Upon the filing of a chapter 7 or a chapter 11 petition, a bankruptcy case starts.  With that start, a stop (or “stay”) is automatically imposed on creditor actions to collect debts from debtor or to control its property or operations – except within the bankruptcy case.  The foreclosure action, the collection calls, the post-judgment collection efforts, the perfection of security interests, and the acts to replace management per loan documents or bond indentures – all must cease.  If they do not, a debtor or trustee may seek relief (injunction, […]

In the context of a bankruptcy case, this refers to the date (set by the court) on or before which a proof of claim must be filed.  Otherwise, the claim may be barred and the claimant entitled to no distribution from a plan or from the proceeds of the liquidation of debtor’s assets.  Again, to distinguish this from the Match.com context, a creditor should not flirt with a bar date, but should compose its proof of claim and file it as soon as practicable, always keeping an eye on the […]

A potentially great information source for creditors, and possibly a chance for a DIP to re-assure creditors. Within a reasonable time after a bankruptcy case starts (including both chapter 7 and chapter 11 cases), the U.S. Trustee convenes a meeting of creditors and equity holders under section 341 of the Bankruptcy Code. A representative of the DIP or debtor is placed under oath and must answer questions posed by, among others, the creditors that are present.  The DIP or debtor is often made to explain why it filed and what it plans […]

Before the bankruptcy case, the creditor had a debt to collect, lawsuit, potential lawsuit, grievance, gripe about slow payment, mounting costs caused by debtor’s conduct or failure to act, or (and?) some other right to payment or other legal or equitable remedy that gives rise to a right to payment. The bankruptcy case begins, and now the creditor now has a claim.  The creditor pursues payment of the claim by filing a proof of claim with the bankruptcy court, then fighting off any objection, and then awaiting distribution under a chapter 11 […]

Immediately upon a business entity’s filing of a petition under chapter 7 of the Bankruptcy Code, the business entity becomes a “debtor” and its property becomes a chapter 7 “estate” in the custody of a chapter 7 trustee. The chapter 7 trustee is a lawyer or financial professional who has been selected on a rotating basis from a “panel” of chapter 7 trustees. The debtor’s former ownership and management are ousted from control. The chapter 7 trustee collects all assets of the debtor’s estate (which may include potential lawsuits against […]

In large chapter 11 cases, the diffuse interests of a large number of creditors may be at stake. Bankruptcy law addresses potential collective action problems (see the brilliant  Mancur Olsen, Jr., The Logic of Collective Action: Public Goods and the Theory of Groups (1965)) by providing that the U.S. Trustee may appoint the membership of an official committee of unsecured creditors (often called “the committee”) having a fiduciary duty to all such creditors. The committee is usually composed of an odd number of the largest unsecured creditors that are willing to serve.  […]

Immediately upon a business entity’s filing of a petition under chapter 11 of the Bankruptcy Code, the business entity becomes a “debtor-in-possession” or “DIP” ( a type of “debtor” within the lingo of bankruptcy) and its property becomes a chapter 11 “estate” in the custody of the DIP.  No trustee is appointed unless a party successfully moves for the appointment of a chapter 11 trustee, based upon certain problems, bad acts, or misadventures involved in DIP functioning.  To confuse the nomenclature further, section 1107(a) of the Bankruptcy Code provides that […]

The Office of the U.S. Trustee is a division of the Department of Justice. The U.S. Trustee for any given “region” is the head of the Office of the U.S. Trustee (the UST) for that region. The U.S. Trustee is authorized to appoint and supervise chapter 7 panel trustees, appoint the membership of official committees in chapter 11 cases, and investigate bankruptcy fraud and abuse.  The U.S. Trustee (through its locally posted and federal government-employed attorneys) can be heard on any issue in a bankruptcy case, and is often active on issues and […]

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