Structure of Bankruptcy Courts

by John Stevens J.D.
Your case will be dismissed if it is filed in the wrong bankruptcy court.

Your case will be dismissed if it is filed in the wrong bankruptcy court.

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Bankruptcy can be a complicated process to complete, as there are a litany of rules and procedures to follow. If you're considering filing for bankruptcy, you must ensure that you file your court paperwork in the bankruptcy court located within your district. Not all bankruptcy courts follow the same rules, however, and some districts differ on where you can appeal an adverse decision.

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The Bankruptcy Court System

State courts do not have the power to hear bankruptcy cases: bankruptcy courts are part of the federal court system, and exist independently from federal district courts. The federal court system is divided into 94 geographical areas, called districts. These districts encompass not only the United States, but also the District of Columbia and Puerto Rico. Each federal district has at least one bankruptcy court within its borders. Some states, such as Minnesota or Colorado, have only one bankruptcy court within their borders, while some other states, such as California, New York and Texas, may have three or four.

Bankruptcy Laws

A number of different sources of law govern the bankruptcy process. The vast majority of bankruptcy laws and rules are found within the Bankruptcy Code, a subsection of the United States Code. A second set of laws, called the Federal Rules of Bankruptcy Procedure, governs the process by which those laws are carried out. Under the Federal Rules of Bankruptcy Procedure, individual bankruptcy courts are allowed to create their own rules, as long as those rules do not conflict with the Bankruptcy Code and the Bankruptcy Rules of Procedure. Every bankruptcy court has therefore created its own set of procedural rules. If you're considering filing for bankruptcy, you can get a copy of local rules from the office of the clerk of the bankruptcy court.

The Role of the Bankruptcy Trustee

Bankruptcy filers are often surprised to discover that they will probably never appear before a bankruptcy judge. A bankruptcy trustee is assigned to every bankruptcy case by the U.S. Trustee’s Office. A trustee is not a judge and does not interpret the law. The primary role of the trustee is to determine whether the bankruptcy debtor has any assets that the trustee can sell and, if so, to distribute the proceeds from the sale to the debtor’s creditors. The trustee also carefully reviews the debtor’s bankruptcy paperwork for any errors and omissions, and questions the debtor to determine whether the information provided is correct.

Bankruptcy Appeals

A decision by a bankruptcy court is not final. If you disagree with the bankruptcy court’s decisions, you can appeal that decision. Where the appeal is heard depends on the Circuit in which the bankruptcy court is located. There are thirteen Circuits in the federal court system. Each Circuit consists of multiple states, and is assigned a number. The First, Sixth, Eighth, Ninth and Tenth Circuits have a special division called a bankruptcy appellate panel. If you intend to appeal a bankruptcy case in these Circuits, you may do so at either the federal district court level or at the appellate panel division for that Circuit. If the district does not have an appellate panel, the appeal must be filed at the district court in that Circuit.