Bankruptcy Courts Will Feel Effect of Government Shutdown
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Bankruptcy Courts Will Feel Effect of Government Shutdown

Bankruptcy Courts Will Feel Effect of Government Shutdown

capitolUnder the constitution, specifically Article 1, section 8, Clause 1, Congress has the responsibility to pass laws that authorize government spending. If Congress refuses to pass these laws, the government can’t spend money. The result of the roadblock?  A government shutdown.

This funding shutdown has different effects on different parts of the federal government, but those effects are far-reaching. They even extend into bankruptcy courts across the nation.

Shutdown’s Effects on Bankruptcy Courts

Bankruptcies must be filed in one of 94 federal district courts, and those courts operate with federal dollars. According to Treasury Secretary Jacob Lew, the courts have enough money to operate until about October 17th. After that, however, there could be significant delays for people who have filed, or plan on filing, for bankruptcy protection.

  • Meetings of the Creditors Delayed. Whenever an individual files for bankruptcy, the bankruptcy trustee will schedule a meeting of the creditors. This is called a 341 meeting, and it takes place between three to six weeks after filing. If the shutdown lasts longer than about 15 days, expect significantly delayed, or even cancelled, 341 meetings.
  • Chapter 13 Plans Put on Hold. In a Chapter 13 bankruptcy the debtor seeks to restructure debt by entering into a repayment plan with his or her creditors. This Chapter 13 payment plan has to be approved by the bankruptcy court. If the shutdown lasts past October 17th, you can expect the court to stat delaying confirmation of Chapter 13 repayment plans.
  • Delayed Hearings. The shutdown will also likely put a delay on any other bankruptcy-related hearings. In 1995, when the last shutdown took place, bankruptcy courts suspended all progress on more than 3,500 cases.

What North Carolina’s Bankruptcy Courts Have Said.

The Eastern District Bankruptcy Court on its website says:

 Unless otherwise notified, the United States Bankruptcy Court for the Eastern District of North Carolina will continue to operate and perform essential functions necessary for the administration of bankruptcy cases throughout any government shutdown.

The Middle District simply states:

 Until further notice, the Court shall remain open in the event of a government shutdown.

What Can You Do About It All?

Call your Congressman to let them know you want to see Congress act – that’s about it.   Though the government shutdown will cause headaches for bankruptcy filers, you can’t let it stop you from protecting your interests. If you need advice or have questions about what the shutdown means for you, contact us.

Photo by Phil Roeder

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Jim White
jwhite@jcwhitelaw.com

Jim White helps people and companies facing serious financial injury by bringing and defending lawsuits and representing debtors in bankruptcy. He has successfully taken on banks, large financial institutions and other corporations in “David v. Goliath” cases. You can reach him at 919-246-4676.