United States Supreme Court Weighs in on the Scope of Bankruptcy Courts

Bankruptcy courts were not created—nor were they authorized by—the United States Constitution. Therefore, they exist as “off shoots” of the federal judiciary. Specifically, the bankruptcy courts exist to have a special forum for all similar cases, since many bankruptcy issues are very specific and are seen time and time again by the judges who handle them.

gavel-5-1409595-mThe existence of bankruptcy courts can pose several questions, one of which concerns what matters can a bankruptcy court hear and what matters must be heard in front of a traditional federal judge. Everyone can agree that bankruptcy cases should go to bankruptcy judges. Likewise, completely unrelated issues should not be in front of bankruptcy judges. But what about those issues that are somewhat related to the bankruptcy proceeding?

Core Versus Non-Core Issues in Bankruptcy Court

The Supreme Court and Congress have come up with a way of determining what issues bankruptcy courts can hear by dividing issues into “core” or “non-core” issues. Bankruptcy courts can hear those issues that are core to a bankruptcy proceeding and render a final decision.

Those issues that are non-core the bankruptcy court can also hear, but can only make a suggestion as to how the issue should be resolved. The final determination would rest with the federal judge.

Executive Benefits Insurance Agency v. Bellingham

In the recent Supreme Court case, Executive Benefits Insurance Agency v. Bellingham, the nine Justices slightly clarified what issues are core and what are non-core. In the case, the issue was whether a claim of fraudulent transfer was core to the bankruptcy proceeding. Congress had labeled the fraudulent conveyance claims as core, but prior Supreme Court case law suggested that they were not core. The Court had to decide which they were.

The Court eventually decided that the claims were non-core and that the bankruptcy judge should have the opportunity to weigh in on the issues, but that his opinion on the matter was not final. A federal judge would then have the final say on the fraudulent conveyance claims.

Are You Considering Filing For Bankruptcy in Kentucky?

If you have decided that you are going to file for bankruptcy in Kentucky, or you are on the fence about whether you should file or not, you should speak with a dedicated Kentucky bankruptcy law attorney about your situation to see if it may be right for you. Bankruptcy law can be exceedingly complex, and the slightest nuance can mean the world of difference in the outcome of your case. Attorney Richard Schwartz has over 29 years of experience helping his clients obtain the financial freedom they desire. He has a keen understanding of the bankruptcy court system and knows what it takes to diligently and aggressively represent his clients in their bankruptcy proceedings. Click here, or call 866-366-3328 to schedule a free initial consultation with Richard Schwartz, an experienced Kentucky bankruptcy law attorney.

More Blog Posts:

Federal Bankruptcy Court Goes over the Differences Between Chapter 7 and Chapter 13 Bankruptcies, Kentucky Bankruptcy Lawyers Blog, published March 31, 2014.

Pizza Chain, Sbarro, Has Its Bankruptcy Plan Approved By Federal Court, Kentucky Bankruptcy Lawyers Blog, published May 28, 2014.

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