United States Federal Bankruptcy

Each state has one or more federal judicial districts. Each district has a federal District Court that hears a variety of civil and criminal cases that arise under federal law. While District Courts are empowered to hear bankruptcy cases, nearly all federal districts have a Bankruptcy Court that handles bankruptcy filings. The District Court has the power to hear appeals from decisions made by the Bankruptcy Court.

Although some states have their own procedures for handling certain kinds of debt liquidation, all bankruptcies are filed in federal court, usually in the Bankruptcy Court. Most Bankruptcy Courts have their own administrative staff, including a Clerk of the Bankruptcy Court that is separate from the Clerk of the District Court.

Bankruptcy Judges

A Bankruptcy Judge presides in the Bankruptcy Court. Each Bankruptcy Judge in a particular district is a judicial officer who is appointed by the judges of the U.S. Court of Appeals with jurisdiction over that district. Bankruptcy Judges are appointed for terms of 14 years.

In addition to handling routine duties, the Bankruptcy Judge decides disputed matters in bankruptcy cases. The Bankruptcy Judge presides over adversary proceedings when issues in a bankruptcy are contested. An adversary proceeding filed in Bankruptcy Court is similar to a lawsuit. An adversary proceeding might be commenced for many reasons:

If a fraudulent transfer of money or property was made within two years of filing bankruptcy in order to keep that money or property out of the bankruptcy estate, the bankruptcy trustee might commence an adversary proceeding to obtain the return of that property or money so that it can be included in the bankruptcy estate.
If a debtor paid any creditor more than $600 during the 90 days before the bankruptcy was filed, the bankruptcy trustee might be able to use an adversary proceeding to obtain repayment of that preference transfer and add it to the bankruptcy estate so that other creditors get their fair share of those funds.
A creditor can use an adversary proceeding to contest dischargeability of a debt that the creditor claims was incurred by fraudulent means.
The trustee or creditors can use an adversary proceeding to object to the discharge if they believe they can prove that the bankruptcy filing is fraudulent or the debtor has violated the Bankruptcy Code or disobeyed court orders.
In a chapter 13 case, a debtor can sometimes us an adversary proceeding to strip the liens from a house, other than the primary mortgage, and have them treated as unsecured debts (but only if the house is worth less than the balance due on the primary mortgage).

A Bankruptcy Judge also rules upon objections made to the confirmation of chapter 13 plans and presides over confirmation hearings. Some judges hold confirmation hearings in every chapter 13 case while others hold them only if an objection to confirmation has been filed.

Trustees

A bankruptcy trustee handles the administrative aspects of a bankruptcy case. Trustees usually preside over the First Meeting of Creditors. In a chapter 7 bankruptcy, a trustee is responsible for the bankruptcy estate. The trustee will gather the debtor’s nonexempt property, sell it, and distribute the proceeds to creditors who have filed approved claims. In a chapter 13 bankruptcy, the trustee receives the debtor’s plan payments and distributes them to creditors with approved claims.

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