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BankruptcyFeaturesLitigationLJN NewslettersThe Bankruptcy Strategist

What Constitutes 'Proper' Notice?

By Bruce Buechler

Proper notice is a hallmark of all bankruptcy proceedings. If a creditor or party-in-interest has no notice of a particular matter, many courts have ruled that the creditor or party-in-interest will not be bound by a particular court's determination. The Fifth Amendment to the Constitution provides that “no person shall … be deprived of life, liberty, or property, without due process of law … .”

Thus, without providing creditors and parties-in-interest with adequate notice of, say, the bar date or the deadline to file a proof of claim, those creditors and parties-in-interest may not be bound by the bar date and their rights will not be cut off. Similarly, in connection with a sale of assets under section 363 of the Bankruptcy Code, if creditors, including lienholders, were not provided sufficient notice of a sale motion, such creditors may not be bound by the sale approval order.

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