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The Government Shutdown and Its Effect on Bankruptcy Proceedings

With parts of the government officially closed today, and a compromise in the future still uncertain, many federal government workers will be experiencing negative financial consequences.  Government workers are expecting to sign furlough papers and return home, however, many are still waiting to see if their department is affected.  There are expected 800,000 workers who are expected to be ordered to stay home on furlough.  The government will continue to support programs that are essential to maintaining public safety and protecting property.

During furlough Americans will not receive a paycheck during the shutdown and might face bankruptcy.  There is a chance that Congress will reimburse them once the furlough ends, but there is no guarantee.  Unfortunately, it will be the hardworking federal employees that will feel the effects of the shutdown the greatest and will be forced to use credit cards to get through this difficult time.

Federal courts will continue to hear and decide case, but the justice department has urged its attorneys to curtail or postpone non-critical civil matters. In regards to bankruptcy courts, the Administrative Office of the U.S. Courts for the Federal Judiciary issued a statement that the bankruptcy courts will remain open, as well as the case management and electronic case filing systems (CM/ECF).  However, if the shutdown proceeds for several weeks, individuals that have filed bankruptcy can expect delays or cancellation of 341 hearings, delays in confirmation of Chapter 13 plans, and other bankruptcy proceedings.  Cancellation of bankruptcy cases will only result if it does not compromise the safety of human life or the protection of property under the terms of the Anti-Deficiency Act.

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