PBCBA BAR BULLETINS pbcba_bulletin_June 2019 - Page 6

BANKRUPTCY C o r n e r Notice of Bankruptcy on Creditor’s State Court Counsel JASON S. RIGOLI It is not uncommon for a bankruptcy to be filed while a lawsuit is pending, or upon a final judgment being entered. One question for a debtor, and debtor’s counsel, is how to list the creditor so that adequate notice of the bankruptcy is provided. The Filing of a Voluntary Bankruptcy and the Deadlines The filing of a voluntary petition under a chapter constitutes an order for relief under that chapter. 11 U.S.C. § 301(b). Along with the petition, the debtor is required to file a list of the debtor's creditors, which must include the name and address of each creditor. 11 U.S.C. § 521(a)(1)(A); Fed. R. Bankr. P. 1007(a)(1). The Bankruptcy Code requires that proper notice of the entry of the order for relief be sent to creditors. 11 U.S.C. § 342(a); Fed. R. Bankr. P. 2002(f); 2002(o). Pursuant to the applicable sections and rules of procedure and Local Rule 2002-1(C)(1), the clerk mails Official Form No. 309, Notice of Commencement of Case, to those creditors at the address listed by the debtor on the list of creditors, unless the creditor has filed a request designating a specific mailing address. Fed. R. Bankr. P. 2002(g). Official Form No. 309 contains certain explanations for the benefit of creditors and, in a Chapter 7 case, advises creditors not to file a proof of claim unless they receive further notice requesting that claims be filed. See Fed. R. Bankr. P. 2002(e). Within the Official Form No. 309, will be the date for the meeting of creditors under § 341(a) , the deadline for filing a complaint objecting to discharge under § 727 or dischargeability under § 523(a)(2), (4), or (6); the deadline for objecting to exemptions, and deadline for filing a proof of claim, except in Chapter 7 cases with no assets. These deadlines are important because with respect to objecting to a debtor’s discharge, seeking a determination as to the dischargeability of a certain debt, or participating in distributions in a bankruptcy case, if you miss the deadline when you had notice you are out of luck. See In re Moseley, 470 B.R. 223, 225 (Bankr. M.D.Fla. 2012) (Rule 4004(b) permits an objection to discharge after the deadline when the three elements are satisfied, and Rule 4007(c) expressly prohibits extending the time after expiration of the original deadline) (citations omitted). See also In re Jackson , 482 B.R. 659, 663 (Bankr. S.D.Fla. 2012) (“[F]ailure to timely file a proof of claim is fatal to a creditor receiving anything on account of such clam in a chapter 13 case.”). Does the State Court Counsel Get Noticed or the Creditor and What is the Effect? When a party is represented all communications from counsel go through opposing counsel and not directly to their client. FL ST BAR Rule 4-4.2(a). This rule of professional conduct causes attorneys to at time reflexively direct everything to counsel for a represented creditor. However, notice to the attorney does not strictly comply with the requirements of Fed. R. Bankr. P. 1007(a). What is the result when notice is provided to the counsel of record in the state court instead of the creditor? Under the appropriate facts and circumstances the creditor is deemed to have actual knowledge of the bankruptcy case and is held to deadlines for filing proofs of claim, objecting to discharge, or seeking a determination of dischargeability of a debt under § 523(a)(2), (4), or (6). See In re Donovan , 411 B.R. 756, 761 (Bankr. S.D.Fla. 2009) (where an attorney for a creditor receives notice of the bankruptcy case, the creditor is “deemed to have actual knowledge.”) (citations omitted)). See also In re Manzanares , 345 B.R. 773, 785 (Bankr. S.D.Fla. 2006) (same). In a recent opinion from New Jersey, the creditors received notice and counsel did not and creditors argued that notice was not adequate for several reasons, including that In re Grand Union Co ., 204 B.R. 864 (Bankr. D.Del. 1997), interpreting Fed. R. Bankr. P. 2002(g), required that notice be sent to state court counsel. In re Peralta , Case No. 16- 21251(RG), -- B.R. --, 2019 WL 1750974 (Bankr. D.N.J. Apr. 16, 2019). The Peralta court rejected the arguments of the creditors and determined that notice sent to the creditors PALMBEACHBAR.ORG 6 and not to state court counsel was adequate in rejecting the request for an extension of time to file an adversary proceeding. Id. Conclusion For all practitioners representing parties in non-bankruptcy matters who may receive notice, on behalf of the client, that a bankruptcy was filed, do not sit on that notice. You have an obligation to notify your client, so the client can preserve its rights as a creditor in a bankruptcy case. For debtor’s counsel, while notice to non- bankruptcy counsel may be adequate, it would be prudent to go above and beyond and notice both non-bankruptcy counsel and the creditor, therefore ensuring notice is adequate and all rules have been fully complied with. This article submitted by Jason S. Rigoli, Furr Cohen, P.A., 2255 Glades Road, Suite 301E, Boca Raton, FL 33431, [email protected] furrcohen.com If YOU need CLIENTS WE need YOU! JOIN TODAY Lawyer Referral www.palmbeachbar.org -or- email: [email protected]