Monday, September 21, 2009

Bankruptcy Court System Structure

The US Constitution grants Congress the exclusive power to create laws regulating bankruptcy. See Article I, Section 8 of the US Constitution. Major bankruptcy statutes were enacted in 1800, 1841, 1867, 1898 and 1978. The statute passed in 1978 was a major revision and has been further amended from time to time, most recently in 2005. The bankruptcy laws are codified at 11 USC Section 101 et seq., and are commonly referred to as the “Code”.

Congress vested all jurisdiction over bankruptcy matters in the US district courts. The district courts have exclusive original jurisdiction over a bankruptcy case itself and original, but nonexclusive, jurisdiction over civil proceedings arising in, arising under or relating to a bankruptcy case.

Federal district courts could abstain and allow state courts to proceed in civil matters where comity or the interest of justice indicates that a state court should hear the matter. Section 1334 of Title 28, US Code, also mandates abstention upon timely motion by a part (a) where the federal courts, absent bankruptcy, would lack jurisdiction over the proceeding, and (b) the proceeding is either (i) pending in a state court at the time the motion is filed, or (ii) the proceedings arises under state law and can be timely adjudicated in state court.

Federal district courts are authorized to refer bankruptcy matters, with limited exceptions, to bankruptcy courts, which operate as a unit of the district court. Bankruptcy judges are appointed for 14-year terms by the US Court of Appeal for the circuit in which they are located. Thus, there are some limits as to the proceedings that may be held before bankruptcy courts, the matters on which bankruptcy courts may issue final or appealable orders, and which bankruptcy courts must make recommendations to district courts subject to de novo review. Bankruptcy courts may enter final, binding orders as to “core proceedings” and must prepare findings of fact and conclusions of law for de novo review by district courts in “related proceedings.”

All district courts have standing orders of reference under which all bankruptcy cases are initially referred to the bankruptcy courts. Source: American Bankruptcy Institute.

Warmest Regards,

Bob Schaller

Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm

Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.

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