Page 23 - Bankruptcy Volume 1

however, there are many instances in which either the Bankruptcy Code contemplates interaction with
state law or where state law or state law concepts are used to fill actual or perceived gaps in federal
bankruptcy provisions.

The Rules Continued — Bankruptcy Rules and Other Applicable Law

Although the substantive aspects of a bankruptcy case are governed by the Bankruptcy Code, the proce-
dural aspects of bankruptcy are covered by the Federal Rules of Bankruptcy Procedure. These rules are
promulgated by the Supreme Court and have the force of law. The Federal Rules of Bankruptcy Proce-
dure are the rules by which all participants must comply if they wish to practice in the bankruptcy court.
The accountant need not understand all of these federal rules because many of these rules apply to the
legal participants, although a book outlining the federal rules should be obtained for general review. The
accountant must be familiar with those rules that directly affect the services rendered by accountants.
These rules provide the framework for notice requirements, time frames required for filing various mo-
tions, appeal procedures, discovery rules during litigation, and many other matters most appropriately
left to legal counsel. These rules supplement but may not contradict the provisions of the Bankruptcy
Code.

In addition, local bankruptcy judges issue local rules that expand on the federal rules, such as the time
frames required for fee applications and discovery. Some local rules contain detailed descriptions for
addressing, stapling, and filing papers being presented to the court. Local rules vary greatly depending
upon the jurisdiction. Some districts have a concise list of local rules comprising a single page, while
other lists may be extensive. Every accountant who would like to provide bankruptcy services should
obtain a copy of the relevant local rules and become familiar with its provisions. For a copy, contact the
Office of the U.S. Trustee in the area, the bankruptcy court clerk, or visit the bankruptcy court’s website.

The Players — Key Constituents in the Bankruptcy Process

In the bankruptcy process, accountants can participate in a number of capacities, including as an ac-
countant or financial adviser to the debtor, official or unofficial creditors’ committee, equity committee,
examiner, or individual creditors. Accountants may also serve as the court-appointed examiner, trustee,
liquidating agent, or disbursing agent, or as an expert witness or consultant. Participants in the process
and the role of the accountant with respect to each are described in the following paragraphs, along with
an introduction to the service that accountants may render in each capacity.

The Debtor

A debtor is an individual, partnership, corporation, or other entity seeking the protection of the Bank-
ruptcy Code. Not every such entity is eligible for relief under the Bankruptcy Code. For example, rail-
roads, insurance companies, banks, savings banks, cooperative banks, savings and loan associations,
building and loan associations, homestead associations, small business investment companies (SBICs),
industrial banks, credit unions, and the like, may not be debtors in bankruptcy. Moreover, entities who
file for bankruptcy under the Bankruptcy Code must reside in the United States or have a domicile, a
place of business or property in the United States. Upon filing the bankruptcy petition, an estate is creat-
ed. The estate is vested with all of the assets of the prepetition entity but is now governed by the rules set
forth in the Bankruptcy Code.

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