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Business Disputes Being Handled in Bankruptcy Court


If your business has filed for Chapter 11 bankruptcy protection in Tampa, what happens when a business dispute arises during the bankruptcy proceedings? For example, if you own a small company in the Tampa Bay area and are seeking to discharge your business debts through bankruptcy and an entity with whom you have been involved in business moves to file a claim against your business, will the bankruptcy court have jurisdiction over the claim? How might the situation differ if the entity previously signed an arbitration clause agreeing to resolve business disputes through arbitration?

These are important questions, and anyone who is considering filing for bankruptcy in Tampa, Florida should have a basic understanding of how business disputes can be handled by bankruptcy courts.  These cases can often be litigated through motion practice within the underlying bankruptcy case, but usually they require the filing of a separate adversary action in the Bankruptcy Court.

Bankruptcy Law Gives Tampa Bankruptcy Courts Jurisdiction

Bankruptcy law, in most situations, sees business disputes (involving a business that has filed for bankruptcy) as central to bankruptcy cases. To be clear, under 28 U.S.C. § 157, bankruptcy courts tend to have jurisdiction of most business-related claims that arise in the course of a business bankruptcy. The law makes clear that “each district court may provide that any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district.”

In addition, the law emphasizes that “[b]ankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11 . . .” In other words, if the business dispute is considered to be a “core proceeding” in relation to the bankruptcy case, then the bankruptcy court certainly will hear the case.

What Are “Core Proceedings” That Result in Business Disputes Being Heard in Bankruptcy Court?

According to 28 U.S.C. § 157(b)(2), “core proceedings” that can lead to business disputes being heard by bankruptcy courts include but are not limited to the following:

  • Matters that concern the administration of the (business) estate;
  • Allowance/disallowance of claims against the estate;
  • Exemptions from property of the estate;
  • Estimation of claims or interests for the purposes of confirming a plan under Chapter 11 bankruptcy;
  • Counterclaims by the business filing for bankruptcy against someone filing a claim against the business;
  • Orders concerning obtaining credit;
  • Orders to turn over property owned by the business;
  • Motions concerning the automatic stay in bankruptcy, including motions to terminate, annul, or modify the automatic stay;
  • Issues concerning whether certain debts can be discharged;
  • Objections to particular bankruptcy discharges;
  • Determinations about liens, including their validity, their extent, and/or their priority;
  • Property leases and their validity;
  • Issues involving the use of cash as collateral;
  • Sale of property; and
  • Other claims or issues impacting the liquidation of business assets.

Who decides whether a business dispute is a “core proceeding” in a particular bankruptcy case? The law makes clear that the bankruptcy judge will make this determination. It is also important to note, however, that business disputes not characterized as “core proceedings” still can be heard by the bankruptcy court. Under 28 U.S.C. § 157(c)(1), a bankruptcy judge still may hear a business dispute that is “otherwise related to a case under title 11.” The bankruptcy judge will then “submit proposed findings of fact and conclusions of law to the district court.”

Dealing with Arbitration Clauses in Florida

What happens when a business dispute that typically would go to arbitration (as a result of an arbitration clause) is a “core proceeding” under the law? In short, this is a much more complicated questions, and it is extremely important to discuss your case with a Tampa bankruptcy lawyer. However, to address the issue briefly, if we look at the language of 28 U.S.C. § 157(c)(1), we see that the law clarifies that a bankruptcy judge “may” hear a case, rather than emphasizing that the bankruptcy judge “will” or “shall” hear a case. As such, it may be up to the discretion of the bankruptcy judge whether an issue that typically would be decided through arbitration will indeed be determined through arbitration or in the bankruptcy court.

As you can see, the issue of handling business disputes in bankruptcy court can become complicated. If you have questions about how a business dispute involving your company in Hillsborough County will impact your decision to file for Chapter 11 bankruptcy, an experienced bankruptcy attorney in Tampa can assist you. Contact Samantha L. Dammer to speak with a bankruptcy lawyer.



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