There Are Four Things You Should Know About Bankruptcy Court

If you’ve looked into filing for bankruptcy, you’ve probably come across references to the United States Bankruptcy Court System  and/or the United States District Court, and you’re probably wondering what the bankruptcy court does.

(1) Definition of Bankruptcy Court

All bankruptcy cases filed in the United States are overseen by the bankruptcy court, which is a federal court. Here’s a more in-depth explanation.

(2) What is the procedure in bankruptcy court?

Both voluntary and involuntary bankruptcy matters are heard in bankruptcy court. The system of bankruptcy court may just perform an administrative function depending on the kind of bankruptcy the debtor has filed, with the filer, their creditors, and the case trustee pushing the case along. 

The bankruptcy court issues a discharge to the filer. This is often done via a “contested issue” addressed as part of the administrative bankruptcy process. The bankruptcy court hears and rules on any disputes in the case, whether between the filer and the trustee or between other parties.

Certain acts taken by the trustee, a creditor, or any interested party may require a separate complaint and litigation. An adversarial process is a legal term for a second lawsuit. 

When an adversary proceeding occurs, there are a few typical situations. For example, before filing for bankruptcy, a filer may transfer money to a friend or family member so that the money is not subject to bankruptcy. 

The trustee has the right to sue that family member or friend to recover the funds and distribute them to the filer’s creditors. An adversary action would be initiated when a creditor obtained money from a filer to settle a debt when the creditor was aware that he had been barred from collecting when the bankruptcy case was filed. In such a situation, the filer has the option to sue the creditor.

(3) Who are some of the experts who work in the bankruptcy court?

Your case trustee, bankruptcy judge, and – if you have one – your bankruptcy attorney will all play significant roles in your bankruptcy case, in addition to the person who files bankruptcy. Here is the link to the entire article about bankruptcy court specialists.

(4) Special Considerations: The United States Trustee and the Bankruptcy Court

The Department of Justice has a section called the United States Trustee Program. Its goal is to improve the efficiency of the federal bankruptcy system while also protecting its integrity. All bankruptcy cases filed in the bankruptcy court are informed to the United States Trustee designated for the area, except Alabama and North Carolina.

The United States Trustee may appear in any bankruptcy case via its staff lawyers. They supervise the trustees on the Chapter 7 panel and form the unsecured creditors’ committee in Chapter 11 cases. The United States Trustee, on the other hand, is restricted to arguing for the interests it represents in bankruptcy court. The bankruptcy judge has final decision-making power.

Conclusion

Although the bankruptcy court plays an essential role in the bankruptcy process, it is not engaged in every case. Simple no-asset Chapter 7 cases often do not require any judicial participation. In reality, most Chapter 7 filers never have to enter a courtroom unless they reaffirm a vehicle loan.

 

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