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What is a Federal Bankruptcy Court?

A Federal Bankruptcy Court is a tribunal that hears insolvency cases involving both natural and juridical persons. While the proceedings under this special court are generally governed by the Bankruptcy Code of the U.S., state laws still control or determine some of the aspects regarding claims, exemptions, or exclusions. A person has several remedies by which he can extinguish his debt.


The federal court that settles bankruptcy claims is called a Federal Bankruptcy Court, more familiarly known as the United States Bankruptcy Court.

The Bankruptcy Court is one of several specialized courts established by the U.S. Congress as part of its powers established under Article III of the United States Constitution. It is established in conjunction with the Bankruptcy Code of the U.S.

Although bankruptcy cases are filed at these courts, exemptions or exclusions and the validity of the filer’s claims are highly dependent on their respective state laws. This means that although there is only one type of court that hears such cases, the guidelines that govern them may vary from state to state.

Filing for Bankruptcy in a Federal Bankruptcy Court

Of the 6 types of bankruptcy stipulated in the Bankruptcy Code, individuals normally file for bankruptcy in a Federal Bankruptcy Court under either Chapter 7 or 13. Chapter 7 involves the liquidation of personal assets to pay off such debt. An actual sale of such may not be needed as the debtor may simply assume ownership of the asset or assets. In such case, the procedure under the said chapter would only be confined to the determination of the value of the properties.

Chapter 13, on the other hand, provides a means for the individual to pay off his or her debt without necessarily liquidating assets. There are two prerequisites that the debtor needs to meet in order to qualify under this type of bankruptcy: (1) there are assigned monetary debt levels for both secured and unsecured debt (below $807,500 and below $269,750 respectively) and (2) the debtor should have some form of regular income existing.

Individuals may also file for bankruptcy under Chapter 12. However, in order to be classified under this chapter, one has to be a farmer or fisherman.

Although an individual may file for bankruptcy under Chapter 11, this is quite rare as businesses are usually the only ones that do so under this Chapter. The reason for this is because the amount of the debt needs to be substantially high.

Filing under Chapters 11, 12 and 13 allows the individual or business to keep assets or properties and establish a payment plan in consideration of the person’s present income status.

Foreign businesses can also file for bankruptcy in a Federal Bankruptcy Court whenever they become insolvent as a result of dealings with local businesses or individuals. Cases that govern such are filed under Chapter 15.

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