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Deep Mining of Bankruptcy Cases after the Great Bankruptcy Drought of 2006

By Joseph McDaniel, Esq.

I was talking the other day to a buddy of mine, who by coincidence is a very experienced, credential heavy, ethical and resourceful bankruptcy attorney in Phoenix.

The talk rolled around to the eighteen Arizona bankruptcy trustees who are appointed to bankruptcy cases here in Maricopa County.

And we swapped stories about 'em, like you do, because the bankruptcy trustees and their attorneys constitute much of the environment in which we work to protect and serve our clients.

And I pointed out that the trustees in Chapter 7 bankruptcy cases in Arizona had become far more aggressive in objecting to exemptions than in my youth.

My buddy concurred, and had this explanation, which I find persuasive: the bankruptcy trustees experienced huge overloads of cases just prior to the effective date of the 2005 amendments to the Bankruptcy Code, because there was a stampede to get into Court under the kinder, gentler bankruptcy law in effect at that time.

And there was a precipitous bankruptcy drought in 2006 and 2007.

And bankruptcy trustees need to eat, too.

So they developed what my buddy called "deep mining" techniques for cases, which explains why, when I have a client who owns a totally worthless piece of non-plastic-poop corporation, the trustee says, "Make me an offer", even though the trustee knows darned well that the business is worthless to anybody but the debtor.

Now, that's not good or bad, depending on whose ox is getting gored; it's just the way it is.

It may be that, on balance, it's a good thing for small business bankruptcy debtors.

I'll think about that and get back to you.

Full post as published by Arizona Bankruptcy Attorney Blog on October 17, 2010 (boomark / email).