shutdown continues longer than two weeks, some staff may be furloughed while others may be forced to work without pay until the shutdown ends.

Federal courts are considered essential services that fall under the Anti-Deficiency Act, a federal law that keeps the government running in the event that federal funding is frozen. All federal courts are encouraged to conserve as much as possible by deferring non-crucial expenses. The Justice Department, which oversees the United States Trustees Program, said that its attorneys would postpone many non-critical civil matters.

Most experts do not expect the shutdown to last longer than a couple weeks. If the shutdown continues, there may be delay in some cases. If you have specific questions regarding how the government shutdown may affect your bankruptcy case, contact your attorney.

Don’t Miss: Leasing After Bankruptcy

South Florida Bankruptcy Court Surviving Government Shutdown

Empty wallet. Photo: Champion studio/Shutterstock.com.The U.S. Bankruptcy Court for the Southern District of Florida is so far surviving the partial government shutdown that’s plagued the nation since Congress failed to pass a spending bill Dec. 21.The court’s three locations in Miami, Broward and West Palm Beach will remain open as usual at least until Jan. 31, when the court will send an update, Clerk of Court Joe Falzone said.Unlike the Miami Office of the U.S. Trustee, which is temporarily closed, the judiciary can afford to plow on as it doesn’t get all its funding from Congress. A handful of staff from the MIami trustee’s office are still available for a limited number of tasks, including scheduling creditor meetings, overseeing the appointment of trustees and tackling emergencies.If the judiciary does shut down, Falzone said the court’s electronic filing system, PACER, would remain online.

Preparing For Financial Turmoil

The

Whether it was prolonged financial carelessness or the unexpected disruption of COVID-19 that created a bankruptcy filing, there are strategies to follow for anyone seeking a financial rebound.

If youre out of work, hold on to your cash, Drescher said. Spending reserve money to pay credit card bills and other debts that could be discharged in bankruptcy would be a terrible mistake right now. Be brave, pragmatic and proactive. Like the virus, the economic problems arent going away.

Stay liquid as possible and reduce expenditures where you can, said Guy Baker, founder of Wealth Team Alliances, a wealth advisor firm. Dont put yourself in a position where people owe you money. Make them pay cash or dont provide the service. Better to not sell something than to sell it and not get paid.

The best way a person or business can cope with the tsunami of bankruptcies coming down the pike is to be nimble and small and have as little reliance on other enterprises as possible, New York-based bankruptcy attorney David Reischer said.

The storm is coming. Be ready for it.

Read Also: Getting Apartment After Bankruptcy

Government Shutdown Hits Bankruptcy Watchdogs

U.S. bankruptcy courts remain open for business, but the government shutdown leaves them far from full strength.

Only one third of the employees from the U.S. Trustee Program, the Justice Department unit that monitors bankruptcy cases throughout the country, are essential workers who are required to work through the shutdown. The other 780 employees have been furloughed.

That means there are fewer eyes watchdogging ongoing bankruptcy cases, both consumer and corporate. The courts remain open and continue to hold hearings and approve motions, but Congresss inability to break the stalemate that shut down the government could slow down some ongoing Chapter 11 cases.

At a hearing in the LightSquared Chapter 11 case Monday, Judge Shelley C. Chapman of the Manhattan bankruptcy court said she was concerned that the U.S. trustee wouldnt be staffed to file potential objections ahead of a key hearing set for next week.

Tracy Hope Davis, the trustee in charge of monitoring the LightSquared case, is still working, but many employees who work for her, including some of the lawyers that prepare court filings, arent. Other U.S. trustees have the same issue.

In a contingency plan posted on its website, the Justice Department said the trustees will attempt to curtail or postpone appearances at the bankruptcy court while the shutdown is in effect.

Write to Joseph Checkler at and Stephanie Gleason at .

Bankruptcy And The Government Shutdown: Possible Effects

What effect will the partial federal government shutdown have on bankruptcy proceedings?

As with so many other aspects of the shutdown, there is a short answer and a long answer.

The short answer is easily enough stated. Federal bankruptcy courts remain open.

In this post, however, we will discuss some of the ways that the government shutdown may still affect the bankruptcy process. In particular, the absence of furloughed federal workers from the U.S. Trustee Program could slow down the ability of the courts to work through bankruptcy cases, especially Chapter 11 cases.

Furloughs have cost the Trustee Program 780 workers this week. This means that U.S. bankruptcy trustees are now operating without about two-thirds of their workers.

The absence of the furloughed workers makes it more difficult for trustees to monitor bankruptcy filings. This means reviewing them so that necessary information isnt missing. It is also important to determine that there were no abuses of the process, such as attempts to hide assets.

Verifying that the means test for a given type of bankruptcy has been met is also part of the process. For example, if someone is over the limit for Chapter 7, they should really be filing Chapter 13, not Chapter 7.

All of these monitoring and reviewing activities are slowed down when the U.S. Trustee is only at one-third strength.

Read Also: Renting During Chapter 13

How Will The Government Shutdown Affect Bankruptcy Matters

TheUS government shutdown has commenced, and we are still determining what the effect will be on bankruptcy cases and related hearings.

It appears thatfor at least the next ten days, the US Bankruptcy Court has sufficient fundingto remain open and functioning, and hearings are still being held inMassachusetts. However, it is not certain whether the potential furloughof non-essential employees in the clerks offices will slow down theprocessing of administrative matters.

What is known is that the shutdownhas serious ramifications for the watchdog agency of the US Dept of Justice,which is better known as the Office of the US Trustee . Thisagency includes the function of reviewing all bankruptcy matters, including chapter7, 11 and 13 cases, and often takes adversary positions in pending hearingsbefore the US Bankruptcy Court. It is reported that only about one-thirdof the employees of the UST are deemed to be essential, and therefore therewill be far fewer employees in that agency reviewing chapter 11 cases,supervising chapter 7 trustees, and able to make court appearances at thehearings that are still being held by the bankruptcy judges.

RELATED ARTICLES

Popular Articles