Bankruptcy Court - What is the Bankruptcy Court Process?

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Bankruptcy Court

Within the United States of America the bankruptcy court is a part of the federal judiciary system. At this juncture it should be noted that each and every state had and has its own laws pertaining to debt resolution. Due to individual states rights these codes and laws were so varied that it was impossible for the creditors and debtors to get justice when the debt insolvency crossed state borders.

Because of these vast differences in law it was determined by the United States Congress that the only way, to protect the debtors and creditors, was to set up a federal system that would take precedence over the state laws and codes. The end result was that each and every case, pertaining to financial insolvency, must be filed within the federal halls of justice. The authority, for this measure, comes to the United States Congress from the United States Constitution.

In the United States, currently, there are 94 judicial districts within the federal system. Each of these districts has responsibility for a prescribed geographical area of the United States, Washington D.C. and Puerto Rico in which legal resolution of debt may be sought.

The federal district judges that are appointed to serve, in the matters of liquidation of legal debt, serve for a term of 14 years (unless reappointed) not life as other federal judges. The appointment of each of these judges is done by the 'United States Court of Appeals' in which the appropriate federal circuit is located.

It should be noted that the U.S. federal district judiciary is responsible for any matters that are filed in that particular federal district system. Within each federal district the cases filed are assigned to the civil or criminal division.

The matter of debt resolution normally is assigned to the civil division. However, there are exceptions to this rule. An example of that would be when the debt repudiation has resulted in a criminal act by either the debtor or creditors. Thus the case would be referred to the "United States Department of Justice" for prosecution to the fullest extent of the law.

Criminal cases are in the minority of cases involving financial insolvency. In 2005 over 1,650,000 cases of debt insolvency were filed in the federal judiciary system. The over whelming majority of these were assigned to the civil division of the federal bankruptcy court.