How Bankruptcy Rule 7004 Affects a Summons

••• The basics of Bankruptcy Rule 7004 and the Summons.  Getty

This article examines the importance of Rule 7004 of the Federal Rules of Bankruptcy Procedure, its role in bankruptcy litigation, and how it differs from Rule 4 of the Federal Rules of Civil Procedure, which governs other types of federal civil litigation.

Origin and Purpose of the Bankruptcy Rules

According to Bankruptcy Rule 1001, “The Bankruptcy Rules and Forms govern procedure in cases under title 11 of the United States Code….These rules shall be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every case and proceeding.”

For most cases, bankruptcy is more of a process like a Social Security disability application, than it is litigation. But, that doesn’t mean there isn’t a treasure trove of opportunity for parties to develop controversies serious enough to present to the bankruptcy judge. 

Types of Bankruptcy Litigation

There are two kinds of litigation in a bankruptcy case. One is called a “contested matter,” which is usually a disagreement between parties as to how some provision of the bankruptcy code will be applied. A contested matter is usually initiated by filing a motion or an objection.

The other is called an “adversary proceeding.” Adversaries are court cases that are separate from but associated with a main bankruptcy case. They’re treated as full scale litigation, and they take on the familiar plaintiff vs. defendant structure.

Most litigation in a bankruptcy case is conducted under the rules in the 7000 series of the Federal Rules of Bankruptcy Procedure. The 7000 series applies in an adversary proceeding. Some of the 7000 series apply to contested matters. Bankruptcy Rule 7004 applies to both.

The Federal Rules of Bankruptcy Procedure often track the Federal Rules of Civil Procedure used by other federal courts for civil litigation. In fact, many of the bankruptcy rules incorporate the corresponding civil rule, or at least parts of it. Still, there are important differences because the bankruptcy rules are designed for efficient administration and lower costs in order to preserve as much of the bankruptcy estate as possible for the benefit of creditors. These differences can be confusing for practitioners who are used to operating under the general civil rules, and they can be downright problematic for the unwary.

Summons Under Bankruptcy Rule 7004 and Civil Rule 4

Bankruptcy Rule 7004 and federal Civil Rule 4 govern the summons, and how a lawsuit is served on the defendant. At its most basic, a summons is an order to appear before the court. In practice, it’s an official notification from the court that the plaintiff has filed a lawsuit against the defendant. It will be accompanied by a copy of the complaint that initiated the lawsuit, and it will inform the defendant of relevant dates, including the last day on which the defendant can file an answer to the suit.

How Rule 7004 and Rule 4 Differ

Rule 7004 differs from Rule 4 in two main ways: how process is served and who can be served. And, because the answer deadline is different, we’ll throw that into the mix as well.

How Is Service Made? In non-bankruptcy civil litigation, Rule 4 requires that the complaint be served on the defendant by a process server (someone at least 18 years old and not a party to the case). This method is also available in a bankruptcy case, but Bankruptcy Rule 7004 goes a step further and allows service by first class mail. Although this is very cost and time efficient for the plaintiff, it can cause an issue when a defendant receives the complaint in the mail and doesn’t understand that the time to answer is ticking away.

 

Note that service may also be made by publication under certain circumstances or pursuant to order of the court. 

Who Can Be Served? The second major difference between Rule 4 and Bankruptcy Rule 7004 concerns matters of the court’s personal jurisdiction over defendants. Unless the case involves a federal question, the federal district court will only have jurisdiction over defendants who have sufficient contacts within the state where the federal court sits.

In contrast, the bankruptcy court’s personal jurisdiction extends to “any defendant with respect to a case under the [Bankruptcy] Code or a civil proceeding arising under the [Bankruptcy] Code, or arising in or related to a case under the [Bankruptcy] Code,” no matter where the defendant is in the United States. F.R.B.P. 7004(f).

See the rules for additional restrictions on service of special populations like minors or corporations.

When Is an Answer or Response Due? One more issue bears examination, although it’s not a part of Rule 7004. The deadline for responding differs depending on whether the case is in District Court or Bankruptcy Court, and whether the case is an adversary or a contested matter. These are the general rules, and they may be modified by the court, or other rules may apply.  

  • Federal Civil Litigation: Under Rule 12(a), in civil litigation in U.S. District Court, the defendant must answer within 21 days of the date of service.
  • Bankruptcy Adversary: According to Rule 7012(a), the defendant must file an answer to the adversary within 30 days after the date on which the summons was issued by the clerk of the bankruptcy court.
  • Bankruptcy Contested Matter: Pursuant to Rule 9006(d), the motion must be served at least seven (7) days before the scheduled hearing, and any response must be filed no later than one day before the hearing. See Bankruptcy Rules Rule 9006 and Rule 9014.

    Summary:

    Bankruptcy Adversary:

    • by First Class Mail, 
    • on virtually anyone in the United States; 
    • deadline to answer is 30 days after the summons is issued by the clerk of the bankruptcy court.

    Bankruptcy Contested Matter:

    • by First Class Mail,
    • on virtually anyone in the United States; 
    • deadline to answer is generally one day before the hearing.  

    Federal Civil Litigation

    • by personal service,
    • restricted to those over whom the court has personal jurisdiction; 
    • deadline to answer is 21 days after defendant is served.