Bankruptcy for the most part is transactional. If all of your paperwork is properly prepared, you will have to go to the court where suit is filed for a meeting of creditors also known as ‘section 341 meeting’ within 45 days of the case filing. About 75% of the cases at our firm are considered transactional cases for which most of the time is spent in educating the client and reviewing the forms for errors. Approximately, 25% of the cases involve bankruptcy litigation which is related to claims litigation, a bankruptcy adversary, objections to debtors’ claim of exemptions or motion for relief from the automatic stay. The law office of Busby & Associates primary practices out of the Houston Division of the Southern District of Texas bankruptcy courts.
A proof of claim is what the creditor files to get paid in a bankruptcy. In a chapter 7 no asset case, most creditors do not file claims as there are no assets to be sold to pay off the claims. In a chapter 13, most secured and priority creditors will file claims. An unsecured creditor may or may not file a claim. Even if a creditor doesn’t not file a claim for the secured or priority claims there is still discharge of the debt, though it may indicate that the creditor either has overlooked the bankruptcy or chosen not to participate. You can file a claim for the creditor if you would like to exercise your right to cure the payments that you are behind on. Priority creditors typically include tax debts and child support. Unsecured debt does not have a lien on your property and will be paid the least amount in a chapter 13 bankruptcy. Typically, the unsecured creditor is discharaged in a chapter 7 bankruptcy with no payment.
Objections to secured proof of claims are typically made when the value is in dispute and you are attempting to cram personal property. If the claim is against the real property, then the objection is usually made because of an accounting issue on the arrears owed, property taxes paid, or homeowners insurance.
Most objections made to priority claims are needed to be accounted for verifying the amount alleged to be owed. For example, the taxes owed and the years that are in question. Child support is typically accounted for through the Texas Attorney General. Spousal support is accounted through a law firm or the obligee, or an employer who is under a wage order.
Most objections here are made when the debt owed has been assigned to a 3rd party creditor and the assignment is not attached to the claim. Also, if the claim is time barred under Texas law (it is over 4 years since the last payment or charge), then you can object to the claim and get it denied.
The bankruptcy adversary is filed as a separate case from the main bankruptcy though it is related to it. If you want a particular type of relief, then under certain fact patterns you could file an adversary.
Adversaries in bankruptcy case involve:
1. Exceptions to discharge
2. Suits to establish interest in real property
3. Request for injunctions not mentioned in the debtor’s confirmed plan
4. Turnover of property (motor vehicles is the most common)
5. Willful violation of the automatic stay
6. Discharge of Student loan
7. Revoke an order of confirmation
Exempt property is a property that the creditor cannot take from you for the purpose of selling it to take the owed amount. In a Texas bankruptcy, you can claim either the Texas scheme or the Federal scheme of exemptions. The creditors have 30 days from the 1st meeting of creditors to file an objection to the claim of exemptions. Most the objections have to do with not spending enough time with your attorney. You can resolve many property issues by doing some pre-bankruptcy planning with me or Eric Southward. Almost all the objections to exemptions that I have seen are because the debtor hired a “baby lawyer” or a lawyer who does not routinely practice bankruptcy.
Motion for relief typically involve secured creditors or divorce proceedings. All other creditors who want relief typically file a bankruptcy adversary if they feel they have a cause. The secured creditor has a right to demand that you make the post-petition payments on time and carry insurance on the collateral. Eviction proceedings may be stayed by filing a bankruptcy for a couple of weeks. There is also a fair amount of stay litigation involved where tenants file bankruptcy and the landlord has to seek relief from the bankruptcy court.