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Motion Practice in Bankruptcy Cases

Many bankruptcy cases proceed to discharge minimal involvement by the judge.  Often, when the trustee is satisfied that a Chapter 7 debtor has reported his assets, debts, income and expenses completely and accurately, and there is no “non-exempt” asset which he can sell for the benefit of creditors, the judge signs a routine order entering discharge and closing the case .  Even when there is such an asset, the judge might not get involved if the debtor simply hands it over, and does not dispute its value or non-exempt status.  A Chapter 13 debtor must file a repayment plan, notice it to creditors, and have the court approve it; this, too, is usually routine.

But some cases present a problem which requires a judge’s decision to resolve, and to get that decision, an interested party must file an appropriate motion (or, in some cases, a lawsuit within the bankruptcy case, called an adversary proceeding).  The following are some of the more common types of motions filed in bankruptcy cases.  Note that most debtor’s attorneys do not include the services to file or respond to these types of motions in their “flat fees” and will charge extra if they must get involved.

  • Relief from Stay. 
    Motions are routinely filed by secured creditors to obtain “relief from stay” (that is, to free them from the automatic stay (Sec. 362) which bars them from actions to collect while the bankruptcy is open).  Debtors in Chapter 13 cases can make “adequate protection” payments to the creditor to maintain the ratio of debt to value of the item securing it (Sec. 1326(a)(1)(C).  If the debtor’s payments post-petition do not cover any loss of value of the item, or increase in debt, the court must allow the creditor relief from stay to foreclose or repossess the collateral.  Commonly, in Chapter 7 cases, this happens when the debtor simply fails to make the on-going payments for his car or house.  The procedures for these motions are strict; if the debtor fails to respond within 20 days of the notice of the motion, the motion will be promptly granted.  In some cases, this will mean that the creditor will complete a foreclosure that was pending when the bankruptcy was filed; it could happen very quickly.
  • Objection to Claim.  
    When the trustee determines that there will be assets to administer (sell and distribute funds) (always the case in a Chapter 13 case), he will require creditors to file proofs of claim to verify their right to a share of the assets of the case.  Either the trustee or the debtor may object to a particular claim by filing an objection which will be heard by the court.  This process may value collateral securing a claim.
  • Valuation. 
    Secured creditors are entitled to have either the return of their collateral, or the prompt payment of its value in cash, unless the debtor continues to make the contract payments (and reaffirm the debt in a Chapter 7 case).  There are often cases when the parties disagree about the value of the collateral.  The debtor can obtain a court ruling on value by filing an objection to a creditor’s proof of claim, or filing his own proof of claim to which the creditor objects.  If the dispute raises the issue of the validity or extent of a lien, an adversary action will be necessary (Rule 3007), but if the only issue is the value, a motion under Rule 3012 will be sufficient to bring the issue to the court.
  • Lien avoidance. 
    A debtor generally can “avoid” only one type of lien: a judgment lien which impairs his exemptions (Sec. 522(f)).  Thus, if a creditor, prior to bankruptcy, went to court and obtained a judgment, and then recorded the judgment so it appears as a lien against the debtor’s real property, the debtor may be able to have the court determine that the judgment lien is void if the value of the property, less the consensual liens (deeds of trust or mortgages), is less than the exemption for the property claimed by the debtor.  For example, debtor owns a house worth $200,000; his mortgage is $100,000; he is entitled to an exemption (under Alaska law) of $70,200, and the judgment lien is $50,000.  The debtor can avoid that part of the judgment lien which exceeds $29,800.
  • Motion to Dismiss or Convert. 
    The US Trustee, charged with, among other things, enforcing the “means test” requirement that debtors whose earnings exceed the median file 5-year Chapter 13 repayment plans, may move for a court order that a debtor’s Chapter 7 filing is defective because the debtor should be in Chapter 13.  If the trustee is correct, the debtor is allowed to chose to dismiss the filing as an alternative to proceeding in Chapter 13 (but bears the disadvantage of having filed bankruptcy).  The debtor may dispute the US Trustee, of course.
  • Motion for Abandonment. 
    The debtor, or a creditor, or the trustee, may seek to have the court order the trustee to abandon the estate’s interest in property of the estate, if the property would have no benefit for the estate.
  • Exceptions to Discharge. 
    While some debts are automatically not discharged (student loans, recent or unfiled taxes, domestic support and others), a few types of debt will be discharged unless the creditor successfully prosecutes an adversary action to have them declared non-dischargeable under the applicable law.  These include debts incurred by fraud or false financial statements, and those for willful and malicious injury.
  • This is by no means a complete listing of all possible motions (there is no such list), but these are all common motions that most bankruptcy lawyers will see over the years.

At the Law Offices of H. Frank Cahill, in Anchorage, we represent clients throughout Alaska, including, Wasilla, Dillingham, Palmer, Valley, Kenai, Fairbanks, Kodiak, Seward, Soldotna, Homer, Juneau, Wrangell, Petersburg, Bethel, Nome and Sitka; in Fairbanks-Northstar Borough, North Slope Borough, Northwest Arctic Borough and Bristol Bay Borough; and across the Kenai Peninsula. 

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.