Bankruptcy laws were set forth in order to allow people a fresh start when bills and debt became too high to possibly pay. One way bankruptcy laws may provide a fresh start is through liquidation of nonexempt assets, payment of creditors with proceeds, and discharge of much or all of the remaining debt. Another way bankruptcy laws provide a fresh start is through a new repayment plan that is feasible for the debtor to complete, and possibly discharge of some debts.
Each of the 94 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.
The Creditors’ Opportunity to be Heard
Creditors are given an opportunity to object to discharge of debts. The trustee and the U.S. trustee are also given an opportunity to object.
These objections are lodged by filing a complaint, which begins the adversary proceeding.
These objections must be made within a certain timeframe. The deadline to file an objection is 60 days from the first scheduled creditors’ meeting, also called the section 341 meeting. Section 341 refers to a section in the United States Bankruptcy Code requiring this meeting.
Sometimes there will be no objections.
Litigation Similar to General Civil Litigation
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.
There may also be appeals after the final determination in the bankruptcy court. Appeals, like litigation in other civil cases, are filed with an appellate court.
Bankruptcy Appellate Panels
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.