Each of the 94 federal judicial districts handles bankruptcy matters, and in almost all districts, bankruptcy cases are filed in the bankruptcy court. Bankruptcy cases cannot be filed in state court.
Types of Bankruptcy Cases
Each bankruptcy court hears a variety of bankruptcy cases. Debtors applying to the bankruptcy courts for financial relief may seek relief under a number of different chapters under the United States Bankruptcy Code.
Chapter 7 provides for liquidation of assets while other chapters provide for repayment plans over the course of a period of years, often three to five years. Under some chapters of the United States Bankruptcy Code, discharge of some or all debt may be an option, possibly in conjunction with liquidation or repayment.
Litigation of Bankruptcy Cases
Litigation in the bankruptcy court is conducted in much the same way that civil cases are handled in the district court. There may be discovery, pretrial proceedings, settlement efforts, and a trial.
- Creditors and trustees are permitted to object to the discharge of debt by filing a complaint. The complaint starts proceedings known as “adversary proceedings.” This is the bankruptcy lawsuit, quite similar to lawsuits in other civil matters.
- In chapter 7 bankruptcy cases, the debtor is not always entitled to a discharge of debts.
- In chapter 12 and 13 bankruptcy cases, the debtor is usually entitled to a discharge of debts after the debtor makes all payments required under the new repayment plan.
- There are other reasons a debtor may not receive a discharge which are based upon the debtor’s conduct, such as failure to comply with a required financial course or prior discharges in bankruptcy proceedings within a certain period of time.
After litigation, there may be an appeal of the bankruptcy court’s decision.
Appeals in Bankruptcy Cases
Bankruptcy Appellate Panels are 3-judge panels authorized to hear appeals of bankruptcy court decisions. These panels are a unit of the federal courts of appeals.
- Bankruptcy Appellate Panels (BAPs) were established under the Bankruptcy Reform Acts of 1978 and 1994.
- 28 U.S.C. §158 sets forth jurisdiction for appeals of bankruptcy decisions and authorizes the establishment of BAPs upon the order of the circuit judicial councils.
- BAP judges continue to serve as active bankruptcy judges in addition to their duties on the appellate panel.
Appeals from dispositive orders of bankruptcy judges may be taken to the district court or the BAP (if one has been established and the district has chosen to participate), with further appeal as of right to the court of appeals for the circuit.
In accordance with requirements of federal statutes and procedural rules, parties may elect to file an appeal of a bankruptcy court decision with the BAP or with the district court.