SLAMMING THE BRAKES: DEALING WITH A BANKRUPTCY FILING OUTLINE

Transcription

1 SLAMMING THE BRAKES: DEALING WITH A BANKRUPTCY FILING OUTLINE I. BACKGROUND II. GETTING SITUATED III. AUTOMATIC STAY IV. MOTION FOR RELIEF FROM STAY (11 USC 362(d)) V. PROOFS OF CLAIM VI. DISCHARGE VII. PARTICULARS DEALING WITH A DEBTOR IN CHAPTER 13 VIII. PARTICULARS DEALING WITH A DEBTOR IN CHAPTER 11 IX. TAKING CONTROL OF THE SITUATION AND USING THE BANKRUPTCY CASE TO YOUR ADVANTAGE X. GETTING HIRED AND PAID BY CHAPTER 7 TRUSTEE XI. GETTING HIRED AND PAID IN CHAPTER 13 XII. GETTING IN BETTER POSITION FOR THE NEXT BANKRUPTCY

2 SLAMMING THE BRAKES: DEALING WITH A BANKRUPTCY FILING as presented for CCCBA 21 st Annual MCLE Spectacular Walnut Creek Marriot NOVEMBER 20, 2015 Speakers: David A. Arietta, Esq. Law Offices of David A. Arietta 700 Ygnacio Valley Road, Walnut Creek, CA (925) David@Ariettalaw.com Scott Jordan Dunning Law Firm 18 Crow Canyon Ct., Suite 280 San Ramon, CA (925) sjordan@sjordanlaw.com M. Jeffrey Micklas Law Offices of M. Jeffrey Micklas 2930 Camino Diablo, Ste. 300 Walnut Creek, CA (925) mjm@micklaslaw.com Leo Spanos Staff Attorney Office of Martha G. Bronitsky, Chapter 13 Trustee Foothill Blvd. #150 Hayward, CA (510) ext lspanos@oak13.com

3 I. BACKGROUND A. THE LAW AND RULES 1. Bankruptcy Code title 11 of the United States Code. Substantial changes in 2005 BAPCPA- watch out for old caselaw. 2. Jurisdictional provisions- 28 U.S.C. Sections 151,157, 158, 1334, Procedural Rules- Federal Rules of Bankruptcy Procedure 4. Local Bankruptcy Court Rules i.e. Northern District of California Bankruptcy Local Rules 5. Judge Rules- Specific requirements of each bankruptcy judge B. LOCATIONS 1. Northern, Eastern, and Southern Districts of California county specific 2. Northern District of California- Santa Rosa, San Francisco, San Jose and Oakland Divisions. See C. STRUCTURE/CASE INFORMATION 1. The main bankruptcy case- petition, schedules, and statement of financial affairs, electronic filing, PACER, closure/reopening 2. Assignment to Specific Judge Lafferty, Effremsky, Novack for Oakland 3. Within the case- Adversary Proceedings- see B.R et. seq. & Motions D. TYPES OF BANKRUPTCY CASES 1. Chapter 7 Throw in the Towel bankruptcy. Liquidation of nonexempt assets to pay creditors. Most cases are no-asset and no distribution. Payout according to priority of claims. Discharge issued in about 3-4 months. 2. Chapter 11- individuals and businesses who restructure their financial affairs through a plan. Corporations can receive a discharge. Individuals can receive a discharge but have to wait until completion of plan payments. 1

4 3. Chapter 13 individual debtors but not corporations or partnerships who can keep their assets so long as they propose a plan to use their projected disposable income to pay creditors over a 3-5 year timeframe. Discharge upon completion of plan payments. E. PARTIES 1. Debtors and Creditors 2. Trustees Chapter 7 Trustee and Chapter 13 Trustee a. Chapter 7 Trustee takes charge of assets, liquidates the estate, prosecutes avoidance actions, examines and investigates the debtor b. Chapter 13 Trustee examines the debtor, collects earnings from debtor and disburses them to creditors. 3. Debtor in Possession Chapter 11 Trustee is an alternate option a. No trustee appointed in a Chapter 11 unless the court orders it. b. DIP has the powers and responsibilities of a trustee. 4. U.S. Trustee- arm of the Department of Justice that supervises trustees and monitors cases, including debtor activity 5. Creditors Committee- mandated participation but usually in larger cases F. KEY CODE PROVISIONS 1. Section 109 identifies who can be a debtor in bankruptcy 2. Section 362- automatic stay 3. Section 507- establishes a ladder of priority for the payment of claims. 4. Section 523- exceptions to discharge 5. Section 524- discharge rules 6. Section 727 discharge rules for a Chapter 7 case. 7. Sections 1123 and 1129 how to confirm a Chapter 11 Plan 8. Section 1141 discharge rules for a Chapter 11 case 9. Sections 1322 and 1325 how to confirm a Chapter 13 Plan 10. Section 1328 discharge rules for a Chapter 13 case II. GETTING SITUATED A. GET INFORMED OF THE SITUATION 1. Chapter? Location? Status? Pending motions? Schedules? 2

5 B. PRIOR FILINGS 1. Chapter 7- Not eligible for a Chapter 7 discharge if were previously discharged in a Chapter 7 case filed within 8 years or in a Chapter 13 case filed within 6 years. 2. Chapter 13 Not eligible for a Chapter 13 discharge if were previously discharged in a Chapter 7 case filed within 4 years or in a Chapter 13 filed within 2 years. 3. Serial filings? C. FILE A REQUEST FOR SPECIAL NOTICE D. CALENDAR IMPORTANT DATES 1. Meeting of Creditors-: you might want to go and ask questions or advise trustee of situation 2. Deadline to Object to Discharge- may want to dispute dischargeability 3. Deadline to File a Claim Chapter 13 so you can participate III. AUTOMATIC STAY A. Generally precludes Creditors from taking any collection action against Debtor and Creditor must discontinue collection action against Debtor regarding prepetition claims 1. Bars actions against estate property. Property of the Estate includes property in which Debtor has a legal, equitable or possessory interest. B. Goes into effect immediately upon the filing of the bankruptcy petition C. Applies to all Creditors even if Creditor unaware of bankruptcy filing D. Also applies to a co-debtor/co-obligor in a Chapter 13 regarding a consumer debt 1. Stay generally does not apply to guarantors, partners, non-filing codefendants 3

6 2. Where debtor is an indispensable party, Bankruptcy Court can issue an injunction staying the action E. Primary purpose is to give a Debtor breathing room F. Actions that are stayed (see 11 USC 362): 1. Enforcement of pre-petition judgments a. Precludes recording of Abstract of Judgment b. Precludes wage garnishments c. Renewal of Judgment stayed. Renewal deadline tolled until 30 days after notice of termination of the stay 2. Foreclosure process (judicial and non-judicial) a. Postponement of foreclosure sale not prohibited b. Exceptions 1) Not stayed where within 180 days debtor filed a prior bankruptcy case that was dismissed for failure to comply with court orders or where prior case was dismissed by debtor following the filing of a motion for relief from stay. 2) Debtor s current case filed in violation of bankruptcy court s Order entered in prior case prohibiting debtor from filing future bankruptcy cases 3. Actions to obtain possession or control of estate property a. Dunning letters or telephone calls, demands for payment b. Monthly billing/invoice 1) Work with debtor s counsel 2) Do not include past due amounts 3) HOAs: separate into pre-petition and post-petition c. Creditor may refuse to deal with a debtor d. Set-off: right to set-off but first need relief from stay 4

7 e. Administrative freeze. Can freeze but cannot take funds without relief from stay 4. Repossession of collateral (includes leased property) 5. Creating, perfecting, or enforcing liens a. Includes post-levy sale of property even if levied upon prior to bankruptcy filing. 6. Suing a debtor (includes administrative proceedings) a. Statute of limitations: 1) (11 USC 108(a)) If period in which debtor must sue has not expired prior to filing of bankruptcy, trustee may commence action before the later of: the end of such period or two years after the bankruptcy filing 2) (11 USC 108(b)) If period in which debtor may file any pleading, demand, notice, cure a default is not covered by 11 USC 108(a) and such period has not expired before the filing of the bankruptcy, trustee may only do so before the later of: the end of such period or 60 days after the bankruptcy filing 3) (11 USC 108(c)) If a period in which a claim against a debtor has not expired before the filing of the bankruptcy, then such period does not expire until the later of the end of such period or 30 days after the notice of termination or expiration of the stay Caveat: May want to file relief from stay to avoid situation where you do not receive notice b. Debtor has affirmative duty to serve and file a notice of stay with the State Court (see California Judicial Form CM 180) c. Precludes filing of cross-claim against debtor 1) Includes claim for indemnity 5

8 2) May need to file motion for relief from stay 3) If debtor suing for monetary relief, may need to determine if Chapter Trustee has abandoned claim. Trustee may be the proper party in interest d. Entry of Judgment, verdict, or decision precluded 7. Appeals a. Appeal by debtor defendant precluded b. Appeal by debtor plaintiff probably not precluded 8. Discovery a. If debtor a party, all discovery as to debtor is precluded. Caveat: Abandonment of property by Chapter Trustee may still have debtor protected by stay G. Exceptions to the Automatic Stay (11 USC 362(b)) 1. Criminal action against debtor. Collection of criminal fines or restitution orders are stayed 2. Domestic relations proceedings and enforcement of support Orders are stayed a. Paternity b. Establish or modify child custody or visitation Order c. Dissolve a marriage (except for division of property) d. Withholding of income for payment of domestic support obligations e. Interception of tax refund to pay past-due support obligations 3. Post-petition perfection of liens a. Where State law permits retroactive perfection, window period is 30 days unless otherwise stated b. UCC purchase money lien. Creditor has 20 days to perfect 6

9 c. Mechanic s lien d. Foreclosure deed. 15 days after sale (relates back to date of sale) 4. Revocation of a professional license not stayed a. Sanctions for attorney misconduct not stayed 5. No stay where the term of a commercial lease comes to an end on a date certain. May be prudent to seek relief from stay 6. Exception for presentment of negotiable instrument or giving notice of dishonor 7. Exception for residential eviction proceedings where judgment for possession entered pre-petition Caveat: Other stay provisions might apply H. Duration of the Automatic Stay 1. Stay applies to property of the Estate and property of the debtor. Estate may abandon property to debtor so stay still exists since debtor has interest in property 2. Stay can automatically expire 3. In Chapter 7, failure to file and/or act upon Statement of Intention re encumbered personal property a. Debtor must elect to redeem, reaffirm or surrender property b. Stay expires earliest of 30 days after petition date or on date of the meeting of creditors c. If a purchase money agreement, stay expires 45 days after meeting of creditors. d. If debtor fails to perform, stay expires 30 days after date first set for meeting of creditors 7

10 e. Stay expires even if debtor current on loan obligation 4. In Chapter 7, failure to reject or assume a personal property lease within 60 days of petition date 5. In Chapter 11 or 13, if lease of personal property not assumed or rejected in the plan confirmed by the court a. In Chapter 13, co-debtor stay terminates as well 6. Where individual debtor s prior bankruptcy case dismissed within one year of the filing of the current bankruptcy a. Stay terminates as to debtor on 30 th day after filing of current case 1) Caveat: Stay terminates as to debtor. There may be other stays in effect and termination does not affect codebtor stay in a Chapter 13 b. Debtor can obtain extension through noticed motion but Order extending stay must be filed within 30 day period 7. Where individual debtor had two or more bankruptcy cases dismissed within one year of the filing of the current bankruptcy a. Stay does not go into effect at all 1) Caveat: Stay terminates as to debtor. There may be other stays in effect and termination does not affect codebtor stay in a Chapter 13 b. Debtor can obtain extension through noticed motion but Order extending stay must be filed within 30 day period 8. Caveat: Though it appears that stay may no longer be in effect, creditor may still want to file motion for relief from stay or motion that stay no longer in effect. 8

11 a. Protects creditor from possible claim for actual and punitive damages and/or having to re-do process as action taken is considered void 1) Specific intent to violate stay not required; knowledge of the stay and an intentional act will suffice b. Many third parties want a comfort order - e.g., title companies, repossessors, courts 9. Until case is dismissed, closed, or discharge obtained 10. Until relief from stay is granted IV. MOTION FOR RELIEF FROM STAY (11 USC 362(d)) A. SEEKS PERMISION FROM THE COURT TO UNDERTAKE CERTAIN ACTIONS OTHERWISE STAYED 1. Creditor may seek to condition, modify, terminate or annul the stay a. Annulling the stay is similar to nunc pro tunc relief 1) Vacates the stay at an earlier date 2) Usually feasible where creditor unaware of stay and would otherwise have been entitled to relief from stay B. GROUNDS FOR RELIEF FROM STAY 1. Cause including lack of adequate protection a. Lack of adequate protection 1) limited to secured creditors 2) Adequate protection protects value of secured creditor s interest in collateral 9

12 a) Lack of insurance may be sufficient lack of adequate protection 3) Proving lack of adequate protection usually requires expert opinion and may be expensive and time consuming 4) Debtor usually not paying so creditor can simply rely on lack of payment as cause where debt is secured a) If debtor brings account current prior to hearing, seek adequate protection Order b. Litigation in non-bankruptcy forum 1) Enforcement of judgment probably still stayed 2) Caveat: File Proof of Claim if litigation will not be final before last day to file a Proof of Claim 3) Relief to allow a state court to divide property is usually not granted 4) Contractually mandated arbitration usually sufficient cause 5) Litigation of insured claims a) Court will usually lift stay where debtor has liability coverage for both defense costs and any resulting judgment 6) Perfection of pre-judgment attachment lien obtained outside the preference period 2. Relief from stay where debtor lacks equity and property not needed for reorganization 3. Single asset real estate cases a. Single asset real estate is real property: 1) constituting a single property other than residential real property with less than four units 2) that generates substantially all of the gross income of a debtor 10

13 3) on which the debtor conducts no substantial business other than the business of operating the property C. PROCEDURE 1. Requires noticed motion a. Caveat: Check local rules as courts have different procedures 1) e.g., Eastern District may state on its calendar printed the day before the hearing that no hearing will be held on matter b. Courts generally require electronic filing 2. Pleadings usually required: Motion, Notice of hearing, Memorandum of Points and Authorities, Declaration, Relief from stay cover sheet, and Certificate of Service 3. There is a 14 day waiting period after Order for relief from stay entered but creditor in its motion should seek to have this waived. 4. Caveat: If seeking relief from stay to foreclose, creditor should also include seeking relief from stay for creditor or successful third party bidder to be able to proceed with eviction. V. PROOFS OF CLAIM 1. Proofs of Claim - a creditor may file a proof of claim See Section 501(a). Covers claims that arose before the bankruptcy order for relief. A Debtor can file a claim on behalf of a creditor. 11

14 2. Deadline: For non-governmental claims it is 90 days after the date first set for meeting of creditors - Bankruptcy Rule 3002(c). New window to file claims after a conversion to Chapter Chapter 7 versus Chapter 11 versus Chapter 13: No need to file proof of claim in Chapter 7 unless notice to file claims sent. Need to file proof of claim in Chapter 13. No need to file proof of claim in Chapter 11 unless disagree with scheduled amount or if scheduled as disputed, contingent or unliquidated. 4. Bankruptcy Rule 3001 sets forth requirements for proof of claim. Official Form and classifications of secured, priority or general unsecured 5. Contingent/Unliquidated Claims - Section 502(c) allows court to estimate the allowable amount. 6. Caps on Claims a. 502(b)(6)- lease termination claims limited to rent for one year (or, if greater 15% - but not to exceed three years- of the remaining term) b. 502(b)(7)- damages for termination of an employment contract are limited. 7. Objections to Claim. A filed proof of claim is deemed allowed unless objection filed Se Sections 502(a) and (b); Bankruptcy Rule VI. DISCHARGE A. THE BANKRUPTCY DISCHARGE (11 U.S.C 524) 1. Voids any judgment to the extent such judgment is a determination of personal liability 2. Injunction against the commencement or continuation of an action, or an act to collect, recover or offset 3. Debtor may voluntarily repay any debt 4. Community property discharge - bars collection from after acquired CP on any community claim 12

15 5. Attorney's fees and costs recoverable when a creditor unsuccessfully challenges a discharge of a consumer debt B. EXCEPTIONS TO THE BANKRUPTCY DISCHARGE (11 U.S.C. 523) 1. All debts are dischargeable except for those that are not. 2. Secured debts require Motion for Relief from Stay. 3. Taxes (of course, with exceptions). 4. Debts obtained by "false pretenses, false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition". (11 U.S.C. 523(a)(2)(A)) 5. Debts obtained by "use of a statement in writing" (11 U.S.C. 523(a)(2)(B)). a. That is materially false; b. That is about debtor's or insider's financial condition; c. On which the creditor reasonably relied; and d. That the debtor caused to be made or published with intent to deceive. 6. Bankruptcy Fraud Test a. False representation or written statement; b. That the Debtor knew to be false; c. That Debtor intended to deceive the Creditor; d. Creditor reasonably relied on; e. Damages (proximate cause test). 7. Other non-dischargeable debts. a. Non-scheduled debts; b. Fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny; c. Domestic support obligations; d. Willful and malicious injury to another or their property; e. Fines, penalties or forfeiture owed to a governmental unit; f. Student Loans (Exception: Under Hardship - Brunner Test); g. Death or personal injury caused by Debtor's intoxication; h. Debts previous determined non-dischargeable; 13

16 i. Res Judicata or Collateral Estoppel where Fraud is found; j. Trust fund debts; k. Non-support debts owed to spouse, former spouse, or child must be accounted for in separation or MSA divorce judgment; l. HOA fees incurred after the filing date; m. Penal/restitution fees; n. 401K etc. loans; o. Debts incurred by violation of State or Federal Securities laws C. CHALLENGING BANKRUPTCY DISCHARGE 1. Adversary Proceeding (Fed. Rule of Bankruptcy Proc. 7001) a. Lawsuit to determine whether a single debt is non-dischargeable; b. Complaint must be filed within 60 days of the first date set for the Creditor's Meeting ("drop dead date"); c. Can be extended by court only for cause; d. New deadlines if case converted 7 to 13 or 11/13 to 7 2. Creditor files complaint. 3. Debtor responds. 4. Initial Status and Scheduling Conference -90 days after Complaint filed. 5. Trial generally scheduled within 6 months. BE READY TO GO BECAUSE IT WILL! D. DENIAL FOR WRONGFUL CONDUCT (11 U.S.C. 727) 1. Generally brought by Bankruptcy or U.S. Trustee AP. 2. The bankruptcy court shall grant the debtor a discharge, unless: a. The debtor is not an individual; b. The debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody or property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or 14

17 concealed property of the debtor, within one year before the date of the filing of the petition; or property of the estate, after the date of the filing of the petition. 3. The debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information unless such act or failure to act was justified under all of the circumstances of the case. 4. The debtor knowingly or fraudulently, in or in connection with the case: a. made a false oath or account; b. presented or used a false claim; c. Gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or d. Withheld from an officer of the estate entitle to possession any recorded information relating to the debtor's property or financial affairs. 5. The debtor has failed to explain satisfactorily, before determination of denial of discharge any loss of assets or deficiency of assets to meet the debtor's liabilities. 6. The debtor has refused, in the case: a. To obey any lawful order of the court; b. On the ground of privilege against self-incrimination, after immunity is granted. 7. Where debtor has been granted a Chapter 7 discharge in a case commenced within 8 years before the date of the filing this petition. (6 years for a prior Chapter 13 case) 8. Where debtor waives discharge. VII. PARTICULARS DEALING WITH A DEBTOR IN CHAPTER 13 A. WHAT TO DO IF A CLIENT FILES A CHAPTER If your client is a plaintiff and he files for bankruptcy, you should immediately notify the court in which the litigation is pending and ask for 15

18 guidance. The judge will probably continue the matter for a status conference and request an order from the bankruptcy court. You should also seek approval from the bankruptcy court to continue the litigation. 2. If your client fails to disclose the litigation as potential asset and/or seek approval from the bankruptcy court to continue litigation, your client may lose the cause of action when it is eventually discovered by the bankruptcy court. Alternatively, any recovery may be required to be paid to creditors in your client s bankruptcy. 3. If the defendant files for bankruptcy, you should immediately stop any litigation activities. To continue in the litigation, you must file a motion for relief from stay in the bankruptcy court. B. CHAPTER 13 PLAN. (Section 1322) provides for proper plan provisions. a. Best Interests of Creditors b. Cure of Defaults on Secured Debt- Sections 1322(b)(3) and (b)(5) c. Assumption of Leases- Section 1322(b)(7) C. CONFIRMATION STANDARDS. (See Section 1325.) a. Good Faith- Sections 1325(a)(3) and (a)(7) b. Liquidation Test- Section 1325(a)(4) c. Feasibility- Section 1325(a)(6) d. Domestic Support Obligations- Section 1325(a)(8) VIII. PARTICULARS DEALING WITH A DEBTOR IN CHAPTER 11 A. KEY PARTS OF CASE 1. Disclosure Statement- sets forth history of debtor, plans to reorganize, feasibility. Need to provide adequate information for a person to make an informed judgment about the proposed plan. Section Chapter 11 Plan - reorganization vs. liquidation vs. sale. 16

19 a. Section 1123 sets forth the contents of Plan- designation of classes as impaired and not impaired; treatment of classes, provide for means of plan implementation, curing of defaults, modification of liens. 3. Objections to Plan Confirmation- good faith, liquidation value, feasibilitycompliance with the provisions of Section Voting one class of creditors who are impaired have to vote in favor of plan. To have a class vote in favor means more than 2/3 in value and ½ in number. Section 1126 IX. TAKING CONTROL OF THE SITUATION AND USING THE BANKRUPTCY CASE TO YOUR ADVANTAGE A. RULE 2004 EXAMINATION. 1. Broad scope and can request production of documents B. CAUSES OF ACTION/COUNTERCLAIMS 1. If Debtor was the holder of an affirmative claim or cause of action, the Chapter 7 trustee may prosecute and settle the claim it. C. ESTOPPEL 1. Failure of a debtor to list a cause of action and defendant contends that debtor is judicially estopped to proceed. 2. Equitable doctrine 3. Result depends on whether debtor was aware of the pre-petition cause of action or whether the omission was inadvertent and debtor corrects the oversight. 4. Defendant does not get a windfall as estopped debtor might not own or have standing to prosecute omitted cause of action but the bankruptcy trustee would. 17

20 X. GETTING HIRED AND PAID BY CHAPTER 7 TRUSTEE 1. Debtor s pre-petition attorney can continue to prosecute a claim or lawsuit if the attorney is retained by the bankruptcy trustee to represent the bankruptcy estate. See Section Need employment application and employment order from the court before work is commenced. Failure to do so or being tardy may result in all fees being disallowed. 3. Conflicts may prevent employment 4. Once retained, still cannot get paid absent court approval. Application for approval of fees and costs to be filed with notice and a hearing. 5. See Guidelines for Payment of Compensation on Northern District website for details, especially how to keep time records XI. GETTING HIRED AND PAID IN CHAPTER 13 A. (11 U.S.C. 327.) EMPLOYMENT OF PROFESSIONAL PERSONS 1. Outside counsel seeking to be paid in an active chapter 13 bankruptcy must obtain bankruptcy court approval under section 327(a) which allows the trustee with the court s approval to employ attorneys... that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee s duties under this title. Since section 1303 gives a chapter 13 debtor exclusive of the trustee, the rights and powers of a trustee under sections 363(b), 363(d), 363(e), 363(f), and 363(l) most cases find that the term trustee in section 327(a) is applicable to a debtor in chapter 13. As such, the debtor can hire an attorney subject to the limitations of 327(a). 18

21 B. BANKRUPTCY RULE Specifies the details that must be included in an application for employment. a. Specific facts showing the necessity of employment; b. The name of person to be employed; c. The reasons for the selection; d. The professional services to be rendered; e. Any proposed agreement for compensation; f. All the applicant s connections with the debtor, the creditors, any party in interest, the debtor s bankruptcy attorney and accountants, or the United States Trustee C. 11 U.S.C Limitation on compensation of professional persons 1. Section 328(a) limits the compensation of an attorney or other professional on any reasonable terms and conditions of employment, including a retainer, on an hourly basis, on a fixed percentage fee basis, or on a contingent fee basis In short, the attorney must file a motion, a declaration in support of the motion, and obtain an order of the bankruptcy court to be employed as outside counsel. Check the local rules for service and notice requirements. 3. Given that the court needs to balance the interests of creditors in the bankruptcy, a contingency fee agreement is usually a safe bet. Hourly fee arrangements will be scrutinized. Practice tips Check the Bankruptcy Local Rules, General Orders, and Guidelines, of the District (and possibly Division) in which the bankruptcy case was filed. For the Northern District of California, go to Contact the Debtor s bankruptcy counsel to see if they have had experience in hiring outside counsel and have insight as to what the court expects. If the bankruptcy attorney is not helpful, contact the Bankruptcy Section of the local Bar Association. Always ask any prospective client if they are in an active bankruptcy. It should be included in your questionnaire for any prospective clients. Make sure you get approval of the Bankruptcy Court before incurring considerable time and expense on the case. 19

22 4. After you have been hired and your fee agreement has been approved, you must notify the bankruptcy trustee and bankruptcy court of any settlement of judgment. The settlement and judgment, including the amount of the fees and costs must be separately approved by the Bankruptcy Court. This can be done by motion and stipulation with the trustee. XII. GETTING IN BETTER POSITION FOR THE NEXT BANKRUPTCY 1. Order for Examination Lien- CCP Section Abstract of Judgment Lien 3. UCC-1 Lien 20