The United States Bankruptcy Court

The United States Bankruptcy Court takes cognizance of cases involving the inability of individuals or businesses to pay their obligations. This tribunal has been formed under the provisions of the Bankruptcy Code and is categorized as a court of special jurisdiction.

The federal court that deals with or has jurisdiction over cases involving bankruptcy is the United States Bankruptcy Court. But just what is a federal court in the first place?

Federal courts are, in essence, courts that are established based on the U.S. constitution. There are two types:

(1) General Jurisdiction Courts are tribunals that are primarily established by the US Congress based on Article III of the constitution. The Supreme Court is among the tribunals established under this category.
(2) Specific-Matter Jurisdiction Courts are courts that are primarily established by the US Congress based on Article I of the constitution

The U.S. Bankruptcy Court is just one of these specialized courts. It is a fact that General Jurisdiction Courts are more “powerful” than the Specific-Matter Jurisdiction courts. This is to maintain a certain balance as regards the exercising of power among the US Government’s branches. The U.S. Congress is permitted by Article III to establish these specialized courts. To offset this power, these specialized courts cannot exceed the capabilities or “reach” of the General Jurisdiction Courts.

The United States Bankruptcy Court and the Bankruptcy Code

The United States Bankruptcy Court was established based on the provisions of the Bankruptcy Code. The U.S. government’s own court-related website (www.uscourts.gov) defines bankruptcy as “A legal procedure for dealing with debt problems of individuals and businesses”. It is sound to infer that any legal disputes that arise from the basic tenet of debt and the inability of an individual or business to pay for this debt are therefore relegated to the U.S. Bankruptcy Court.

There are 6 essential chapters in the Bankruptcy Code that define 6 corresponding types of bankruptcy:

(1) Chapter 7 deals with an individual or business bankruptcy and sets up guidelines on how assets should be liquidated to settle most, if not all of the debt.
(2) Chapter 9 deals with municipal bankruptcy.
(3) Chapter 11 deals with businesses mainly but individuals may be classified under such as long as the amounts owed are substantially high.
(4) Chapter 12 is for farmers and fishermen.
(5) Chapter 13 contains guidelines for the establishment of a payment plan for individuals with some form of steady income.
(6) Chapter 15 deals with cases of bankruptcy where foreign businesses are the ones burdened with debt.

By filing for bankruptcy, the (bankruptcy) code allows for such individual or business the chance to relieve oneself of their debts, normally through a complete write-out of the debt and/or establishing a payment plan that would be convenient to the debtor. This, of course, pre-supposes that the individual or business honestly declares the inability to pay off such debt and it is up to the United States Bankruptcy Court to determine whether or not that this claim is indeed true.

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