The Bankruptcy Code is full of unusual terminology, but one of them that’s fundamental is the “order for relief.” What is this and what role does it play in a New York bankruptcy?
In a voluntary bankruptcy—that is, one in which the debtor files voluntarily—the order for relief is the bankruptcy petition itself. That may seem odd to people with a passing familiarity with law. Court orders are typically individual documents separate from all of the motions, briefs, and other paperwork the legal system produces. However, for bankruptcy, the order for relief is the petition itself.
In involuntary bankruptcy, which is when creditors bring a debtor into bankruptcy, the order for relief is a separate document, Form B 2530. The reason for the difference is that the Bankruptcy Code gives debtors in involuntary bankruptcies an opportunity to contest the cases. If they are successful, the court will dismiss the involuntary bankruptcy, but if not, then the order for relief is entered. I discuss here when it’s worthwhile to initiate an involuntary bankruptcy against a debtor. Of course, debtors in involuntary bankruptcies can always choose not to contest the cases against them, and the order for relief will then be entered.
So what does the order for relief do?
The most important thing the order for relief does for debtors is initiate the automatic stay. The automatic stay halts all actions by creditors to collect on debtors’ debts or foreclose or repossess their assets. It’s one of bankruptcy’s biggest privileges to debtors.
Secondly, the order for relief separates the time before debtors file bankruptcy from the time afterward. The bankruptcy process looks only at debts that debtors accumulated prior to bankruptcy but excludes post-petition obligations. It also marks the end of the look-back period for unauthorized transfers, i.e. preferences and fraudulent conveyances. The date of the order for relief sets the benchmark for many bankruptcy timelines.
Thirdly, the order for relief establishes that the debtor is subject to the bankruptcy court’s personal and subject-matter jurisdiction. This is typically a trivial concern for debtors, but legally it’s crucial. If debtors file incomplete petitions, or they make material mistakes, then their cases will not be accepted and the order for relief not granted.
The order for relief is such a fundamental part of bankruptcy that it’s easy to miss how important it is. If you are encountering serious financial hardship, than consulting with an experienced New York bankruptcy lawyer can help you assess your options and do the crucial paperwork correctly the first time.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
