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Judicial Practice Tips
Fifteen Common Bankruptcy Practice Errors and How to Avoid Them By Honorable John Q. Squires DuPage County lawyering in the Bankruptcy Court for the Northern District of Illinois is generally quite good, notwithstanding the high caseload and attendant pressures from the competing interests of debtor and creditor clients. However, all lawyers occasionally make a mistake. This Judge and his staff have observed a number of persistent common practice errors reoccurring in DuPage and the other collar counties, as well as Chicago. Usually, they are committed by the infrequent bankruptcy practitioner whose regular forum is the Illinois Circuit Courts. These errors can be easily corrected, but inevitably cost the client in lost time and money, which could be saved if proper procedures were followed in the first instance. In addition, these errors invariably cause extra work for the Court and its staff, which we would like minimize. This is significant in these times of record numbers of case filings1 and crowded calendar calls. Without further ado, here is the laundry list and how to clean it up. 1. Failure to Properly Serve the Debtor Most motions, applications and other papers are served by regular mail as contemplated by the Federal Rules of Bankruptcy Procedure, consonant with its ease of service and the nationwide scope of process service under the Rules. Federal Rule of Bankruptcy Procedure 7004(b)(9)2, however, mandates that both the debtor and the debtor’s attorney must be served by mail at the proper address of record for any matter which may affect the debtor’s interest. This is in marked contrast to practice in the Illinois state courts, which requires service only on the attorney of record3. Use by the infrequent or inexperienced practitioner of a certificate of service referencing the Illinois Supreme Court Rule is frequently a dead giveaway that the attorney either hasn’t read or is unaware of the bankruptcy service requirements. Failure to comply with Bankruptcy Rule 7004 requires that the motion must be denied without prejudice, stricken, or most likely continued to another date to allow the debtor to be properly served. 2. Failure to Serve the Chapter 13 Trustee or to Serve the Correct One On all Chapter 13 cases assigned to Judge Squires, Jack McCullough is the Standing Trustee, not Craig Phelps. This holds true for all DuPage County cases as well as Cook County cases. Not all matters that are erroneously served on Phelps’ office are received by McCullough’s office by the time the matter is originally presented on the motion call. This error sometimes prompts a needed continuance for receipt and review of the subject document. On virtually every Chapter 13 matter, the Standing Trustee’s Office should be served, as everything either affects the bankruptcy estate, the plan, or the administration of the case. 3. Failure to Serve the Chapter 7 Trustee or to Serve the Correct One The same concerns stated in No. 2 above apply in Chapter 7 cases, except that the pool of panel trustees for DuPage County cases extends among David R. Brown, David E. Grochocinski, Brenda Porter Helms and Gina B. Krol. Check with either the Clerk’s Office to see who is listed on the docket as the assigned trustee, or the United States Trustee’s Office if the appointment is not yet reflected on the docket. Like their Chapter 13 counterparts, Chapter 7 trustees need to be in the loop and on the service list on virtually every matter brought before the Court. 4. Failure to Attach Minute Orders or Draft Orders With Motions and/or Failure to Submit Draft Orders in the Time Given Local Bankruptcy Rule 402.L expressly requires that "[e]ach written motion shall be accompanied by a minute order form and proposed draft order." This is because of the separate order requirement of Federal Rules of Bankruptcy Procedure 5003(c) and 9021. Thus, just as the practitioner must state the relief requested with understandable clarity in the motion, as required by Bankruptcy Rule 9013, so too must he or she draft and submit the appropriate order for its disposition either pursuant to the requested relief or as directed by the Court. 5. Send Enough Copies of Motions and Draft Orders to Chambers and Include a Stamped, Self-Addressed Envelope for Filed Copies to Be Returned Local Bankruptcy Rules 402.G(2)4 and 402.J5 mandate that there be an original and one legible copy of each matter and exhibits for filing. If additional file-stamped copies are requested to be returned, be sure to include a stamped self-addressed envelope. If the papers are personally delivered to the Clerk’s Office, a courtesy copy dropped off my Chambers6 would be appreciated. Sometimes there is a lag in delivery of the copies from the Clerk’s Office to Chambers, especially if the matter is going to be presented in Court on an emergency basis the next day or on the short two business day gap after serving the necessary parties. 6. Failure To Note the Date and Time of Hearing in the Caption of Filed Pleadings Local Bankruptcy Rule 400.B provides, among other things, that "[t]he first page of each document shall bear . . . the next date, if any, that the issue is set." Even experienced practitioners frequently omit this information on the pleadings they file. There are thousands of pleadings filed annually in bankruptcy cases in this district and division, and frequently hearing dates are set far in advance. Including the hearing date on the document would greatly eases the burden of collating and preparing the Court’s call. 7. Failure to Sign Original Notices, Motions and Proofs of Service Federal Rule of Bankruptcy Procedure 9011, among its lesser known requirements, contains the mandate that the originals of all papers must be signed by at least one attorney of record in the attorney’s individual name. Aside from the more well-known sanctions potentially leviable under the Rule, which are triggered by the signature requirement, Bankruptcy Rule 9011 also mandates that the document shall be stricken unless it is promptly signed after the omitted signature is called to the attention of the person whose signature is required. Another unstated, but obvious, point is that the signature should be legible so the Court can reasonably ascertain the signatory attorney if problems arise or something contained in the paper is questioned. 8. Failure to Attach Copies of Security Documents or Other Exhibits and Statements of Default to Stay Motions The most common and frequently encountered motions are those seeking relief from the automatic stay of 11 U.S.C. § 362(d). Local Bankruptcy Rule 402.J, coupled with the seminal Seventh Circuit decision in In re Vitreous Steel, 911 F.2d 1223 (7th Cir. 1990), require that legible copies of the security documents be attached to the motion by the moving secured party to show its colorable claim of interest in the subject property. Some attorneys wait to furnish the documents until the time of the hearing on the motion, which does not technically comply with the mandate of the Rule. Those who fail to furnish those documents at the hearing must wait for the relief requested in the motion until after they have furnished those papers to Chambers for review. Failure to attach these documents to the motion adds to the delay and cost, which could be avoided if the practitioner complies with the Rules. 9. Failure to Attach Copy of the Underlying Claim to Objections to the Claim Local Bankruptcy Rule 402.J again comes into play with regard to claim objections. Because there are literally hundreds of thousands of proofs of claim filed annually, it makes it much easier for the Court and its staff to process and determine claim objections if the objector furnishes a copy of the claim objected to, or the pertinent parts thereof, along with the objections. Otherwise, the Court’s staffs compelled to expend a significant amount of time searching for the subject claim at bar. Without a copy of the claim to refer to, in light of the grounds of the objection stated, it makes it difficult for the Court to decide the proper disposition of the matter without both documents before it. 10. Failure to Appear at the Time of Presentment of Motion Without Advising the Parties Noticed and Chambers The principal benefit of our peculiar local custom and practice regarding the first hearing date held on motions and applications in this District, as embodied in Local Bankruptcy Rules 402 and 403, is that most matters can be disposed of at that first hearing with minimal time or delay after filing. Moreover, the first date when the matter is to be presented in open court is largely within the control and scheduling of moving counsel. The downside is that effort is wasted if the movants fail to appear on the date they have noticed for presentment. Failure to appear may cause the noticed parties to incur costs and fees, and require my staff to expend time calendaring and entering the matter on the call. Local Bankruptcy Rule 402.17 allows the Court to not only strike or deny the matter for want of prosecution for failure to attend the hearing, but also expressly allows the Court to tax the moving party with the reasonable and necessary costs and fees incurred by the other party as a result of the failure to appear and prosecute. If an unexpected emergency or problem arises which precludes attendance, a courtesy phone call to Chambers and the noticed parties can save all concerned time and trouble, as well as a possible assessment of fees. 11. Failure to Notice Motions at the Correct Date. Time or Venue As a general rule, all DuPage County matters in Chapter 7, 12, and 13 cases are heard every Friday.8 Similarly, as a general rule, all Cook County cases and all Chapter 11 cases assigned to Judge John H. Squires are heard Mondays through Thursdays in Courtroom 619, Chicago, Illinois. Check the Chicago Daily Law Bulletin for the published court calls. Do not hesitate to call Chambers to check when and where a matter is scheduled for hearing.9 Unless approved in advance by this Court, DuPage County matters are to be heard on the DuPage call, and Chicago matters are to be heard on the Chicago call. Do not, without prior Court approval, notice a DuPage matter on the Chicago call or vice-versa, unless it is a true emergency. Local Bankruptcy Rule 306 defines a true emergency matter.10 This Judge strictly construes Local Bankruptcy Rule 306. Frankly, most self-created and styled "emergencies" are not true emergencies within the spirit or letter of Local Rule 306. Rather, they are a result of poor or inadequate calendar management by counsel. 12. Failure to Give Proper Notice on Fee Applications and to Attach Cover Sheets Federal Rule of Bankruptcy Procedure 2002(a)(6)11 establishes a 20-day notice period to parties in interest (which includes the Court) for hearings on fee applications of $500.00 or more. Local Bankruptcy Rule 607. A requires the addition of a completed cover sheet in such applications in Chapter 11 cases and in other cases where the Court may apply its requirements.12 Applicants must make sure that the proper amount of time is given the parties in interest and the Court in order to adequately review and possibly object to the application. This can be a problem with year-end pressure to bill and collect unpaid fees. The Court is sometimes inundated at the end of the calendar year with fee applications. Accordingly, give as much advance notice as possible. Furthermore, provide a courtesy copy of the fee application to Chambers. 13. Failure to Date Proof of Service and/or Attach Service List Local Bankruptcy Rules 400.B,13 402.E(3)14 and 402.E(4)15 encompass the signature and service list requirements under the local rules, and the applicable Federal Rules of Bankruptcy Procedure specify and identify the necessary parties who must be served with the particular paper at bar. Given the presentment and other requirements of Local Bankruptcy Rule 402.B-G, failure to fill in the date of service of the paper and show exactly who was served as well as the method(s) employed in effecting service can be fatal. Failure to do so can result in delay, at the least, if not denial or striking for failure to show proper service on the face of the paper. 14. Improperly Mailing Papers to the DuPage County Judicial Center for Filing Neither this Court nor the Bankruptcy Clerk maintains a Chambers or an Office in the DuPage County Judicial Center. Attorneys and parties occasionally send originals and copies of proofs of claims, motions, applications, correspondence, and various other papers for filing to DuPage County, rather than to the Bankruptcy Clerk’s Office.16 This can be fatal if a statute of limitation is about to expire and a paper needs to be filed by or before a certain date. All documents and correspondence must be sent to Chicago. 15. Failure to Timely and Fully Comply With Preliminary and Final Pretrial and Prehearing Orders This Court usually enters prehearing orders and preliminary and final pretrial orders on most contested matters that involve evidentiary or testimonial hearing. These calendar management and docket control tools are expressly contemplated by Federal Rule of Bankruptcy Procedure 7016 with sanctions available for failure to comply as prescribed by Bankruptcy Rule 7037. See also Dornik v. Maurice (In re Maurice), 138 B.R. 890 (Bankr. N.D. Ill. 1992), aff’d, No. 92 C 4043, 1992 WL 308535 (N.D. Ill. Oct. 19, 1992), aff’d, 21 F.3d 767 (7th Cir. 1994). This Court has always enforced such orders and will continue to do so given the unprecedented and record number of bankruptcy cases and adversary proceedings filed. Trials are set long in advance to accommodate the needs and schedules of the attorneys and parties involved. Trials are never set on a trailing case calendar, so the time allotted the matter to be tried is yours for the benefit of your client. Be prepared, and help the Court adequately prepare, by timely and fully complying with the pretrial orders. If the matter settles at any time, please promptly notify Chambers. Then notice the appropriate motion or application to have the settlement approved per Federal Rule of Bankruptcy Procedures 9019. The foregoing list, in no particular order of frequency or degree of condemnation of commonly occurring error, contains nothing of obtuse complexity or difficulty to remedy. It merely reflects the easily rectifiable, but most repeated, problems that cause attorneys and their clients unnecessary delays and costs with attendant inconvenience and extra work to the Court and its staff. Please take the appropriate corrective measures. 1.Attached are statistics covering a five-year period, 1992-1997, reflecting the increase of bankruptcy case filings. 2. Bankruptcy Rule 7004(b)(9) provides: (b) SERVICE BY FIRST CLASS MAIL. Except as provided in subdivision (h), in addition to the methods of service authorized by Rule 4(e) - (j) F.R. Civ. P., service may be made within the United States by first class mail postage prepaid as follows: (9) Upon the debtor, after a petition has been filed by or served upon the debtor and until the case is dismissed or closed, by mailing a copy of the summons and complaint to the debtor at the address shown in the petition or statement of affairs or to such other address as the debtor may designate in a filed writing and, if the debtor is represented by an attorney, to the attorney at the attorney’s post office address. 3. Rule 11 (a) of the Illinois Supreme Court Rules provides: (a) On Whom Made. If a party is represented by an attorney of record, service shall be made upon the attorney. Otherwise service shall be made upon the party. 4. Local Bankruptcy Rule 402.G(2) provides in pertinent part: (2) The original and one copy of each motion shall be delivered to the clerk by 4:30 p.m. on the second business day preceding the date of presentment, regardless of the location of the of offices of moving counsel, unless delivery is directed otherwise by the judge. 5. Local Bankruptcy Rule 402.J provides: Where the motion, by reference to specified exhibits makes those exhibits part of the motion, legible copies of the specified exhibit shall be appended to and served with the motion and notice, unless excused by court order. 6. The address of my Chambers at the Everett M. Dirksen Building is: 219 South Dearborn Street, Room 656, Chicago, Illinois 60604. 7.Rule 402.1 states: Should the moving party or its counsel deliver a motion to the clerk or chambers but fail to appear and prosecute the motion at the time and place noticed, the court may without notice deny the motion or strike the motion for want of prosecution. If any opposing party or its counsel appears in response to any notice of motion not presented, the court may also upon notice and motion by that party tax and assess reasonable and necessary expenses and fees incurred as a result of the failure to prosecute the motion. 8. The bankruptcy hearings are held in the DuPage County Judicial Center, 505 North County Farm Road, Courtroom 2000, Wheaton, Illinois 60187. 9. The telephone number for Chambers is: (312) 435-7580. 10. Local Bankruptcy Rule 306 provides: A matter brought as an emergency motion must be of such a nature that any delay in hearing would result in serious, irreparable harm to one or more of the parties to the proceeding. 11. Federal Rule of Bankruptcy Procedure 2002(a)(6) provides: (a) Except as provided in subdivisions (h), (i), and (l) of this rule, the clerk, or some other person as the court may direct, shall give the debtor, the trustee, all creditors and indenture trustees at least 20 days’ notice by mail of: (6) hearings on all applications for compensation for reimbursement of in excess of $500. 12. Rule 607.A provides in pertinent part: each application for interim or final compensation for services performed and reimbursement of expenses incurred by a professional person employed in a Chapter 11 case shall begin with a completed and signed cover sheet in the form appended to and made part of this rule, and shall also include both a narrative summary and a detailed statement of the applicant’s services for which compensation is sought. 13. Rule 400.B provides in pertinent part: The final page of each document required to be signed by counsel shall be signed by one or more licensed attorneys or by an individual party filing pro se. 14. Rule 402.E(3) provides: Each motion other than one filed ex parse shall be accompanied by a certificate of service indicating the date and manner of service and a statement that copies of documents required to be served by Fed. R. Bankr. P. 7005 (Fed.R.Civ.P.5(a)) have been served. 15. Rule 402.E(4) provides: Where the service was by FAX, the certificate shall be accompanied by a copy of the transaction statement produced by the FAX machine. Such transaction statement shall include the date and time of service, the telephone number to which the documents were transmitted, and an acknowledgment from the receiving FAX machine that the transmission was received or, in the event that the receiving FAX machine did not produce the acknowledgment to the transmitting FAX machine, an affidavit or, if by any attorney, a certificate setting forth the date and time of service and telephone number to which documents were transmitted. Electronic transmission of documents to the court is not permitted under this rule. 16. All papers should be filed with the Bankruptcy Clerk’s Office, 219 South Dearborn Street, Room 710, Chicago, Illinois 60604. Honorable John Q. Squires is the Presiding U.S. Bankruptcy Judge for the Northern District of Illinois in DuPage. |
