When you file for bankruptcy, you won’t go to the local state courthouse. To start your case, you’ll submit the official bankruptcy paperwork to the clerk at the federal court. Why? Bankruptcy is a process governed by federal bankruptcy law.
For instance, the law allowing for a Chapter 7 or Chapter 13 bankruptcy is found in the bankruptcy code (Title 11 of the United States Code). The Federal Rules of Bankruptcy Procedure provide instructions that help the courts carry out the bankruptcy law.
The purpose of bankruptcy is to give a filer a fresh financial start by canceling out debt owed by a debtor (the filer of the case) to a creditor. In exchange, the debtor agrees to give up property or income that isn’t needed to maintain employment and a modest home. Any excess gets distributed to creditors. The law that allows this process is in the bankruptcy code.
Among other things, the bankruptcy code defines:
The bankruptcy code is divided into chapters. The first three chapters apply to all cases regardless of type:
Each of the remaining chapters covers just one type of bankruptcy:
You’ll find an online copy of the bankruptcy code on the Cornell Law School website.
Virtually every court system in the country—federal, state, or otherwise—has a system of rules explaining how a case should proceed. The Federal Rules of Bankruptcy Procedure implement the bankruptcy code.
Congress gave authority to the Supreme Court to write the rules that govern the procedure of bankruptcy cases. According to Rule 1001, the rules are intended to “…be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every case and proceeding.”
You can find a copy of the Federal Rules of Bankruptcy Procedure on the U.S. Courts website.
The Supreme court designed the rules to implement code sections. The rules explain how the parties should conduct the case. For instance, the following rules create a uniform system that all courts follow when accepting a bankruptcy case:
When the rules conflict with the bankruptcy code, the bankruptcy code will prevail.
The bankruptcy court in each federal district has authority to enact rules for the district. These rules often address procedures for bringing certain types of motions before the court, entering orders, setting briefing schedules, and filing local forms required in that jurisdiction.
Sometimes referred to by bankruptcy lawyers as the “local-local rules,” most bankruptcy judges have their own rules of conduct in their courts. These often articulate the judge’s personal preferences for conducting hearings, policies for handling emergency motions, telephone and video hearings, interaction with court staff and other issues.