How Will the Government Shutdown Affect Bankruptcy Filings?

How Will the Government Shutdown Affect Bankruptcy Filings?Several government employees were given furloughs on October 1, 2013 as the Government Shutdown began. Still, Burbank Bankruptcy Lawyers are not sure what will happen with Bankruptcy Court cases and similar hearings and appearances.

For ten days, at least, the United States Bankruptcy Court will continue to operate.  In Massachusetts, the courts are still going to hold hearings. The problem is, that the non-essential employees of the clerks are on furlough, also. It is unclear whether or not this will adversely affect administrative duties.

The Office of the United States Trustee or UST, is commonly called the Watchdogs of bankruptcy. It is actually an agency of the United States Department of Justice and  one of it’s roles is to examine every bankruptcy filing. This includes chapter thirteen, chapter eleven and chapter seven bankruptcies. They frequently take an oppositional point of view at hearings pending before the court. Two-thirds of their employees are considered non-essential and are on furlough, leaving only one-third of their usual staff to review cases and make court appearances.

In some jurisdictions, cases which require the presence of the Office of the United States Trustee are being postponed until an agreement is reached and the shutdown is discontinued . Unfortunately, if funding is exhausted, it is possible that some cases will not get due process from the court, which could cause irreversible harm.

New bankruptcies, however, are unaffected by the shutdown because Burbank Bankruptcy Lawyers file these matters electronically. Therefore new bankruptcies can continue as usual. If people are filing new cases at the same rate as before, while the current cases are being held up in the courts, how long will it be until these new cases make it in front of the judge?

One judge in Manhattan was apprehensive about the clerks office being understaffed and not getting objections which are imperative to the LightSquared case filed on time for a hearing which is key to the case and scheduled for next week.

The trustee in charge of overseeing the LightSquared case, Tracy Hope Davis, is still working, but is understaffed due to the fact that many of her employees, lawyers who prepare court motions included, are on furlough. Many trustees are faced with the same situation.

The Justice Department stated in an emergency plan that they would try to defer appearances until the shutdown is over.

The chief judge of the Southern District of  New York’s Bankruptcy court apparently had some concerns regarding this matter also. She ordered that, if a federal agency is included in any contested case or bankruptcy, it will be postponed. She, then, took it a step further, according to a Burbank Bankruptcy Lawyer, ordering it to be as such until the day after the president sets aside funding for the Department of Justice.

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