If you've recently fallen behind on some bills (or are tired of juggling to avoid the inevitable) and are considering filing for bankruptcy protection, you may also be struggling with other legal problems. Often, bankruptcy comes on the heels of a messy divorce or inheritance battle -- and in some cases, you could find yourself engaged in several simultaneous matters in both state and federal court. However, a new ruling from the U.S. Supreme Court can allow you to grant permission to the bankruptcy court to consolidate each of your related cases and hear them along with your bankruptcy. When should you consent to this consolidation? What effects could this decision have on your case? Read on to learn more about the factors you may want to weigh when making this important decision.
When may other cases be heard by a bankruptcy judge?
If you've already stopped paying certain bills, you may have begun receiving collections notices or court summonses. These collection matters are generally filed on the state level, in your local county court. However, bankruptcy law is federal -- and the courts that hear bankruptcy matters answer to the U.S. Supreme Court. Because bankruptcies and collection matters are handled by different types of courts, there's relatively little overlap, even if the same debt is at issue in both matters.
For decades, the common law permitted individuals who had other related cases pending to request that the bankruptcy judge to make findings of fact and issue rulings on these related cases, along with the bankruptcy itself. This changed in 2011, when the Supreme Court held in Stern v. Marshall that federal bankruptcy courts couldn't constitutionally enter final judgments in state court cases, even if the matter had essentially already been litigated in the bankruptcy court. The Court clarified this controversial ruling in May 2015, holding that while their previous constitutional argument stood, parties should be permitted to consent to the court's exercise of jurisdiction over other cases. This essentially takes the courts back to the pre-Stern v. Marshall days and allows them to streamline their workload by consolidating multiple federal and state law issues into a single case.
Under what circumstances should you consent to consolidation?
In most cases, allowing the bankruptcy court to hear evidence and make findings of fact in your related matters -- like garnishments, liens, inheritances, or divorce settlements -- will dramatically reduce the amount of time you have to spend in various federal and state courts, as well as lower the amount you must spend in attorney's fees. Because the bankruptcy judge has already been presented with extensive information on your financial matters in conjunction with the Chapter 7 liquidation or Chapter 13 repayment plan, you won't need to relitigate these issues, and your attorney won't need to spend extra time preparing for a hearing or cross-examination.
However, the streamlined docket resulting from your consent for the bankruptcy court to hear your case may not always be worth the potential drawbacks. In some cases, you may already have a good relationship with the local district or trial court, and may want to keep your non-bankruptcy case(s) in this court for continuity and because you expect a good and fair result. However, even if you withhold your consent, you may not be able to stop this process. If you refuse to consent to have your other cases heard in bankruptcy court, the bankruptcy judge may hear these cases anyway -- but simply write up proposed findings of fact and conclusions of law to the district or county court rather than issue a binding court order in contravention of your request that these matters be heard by a state court judge. For more information, check out firms like Wiesner & Frackowiak, LC.