US Bankruptcy Court: What Happens When You File for Bankruptcy?
Bankruptcy claims work differently than other court proceedings. If you’re thinking that bankruptcy might be a good option for you, it’s imperative that you become familiar with the system. You should know which court handles your claim, what issues within your case will be handled by whom, where to send any appeals if necessary, and about how long it will take. We’re going to guide you through all of this information and more to get you feeling confident about your choice to file bankruptcy.
Table of Contents
What Is US Bankruptcy Court?
Bankruptcy court is a specific jurisdiction of court held by the federal government, which means all bankruptcy cases are handled at the federal level. The federal court system is divided into several different types of courts. Each of these federal courts handle a different process. Just as a quick overview of how federal courts work: you have trial court, appellate court, and supreme court. The court that applies to bankruptcy cases happens to be the trial court.
Now, the trial court handles many different cases, not just bankruptcy cases, but a specific branch of trial court (often called district court) always handles bankruptcy cases. So, essentially, there is a district court branch of the federal court system that is assigned every bankruptcy case — this is the US bankruptcy court.
Bankruptcy Court Jurisdiction
All cases of bankruptcy are handled in exactly the same way. As for many other types of courts that are handled at the state level, laws and regulations vary from state to state. However, bankruptcy is quite a firm process that follows a very specific set of rules depending on what chapter you file. As such, the government has ruled that all of these cases be treated exactly the same, which means no state rules may apply. This is why the US bankruptcy court is necessary.
The bankruptcy court will likely have all the final say on everything within a case. This means, everything pertaining to forgiveness of debts and the reorganization of your debts will be decided in court. If there are any uncertain areas within your case and how it translates to directly to bankruptcy law, this court will be the one to make decisions about what will be done. All of these points that are directly pertaining to the outcome of your case are called “core matters” and will be handled by the bankruptcy court. Anything else that has to do with your case, but that might not directly affect your bankruptcy status might be handled elsewhere, or it could still be appointed to your bankruptcy judge.
Every case is different, so depending on the circumstances, the bankruptcy could hand your case over to the district court (or even your state court) after all core matters have been addressed. Sometimes your bankruptcy judge will be allowed to make a ruling on everything within your case, and in other situations, the judge may be required to send the case up to the district court level to receive final approval.
In addition, if you’re unhappy with the ruling that you’ve received you can ask for an appeal. However, just as a regular bankruptcy case is handled at the federal level, your appeal will be too. This means you will likely need to go through district court or maybe even appellate court in order to dispute your case rulings.
You may have heard that federal judges are appointed for life, which is true. However, unlike other federal judges, bankruptcy judges have separate statutes that apply to their position. They are not appointed for life, but usually for 14 years. At the end of their 14 year term, they have the possibility to renew their status. However, their position is only renewed by the appellate court, which means if for any reason the appellate court sees that a judge is unfit for their position, their term will not be renewed. What’s more, a bankruptcy judge is not required to renew their position. If they would rather, they have the option of declining a renewal after their term has ended.
Bankruptcy Court Appeals
Before we get into appeals, let’s break down what bankruptcy court looks like within the district court. There are different “circuits” of bankruptcy courts that handle all claims. Essentially, this means that there isn’t just one bankruptcy court that handles all claims from across the country. There are several “circuits” or different regional bankruptcy courts that exist. They all do the same thing, there is just more than one of them in order to accommodate all of the bankruptcy claims that come in.
In some of these circuits, they have appointed what is called a “bankruptcy appellate panel”. This acts as an appellate court panel if you decide to appeal your case. This panel consists of bankruptcy judges that exist within a single circuit. What that means is, if you decide to appeal your case, your assigned judge might hand the case over to the assigned bankruptcy appellate panel, which is not the actual appellate court. This system has been put in place in several circuits in order to streamline the appeals process. However, you may request that your appeal be handed over to the district court or the appellate court if applicable.
If your case moves beyond your local district court, it will be handed up to the United States Court of Appeals. For example, if the district court views your appeal and denies it, you may or may not be offered the chance to appeal at a higher level. The district court will then hand your case over to a US court of appeals judge within your circuit to handle the case. From there, if the case was again denied, you may or may not be offered the chance to go even higher. The final level would be the United States Supreme Court, which is completely separate from the bankruptcy court, district court, or any judges within your assigned circuit.
Bankruptcy Court Records
If you choose to file for bankruptcy, you must follow the Federal Rules of Bankruptcy Procedure. This is the federal statute that mandates how the bankruptcy courts must conduct their cases. It applies to you as well. You must make sure that your bankruptcy claim is filed according to this procedure and that any documents necessary from you are provided according to the procedural timeline as well.
In general, most bankruptcy cases take anywhere from four to six months to complete. In some cases it could be a shorter time period and in others it could be much longer. It completely depends on your situation, documentation needed, time for agreement on reorganization (if applicable), and any appeals that may occur.
Now, if you’re thinking about filing for bankruptcy, you should have a clearer picture of how it will work within the bankruptcy court system. Although it may seem a bit complicated, it’s very important that you understand the different branches and intertwining areas of bankruptcy court. It will save you stress if you’re unsure of exactly what is happening to your case or if you feel that you are in need of an appeal. You’ll already have an idea of how the system works and how things should properly be done by yourself and the court. Yes, bankruptcy claims can be a lengthy process. However, keeping yourself educated about the system and your case can lessen obstacles and make things go as smoothly and quickly as possible.
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Trisha is a writer and blogger from Boise, ID. She is a dedicated vegan, an avid gamer, cat lover, and amateur SFX artist.