Minnesota Bankruptcy Powers and Trustees: The Authority and the Responsibility

Bankruptcy is the process through which an individual or business has the opportunity to have debts eliminated, or discharged, or the process through which an individual or business has the opportunity to pay back existing debts over a set number of years.

Who May File for Bankruptcy?

Not everyone is permitted to file for bankruptcy. A person or business must qualify under the Bankruptcy Code in order to qualify to file for bankruptcy. Certain limitations are placed on who can file bankruptcy, and when. For instance, there is the “means test,” which limits people from filing bankruptcy if they do not financially qualify. There are also limitations on when a person or business can file for bankruptcy based on whether the person or business previously has filed for bankruptcy, and when.

Where Does Bankruptcy Come From?

A person filing for bankruptcy, or investigating whether such a filing will be permitted, will look to certain laws for guidance. Article I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” Under this grant of authority, Congress enacted the “Bankruptcy Code” in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases.

Additionally, the procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses.

Who Rules Over the Bankruptcy Process?

The Bankruptcy Code and the Bankruptcy Rules are interpreted and enforced by the courts. There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country.

The bankruptcy courts generally have their own clerk’s offices. The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts.

Despite the power of the courts to enforce and apply the Bankruptcy Code and Bankruptcy Rules in each case, much of the bankruptcy process is administrative, and is conducted away from the courthouse. It is important to accurately understand the applicable Code and Rules when filing for bankruptcy.

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