Removing Cases To The Bankruptcy Court

10 Sep Removing Cases To The Bankruptcy Court

Under 28 U.S.C. section 1452, a bankruptcy debtor may remove an action from any other court to the bankruptcy court, simply by filing a notice of removal with both the original court and the bankruptcy court in which the debtor’s bankruptcy case is pending. The action can be removed to the bankruptcy court by either a plaintiff or a defendant, and it can be done no matter what stage the proceedings have reached. Removal can be a powerful tool in the debtor’s arsenal. Once the notice of removal is filed, the action is no longer pending in the original court. Instead, the action is automatically and immediately pending in the U.S. district court, which immediately and automatically refers the action to the bankruptcy court.

Removal of an action to the bankruptcy court is a drastic remedy which rarely needs to be used by a consumer debtor, but when removal is done, the opposing party will likely be dismayed and possibly flabbergasted. Perhaps the opposing attorney will not even be licensed to practice in federal court. The debtor who removes a case to bankruptcy court can now litigate the action in familiar territory, where the debtor’s counsel is familiar with the judge and all the court’s rules. Also, the bankruptcy judge may be more likely to be mindful of the competing claims of other creditors upon the debtor’s limited resources than would a non-bankruptcy judge, possibly resulting in more fair treatment of the debtor, should the court need to determine the amount of a verdict or damages.

A party to a removed case can ask the bankruptcy court to remand the action back the original court under 28 U.S.C. section 1452(b), under any equitable grounds, such convenience of the parties or comity with other court systems. However, even if a removed case is remanded, the debtor may have achieved a significant advantage by the removal. For example, a delay in the proceedings may prove beneficial, or a busy state court may not have time to place a trial back upon its docket until a date far into the furure. For these reasons, removal can be an effective strategy for the debtor in unusual cases.

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Bankruptcy Law Network (BLN)

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