Physical Address: The Henry Rust Building 2627 W. Idaho Street Boise, Idaho 83702 | Mailing Address: Po Box 637 Boise, Idaho 83701 | Call Now: (208) 338-1001

Bankruptcy Abstention


Published On: September 20th, 2012 | Author: Perry Law, P.C. | Category: Bankruptcy Idaho

One recurring issue in bankruptcy proceedings is who has jurisdiction between a bankruptcy court and a state court. There are intricate rules as to core and non-core proceedings, which influence the decision. But, to complicate matters even further, the Bankruptcy Code provides for circumstances when a bankruptcy court must abstain from exercising its jurisdiction, and when it may abstain from exercising its jurisdiction.

28 U.S.C. Section 1334(c)(2) states seven requirements that must be met for when a bankruptcy court must abstain from exercising its jurisdiction. Those requirements are:

  1. A timely motion must be filed by the party seeking abstention;
  2. The action must be based on questions of state law;
  3. The proceeding must be related to the bankruptcy case as opposed to being an actual case or core proceeding;
  4. The proceeding must be an action for which there is no independent federal jurisdiction absent the petition under title 11;
  5. The action is commenced in a state court;
  6. The action may be timely adjudicated in a state forum; and,
  7. A state forum of appropriate jurisdiction exists.

Furthermore, 28 U.S.C. Section 1334(c)(1) states that “nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.” The Ninth Circuit has settled on twelve factors to consider when deciding whether to voluntarily abstain:

  1. The effect or lack thereof on the efficient administration of the estate if a Court recommends abstention;
  2. The extent to which state law issues predominate over bankruptcy issues;
  3. The difficult or unsettled nature of the applicable law;
  4. The presence of a related proceeding commenced in state court or other nonbankruptcy court;
  5. The jurisdictional basis, if any, other than 28 U.S.C. Section 1334;
  6. The degree of relatedness or remoteness of the proceeding to the main bankruptcy case;
  7. The substance rather than form of an asserted “core” proceeding;
  8. The feasibility of severing state law claims from core bankruptcy matters to allow judgments to be entered in state court with enforcement left to the bankruptcy court;
  9. The burden of the bankruptcy court’s docket;
  10. The likelihood that the commencement of the proceedings in bankruptcy court involves forum shopping by one of the parties;
  11. The existence of a right to a jury trial, and,
  12. The presence in the proceeding of nondebtor parties.

In re Tucson Estates, Inc., 912 F.2d 1162, 1166-67 (9th Cir. 1167).

Perry Law is licensed to practice in Arizona, Florida, Idaho, Oregon and Washington, we are a regional law firm, that gets large firm results.

When faced with a difficult legal situation, you want to make certain you have the best representation and legal team in your corner. At Perry Law, our attorneys and support team are here to ensure you the most sound advice and legal counsel possible.  Perry Law is a regional law firm with attorneys licensed in Arizona, Florida, Idaho, Oregon, and Washington. The firm represents over seventy years of combined legal experience.