Working in bankruptcy court

Fannie Smith
Posted 2/14/03

Now and then, as a freelance court reporter, I was called to the bankruptcy court, a division of the federal government with a branch office in Minneapolis. This division was used by failing companies who found they had substantial debt, over and above their possible income. The assets were collected and sold by an apppointed trustee. The money received by the trustee was distributed on a percentage basis - anywhere from a few cents to 100 cents on a dollar - for the creditors. When the final formal meeting was held, the judge (hearing officer) directed and issued an order.

Sometimes, informally, after the bankruptcy proceeding finished, investors came forward, organized a meeting, and wanted a re-organizational meeting recorded, and wanted to re-finance the bankrupt company because they believed the company had good potential if they changed methods or officers. After a waiting period, the parties started a new company, assuming the non-exempt debts, and making new agreements and stipulations. The idea was they had a head start over setting up an office, business or store from nothing.

For individuals, certain debts were not dischargeable; some taxes, child support, alimony, student loans, debts incurred by fraud, certain driving violation payments and a few others.

There are/were exemptions for individual bankrupts, like the home, car, household items and tools of a trade. If a wage-earner filed bankruptcy, he could re-arrange his debt and a new schedule was arranged to pay his debts in three to five years in a more realistic payment plan. Debters likely to arrange for this kind of plan have more assets than can be protected under the first plan cited because they have sufficient income above their living expenses.

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"Some debts are fun when you are acquiring them, but none are fun when retiring them." -Ogden Nash

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Many individuals also used the bankruptcy service when they let their finances get out of control and realized there was no way to pay their accumulated debts. This process carried with it some consequences. The credit and financial liberties otherwise granted every citizen were gone. These persons were forced to live on a cash basis for some years because the record in the bankruptcy court remains available to the public.

There's another way for farmers who are experiencing economic difficulty. They can pledge to pay the debts from future crops harvested. In farm debts, whenever a debtor files bankruptcy, an order is issued stopping all bill collection efforts until the crops are sold.

"America has become so tense and nervous, it's been years since I've seen anyone asleep in church - and that's a sad situation."

-Norman Vincent Peale