Bankruptcy Court

All bankruptcy cases are filed in federal rather than state courts where the federal court system has exclusive jurisdiction. Most statutes regarding bankruptcy filings are codified in the U.S. Code Title 11. Other laws for governing the bankruptcy process can be found in the Federal Rules of Bankruptcy Procedure, which allows federal bankruptcy courts some leeway to create their own regulations, assuming they do not conflict with the laws outlined in the Bankruptcy Code.

Bankruptcy courts how are they structured?

Bankruptcy courts are part of the federal court system which is divided into ninety-four districts. Although they are part of the federal court system, the bankruptcy courts operate independently. There is one bankruptcy court established within every district.

Function of the bankruptcy court

The bankruptcy courts primary purpose is to ensure that a debtor repays their creditors in a fair, lawful, and orderly manner. For example, the bankruptcy laws and the court determine what creditors are paid and in what order.

If the bankruptcy court is overseeing a Chapter 7 personal bankruptcy they will ensure that the debtor’s assets are liquidated and the proceeds of the sale are used to compensate creditors. Bankruptcy courts may also oversee the restructuring of businesses under Chapter 11 bankruptcy.

The goal of bankruptcy courts is to ensure dishonest actions are eliminated and rules and procedures are followed so bankruptcy laws are not undermined.

Bankruptcy court and the assigning of the trustee

After a petitioner has submitted their bankruptcy petition to the appropriate federal district court, a U.S. trustee is assigned to their case by the U.S. Trustee’s Office. Although the trustee is not a judge, they will review the bankruptcy case and determine what assets are exempted and which can be sold or liquidated. If assets are sold they will also determine how to distribute the proceeds from the sale to the appropriate creditors.

If a debtor has filed Chapter 13 bankruptcy there may not be a liquidation of assets, but the trustee can oversee the creation of the Chapter 13 debt repayment plan.

Finally, the trustee will review all submitted forms, schedules, and the bankruptcy petition to ensure that the information is correct.