The bankruptcy court isn’t known to be a jury-friendly place. Few cases are entitled to a jury trial, and, even when they are allowed, bankruptcy courts don’t encourage them. In this article, you’ll learn why litigants should weigh and balance the potential benefits—and pitfalls—of a jury trial request.
(If you’d like to learn the basics, you’ll find an overview in The Bankruptcy Litigation Process.)
If you think that you’re going to be involved in a lawsuit and you’d like a jury, filing for bankruptcy beforehand might not be a good idea. In most bankruptcy courts, it’s preferred that the judge hear and decide the case rather than trying it in front of a jury—primarily because bankruptcy court is known for handling bankruptcy matters in a speedy and efficient manner.
By contrast, jury trials take a lot of time and require a lot of resources, and asking for a jury trial, even if you are entitled to one, could end up being a tactical mistake.
Most people choose to file for bankruptcy voluntarily. In rare circumstances, a debtor (the person or business in debt) can be forced into bankruptcy by creditors in what is known as an involuntary bankruptcy.
Most courts find that by filing a voluntary bankruptcy, the debtor waives the right to a jury trial because the debtor has chosen to be subject to the jurisdiction of the bankruptcy court.
Even so, you might have the right to a jury trial if:
The most common type of case that will give rise to a jury trial in bankruptcy is one for recovery of money or property as the result of a fraudulent transfer of funds or property. This usually occurs when a debtor wishes to avoid paying a creditor. Another common lawsuit involves a debtor paying a large sum of money to a particular creditor shortly before the bankruptcy case. Doing so puts that creditor in a better position than other creditors (called a preference payment).
The bankruptcy trustee responsible for overseeing the case often brings fraudulent conveyance and preference payment actions. If the trustee wins, the proceeds from the fraudulent transfer or preferential payment will be returned and dispersed among all creditors according to priority payment rules.
By contrast, a debtor doesn’t have the right to a jury trial in a public action, such as a case brought by the federal government. The action must be private.
Usually, the person making the request files a separate document with the court asking for a jury trial. It has to be made within ten days of the last document directed at the issue for which you want a jury trial.
Jury demands are generally made by creditors. Usually, the creditor doesn’t want the bankruptcy court to conduct the jury trial. The goal is to get a different judge (if the creditor has reason to believe the bankruptcy judge won’t be favorable), or to use the jury demand to stall or force a settlement (again, jury trials are time-consuming and expensive for all involved). A creditor accomplishes this by requesting a jury trial and then refusing to consent to the bankruptcy judge trying the matter. If both parties don’t consent, the case gets tried in the district court.
This simply means that the district court has given the bankruptcy judge permission to try such matters. You will need to check the general orders and local rules to see if your district court has designated a bankruptcy judge to conduct such trials.
Conducting an adversary proceeding (the term for “trial” in bankruptcy) isn’t feasible for most people without formal legal training. If you find yourself facing litigation in bankruptcy, you should seek the advice of a bankruptcy litigation attorney.