Loading the player...

WHAT IS 'Bankruptcy Court'

Bankruptcy court is a term that refers to specialized federal courtrooms in the United States.

BREAKING DOWN 'Bankruptcy Court'

A bankruptcy court is a specific kind of courtroom in the United States. The federal government created these courtrooms to settle all types of personal and corporate bankruptcy cases. Unlike the federal court, which U.S. Constitution established in 1781, the bankruptcy court system did not exist until 1978, when congress established the system as part of the Bankruptcy Reform Act.

While most criminal, civil and family cases are heard in state courts, bankruptcy must be filed in a federal court. The laws that govern bankruptcy are part of federal law, not state law, so in order to start bankruptcy proceedings, an individual must work within the federal court system. There are 94 federal judicial districts throughout the United States, and each district has a bankruptcy court. Federal law requires that a bankruptcy case be filed and heard in the judicial district that is the primary residence, place of business or site of the principal assets of the filer. Though the cases take place within individual states, the Federal Rules of Bankruptcy Procedure govern the bankruptcy process, in order to maintain consistency from state to state. The United States Court of Appeals appoints bankruptcy judges, who serve 14-year terms.

Bankruptcy itself refers to an instance in which a person or business cannot repay their debts. Once the debtor files the petition, the following proceedings are decided by the bankruptcy courts. The court measures and evaluates the debtor's situation, and then returns a process and plan for how the debtor’s assets may be used to repay a portion of outstanding debt. The decision is overseen by a bankruptcy judge, and that judge is able to decide whether or not the debtor should be discharged of their debts. This means that the debtor will no longer be responsible or personally liable for the debts associated with the filing. However, some debts are ineligible for discharge, including tax claims, child support or alimony payments and personal injury debts. An individual also cannot be discharged from any debt on any secured property, and any creditor can still enforce a lien on a debtor’s property.  

When You Disagree With the Bankruptcy Court’s Decision and Where to Go Next

If an individual disagrees with the bankruptcy judge’s decision, and wishes to contest the judge’s ruling, the filer has the option of filing an appeal and beginning the appeal process.  An appeal court generally handles bankruptcy appeals; in fact there are many judicial circuits which have their own bankruptcy-specific appellate courts to handle such disputes.

RELATED TERMS
  1. Voluntary Bankruptcy

    Voluntary bankruptcy is a type of bankruptcy where an insolvent ...
  2. Keep And Pay

    Keep and pay is a bankruptcy exemption. It lets a person keep ...
  3. Bankruptcy Financing

    Bankruptcy financing is financing arranged by a company while ...
  4. Chapter 7

    Chapter 7, known as straight or liquidation bankruptcy, of Title ...
  5. Bankruptcy Trustee

    Bankruptcy trustee is a person appointed by the United States ...
  6. Involuntary Bankruptcy

    An involuntary bankruptcy is a legal proceeding where creditors ...
Related Articles
  1. Taxes

    How To Survive A Bankruptcy Filing

    Learn how to make filing for bankruptcy less painful so you can successfully rebuild your financial life.
  2. Taxes

    Bankruptcy Filing Changes That Could Affect You

    When the economy is down, more people file for bankruptcy. Make sure you know about the changes that have been made to this process.
  3. Personal Finance

    What You Need To Know About Bankruptcy

    Don't choose this last-resort option until you learn how it will affect your future.
  4. Taxes

    How to Hire a Bankruptcy Lawyer

    How do you find the right bankruptcy lawyer? What you should look for to determine the right attorney for you.
  5. Taxes

    How To Survive Bankruptcy

    Bankruptcy is not the end of the world. You can survive it and come out on the other side more financially solid.
  6. Insurance

    Personal Bankruptcies Cut Almost in Half After Obamacare

    Access to health insurance many have saved many Americans from going broke.
  7. Personal Finance

    Millionaires With The Most Bankruptcies

    These celebrities made a lot and lost a lot - sometimes several times over. Find out who they are.
  8. Investing

    5 Energy Companies Crushed by Low Oil in 2016

    Oil companies globally are at risk of slipping into bankruptcy, and many of these businesses could disappear, leaving the sector worse off than in 2008.
  9. Small Business

    7 Bankrupt Companies That Came Back

    Bankruptcy is often the end of a company – until it isn't.
  10. Taxes

    7 Decisions That Lead To Bankruptcy In The UK

    In the past three years, personal bankruptcies have been on the rise throughout the U.K. Here's how it happens.
RELATED FAQS
  1. Can personal loans be included in bankruptcy?

    Read about debts that are dischargeable when filing for bankruptcy. Learn about how personal loans are treated when filing ... Read Answer >>
  2. What effect did the Bankruptcy Abuse Prevention and Consumer Protection Act of 2 ...

    Credit card companies and banks hate deadbeats who take from their bottom lines. They especially dislike the Chapter 7 bankruptcy ... Read Answer >>
Trading Center