Aug. 5, 2020 – Bankruptcy is in the news with the pandemic economic downturn. Both creditors and debtors are having problems either paying their bills or collecting debts owed to them.
Clients may turn to you for help and advice on the pros and cons of filing for bankruptcy, so bankruptcy might appear to be an attractive addition to your practice. However, to actually help your clients by offering competent advice, there are several factors to consider.
Background: State and Federal Statutes
Bankruptcy law, like tax law, is heavily dependent on statutes and rules. The federal bankruptcy code is found at U.S.C. Title 11. It is divided into chapters. Some of the chapters, such as chapter 2 (case administration) apply to all forms of bankruptcies. Other chapters focus on the type of entity seeking bankruptcy (chapter 12, family farmer) or the type of bankruptcy (chapter 7, liquidation). Again, like the tax code, there are numerous cross references.
Barbara Fritschel is the Seventh Circuit Court of Appeals branch librarian in Milwaukee. She is a member of the Law Librarians Association of Wisconsin. LLAW's Public Relations Committee coordinates regular contributions by its members to InsideTrack.
Wisconsin has a similar bankruptcy procedure under Wis. Stat. chapter 128 (Assignment for the benefit of creditors).
State law also plays a role in a federal bankruptcy proceeding. For example, debtors are allowed to “exempt” (i.e., keep) certain property up to a specified amount. Both federal and state law provide these exemptions. Some states have “opted out” of the federal exemptions meaning people in that state can only apply the state’s exemptions. Wisconsin has not opted out, so debtors can choose either the Wisconsin or federal exemptions. There is no mixing between the two.
Bankruptcy relies heavily on documents. In addition to the petition, a debtor will have to fill out numerous schedules and notices and be prepared to hand over tax returns and other documents. Attorneys have additional responsibilities in disclosures and certifications.
Many requirements have short deadlines, and failure to meet them can result in the case being dismissed. Short deadlines and document mistakes are just two of the pitfalls awaiting the unwary.
Bankruptcy practitioners have their own terms of art, many of which are not mentioned in the code, such as “Chapter 20” and “means testing.” Fortunately, there are several resources to help avoid common pitfalls and understand the terms of art.
Access to the federal bankruptcy code and the Federal Rules of Bankruptcy Procedure is a must. Several publishers offer print copies, ranging from just the text to those including comments from the rules committee and legislative history, to redline editions showing changes from the previous year. They are also available online.
Knowing the local bankruptcy court rules is extremely important. Both the Eastern District and Western District bankruptcy courts have local rules. The Eastern District’s bankruptcy rules are more extensive, including appendices and model forms such as a mandatory form for Chapter 13 bankruptcies (Adjustment of debts of individuals).
The courts’ websites provide other useful information, including filing fees, local forms and information for attorneys, debtors and creditors – you can find them linked on the homepages of each district – for the Eastern District and the Western District.
The U.S. Courts website includes fees information, a glossary of bankruptcy terms, and official forms.
Books on Bankruptcy: Federal
There are several good one-volume primers for general practitioners or others interested in handling bankruptcy cases.
David Epstein’s Bankruptcy and Related Law in a Nutshell from West Academic Publishing is a familiar source to law students. This book offers basic descriptions of the law, seminal cases, and key questions that need to be answered by the bankruptcy practitioner. It is especially good at pointing out terms of art.
Bankruptcy Practice for the General Practitioner by W. Homer Drake Jr. and Karen Visser, from Thomson Reuters publishing, is a large, one volume book that provides more detail than Epstein’s book. It is arranged by topic and not code section (which is the arrangement of most bankruptcy books), and includes sample forms.
The Federal Judicial Center’s Consumer Bankruptcy Law, Chapter 7 & 13 pamphlet – free for download – covers the basics of both forms of consumer bankruptcy, noting many of the pitfalls that can lead to dismissal.
Resources on Bankruptcy in Wisconsin
Collections and Bankruptcy in Wisconsin from State Bar of Wisconsin PINNACLE® focuses on Wisconsin law and cases. In addition to a significant section on bankruptcy, it includes sections on other forms of collection such as garnishment, replevin, and Chapter 128 actions. Inside, you’ll find tips, checklists, cautions, and other helpful tools.
In addition to books, the State Bar also regularly offers CLE seminars on all aspects of bankruptcy. To see a current list, use this link to visit Marketplace on WisBar.org. You may find two recent OnDemand seminars a good introduction: The Basics of Filing Chapter 7 & Chapter 13, 2020 and Beyond the Basics of Chapter 7 & Chapter 13, 2020.
A good way to learn about the practice is to join the State Bar’s Bankruptcy, Insolvency, and Creditor's Rights Section. As a section member, you have access to the section's website, its three elists, and other helpful resources. The section is regularly involved with bankruptcy-related CLE programs and organizes an annual educational retreat.
Also, keep an eye out for articles in State Bar publications InsideTrack and Wisconsin Lawyer® magazine, including Adding Bankruptcy to Your Practice in Tough Economic Times, in the June 3, 2020, issue of InsideTrack.
Treatises on Bankruptcy
Collier on Bankruptcy by Henry Sommer and Richard Levin, from Matthew Bender publishing, is considered the preeminent treatise on this topic. Coverage is comprehensive and includes several volumes on forms (both consumer and commercial), state exemptions and legislative history. Numerous smaller, specialized sets, such as Collier Family Law and the Bankruptcy Code, are also available.
Ginsberg and Martin on Bankruptcy, by Robert E. Ginsberg, Robert D. Martin, Susan V. Kelley from Wolters Kluwer publishing, has always been edited by Wisconsin bankruptcy judges, currently the Western District Chief Judge Catherine J. Furay. This treatise, in its fifth edition, includes a significant number of Seventh Circuit case references. Available in three volumes or via online access, this can be a practical choice for a general practitioner.
Starting a new practice area is not an easy task, but with these resources, you can determine whether bankruptcy law is right for you. In addition to joining the State Bar Bankruptcy Section, reach out to specialty and local bar associations, which may have members experienced in bankruptcy. Your colleagues may be able to put you in touch with someone willing to talk with you and potentially be a mentor.
And, if you are not sure which resource might work best for you, don't hesitate to look them over at your local law library or ask the librarian for more information.