What is Discovery in a Bankruptcy Case?

In many different types of legal proceedings, there is a part of the process known as “discovery.” This is a legal term that refers to the process through which both sides exchange information, including information about evidence they plan to use and witnesses they plan to present. Discovery often involves depositions, which are formal out-of-court statements that parties provide under oath at a time and place where all parties to the case (i.e., both sides) can be present. Depositions give the parties a chance to know how witnesses are going to respond to certain inquiries and what type of information a witness will be providing. The purpose of discovery is generally for either side to have a general sense of what to expect and to be able to plan.

While discovery is common in civil litigation, it is not commonly considered to be part of bankruptcy cases. Yet in some bankruptcy proceedings, discovery will occur. When is discovery part of a bankruptcy case, and what is its purpose? Our West Palm Beach bankruptcy attorneys can explain in more detail.

“Examinations” Under the Bankruptcy Code

American bankruptcy law allows for discovery in bankruptcy proceedings in terms of an “examination” under Rule 2004 of the Federal Rules of Bankruptcy Procedure. The scope of “examination” that is permitted under the Rules is quite broad, and it is often discussed in relation to “discovery” since an examination in a bankruptcy case works very similarly to a deposition.

Rule 2004(a) says that, “on a party in interest’s motion, the court may order the examination of any entity.” In a motion for an examination, the party requesting to conduct an examination usually must show good cause to do so.

Scope of an Examination in a Bankruptcy Proceeding

After the bankruptcy court has ordered the examination of a party, the examination can then have a relatively broad scope under Rule 2004(b), which allows an examination to cover any of the following:

• The debtor’s acts, conduct, or property;
• The debtor’s liabilities and financial condition;
• Any matter that may affect the administration of the debtor’s estate; or
• The debtor’s right to a discharge.

In certain types of bankruptcy cases, specifically Chapter 12 or 13 bankruptcies, as well as in most Chapter 11 bankruptcies (as long as the bankruptcy is not a “railroad organization”), then the following matters are also within the scope of examination:

• The operation of any business and the desirability of its continuing;
• The source of any money or property the debtor acquired or will acquire for the purpose of consummating a plan and the consideration given or offered; and
• Any other matter relevant to the case or to formulating a plan.

Contact Our West Palm Beach Bankruptcy Attorney Today 

Are you considering a bankruptcy filing as an individual or for your business? It is important to have legal advice from the start. One of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan Delaney & Eller, PLLC can discuss your financial details with you today and can help you to determine the type of bankruptcy you should be planning to file. Once you are ready to get started, our firm is here to assist you. Contact us to find out more about the bankruptcy services we provide to individuals and businesses in South Florida.

Source:

law.cornell.edu/rules/frbp/rule_2004