If you have been following political news lately, you have probably heard that lawmakers have not been able to reach a compromise regarding a spending bill, and as a result, the federal government may temporarily shut down. As a bankruptcy lawyer, I am interested in how this will affect progress in bankruptcy cases. The last time the federal government shutdown 3400 bankruptcy cases were delayed. This sounds like a lot, but it is important to consider this number in the context of how many cases are filed each year. In 2010, over 1.5 million bankruptcy cases were filed in the United States, so the number of cases actually delayed by the government shutdown represented a very small percentage of cases filed.
If the government shuts down, it is unlikely to cause a significant delay for most bankruptcy cases. Chapter 7 Trustees receive payment from a portion of the filing fee each debtor pays when they file their case, as well as receiving a portion of the proceeds from liquidated property. Chapter 13 Trustees receive a portion of all disbursements they pay to creditors. So you can see that these important participants in the bankruptcy process have little financial reliance on the federal government. But what about the bankruptcy courts? If the courts shut down temporarily, the confirmation process in Chapter 13 cases will be affected, but a shutdown will have little effect on the Chapter 7 process, except to delay discharge orders. Fortunately, if debtors bankruptcy cases are delayed, they will still be protected by the automatic stay. A delay in bankruptcy cases will be inconvenient, but unlikely to cause any harm to debtors.