Council Post: How Court Closures May Affect Your Bankruptcy Case

William Waldner is a NYC bankruptcy attorney whose sole focus is in the areas of chapter 7 and chapter 13 bankruptcy cases. 

Business shutdowns have hit far and wide, and virtually every small business owner in America has felt it. Bankruptcy, personal and business, is an increasingly helpful and potentially necessary option for many.

Coronavirus-related legislation has eased certain bankruptcy rules. These rule changes and other stimulus legislation may also make personal bankruptcy a more effective way for business owners to prepare for our eventual economic recovery.

Whatever kind of bankruptcy you pursue — personal or business; chapter 7, 11 or 13 — your case will start, end and spend much of its life in a federal bankruptcy court. But what does “in court” even mean these days?

The answer to that question is every client’s least favorite to hear, but often the only response an honest lawyer can give: It depends.

Bankruptcy Courts: From Teleconferencing To Business As Usual

Like everywhere else, courts around the country shut down as the pandemic reached our shores. This disrupted all types of cases, including bankruptcies, and judges immediately got to work figuring out how to keep their dockets moving with video and teleconferencing, better electronic filing capabilities and more.

Bankruptcy courts are a bit of an unusual beast, though. I won’t go into all the constitutional details, but there’s one bankruptcy court per federal district (there may be more than one courthouse for each “court,” as well). Every court in each district, including each bankruptcy court, can make some of its own administrative decisions, but it also has to follow certain rules set by the federal circuit court presiding over the district. And each federal circuit covers more than one state.

And as you’re no doubt aware, each state is free to determine its own plan for stay-at-home orders and reopening businesses and public places. Some counties and cities are even making their own decisions in these regards.

So, for example, the bankruptcy court in Manhattan, which is in the Southern District of New York, has to make some of its own decisions regarding how to conduct business, but it is also subject to any rules or guidelines set by the judges of the Second Circuit — which presides over courts in New York, Connecticut and Vermont — and it also needs to take into account state and city restrictions regarding the pandemic.

Across the river, the New Jersey Bankruptcy Court — which has courthouses in Trenton, Newark and Camden — must account for any special restrictions in those cities, as well as New Jersey’s own rules and any guidelines set by the Third Circuit, which also includes Pennsylvania and Delaware.

The end result is a lack of uniformity in the way bankruptcy courts are getting things done, with some conducting more limited business via telephone, while others are engaged in active videoconferencing in a way that approximates business as usual, and some are on the verge of reopening for in-person appearances with varying restrictions.

Your Case Isn’t On Indefinite Hold

The good news is that bankruptcy courts are getting things done. Even those that began with more limited proceedings are ramping up their virtual hours to something close to normal, and teleconferenced hearings and proceedings may prove to be more efficient.

Better still is the fact that bankruptcy proceedings have traditionally involved more paperwork moving in and out of the court system, and fewer in-person hearings. This naturally lends itself to work-from-home and other distancing restrictions, and it means you don’t personally need to worry about the mechanics of your case. Your bankruptcy lawyer will handle most of the logistics.

Your lawyer will also undoubtedly be aware of your district bankruptcy court’s current state of operation, but you can and should check for yourself. Head over to USCourts.gov and enter your zip code in the search box at the bottom of the right sidebar (enter the zip code of your personal residence for tax purposes or the location of your business).

Look for the bankruptcy court in your results, and you can go to that court’s homepage to get information on how it is holding hearings, what postponements it may have and more.

You can also read about the bankruptcy process, in general, to see how your case might progress and what types of information you’ll need to start gathering.

No one starts a business intending to file for bankruptcy, and it can be a tough decision to make. Remember that bankruptcy is a tool like any other, and it exists for a reason. Sometimes, it’s the best tool you have to weather a financial storm so that you can make hay when the sun starts shining. Whether you’re in the middle of your bankruptcy or thinking of filing, the tool is there for you to use.

And one way or another, the bankruptcy courts are open for business.

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