When Can You Appeal a Bankruptcy Case?

Learn about the factors a court will consider when determining your right to appeal a decision.

Appealing a decision in a bankruptcy case might seem tricky, but in some ways, it’s easier than in other types of litigation. For instance, in most civil litigation, only a “final” decision can be appealed. By contrast, many decisions can change the course of a bankruptcy case or cause irreparable harm to someone involved. As a result, courts usually have a more relaxed view of appeals in bankruptcy.

Disputes in Bankruptcy

A bankruptcy case doesn’t end with one big decision that resolves the entire matter. It’s a series of smaller decisions, involving dozens and sometimes hundreds of creditors, all with different interests. It can touch on every aspect of individual filer’s financial life and virtually every aspect of a business.

What sets bankruptcy apart from other types of litigation is that any one of the small decisions could result in harm to someone involved in the case. And, bankruptcy cases can take years to resolve.

During that time, assets depreciate, get lost, suffer damage, or change hands. Even when the assets are liquidated (sold) and proceeds distributed to creditors, it can be difficult to fix an error on appeal if it is late in the case and creditors already received the available funds.

(Learn more about bankruptcy litigation in The Bankruptcy Litigation Process.)

Appealing Final Orders: Factors Courts Consider

In bankruptcy, if the bankruptcy litigation for a particular issue is considered final, or resolved, it will be appealable. Courts look at several factors when determining finality for a bankruptcy appeal. For instance, One of the factors considered by the court is whether the appeal will promote judicial economy by resolving the case more quickly. But there are more. Here are some others:

  • Can an immediate appeal prevent irreparable harm? A creditor could suffer irreversible damage if its claim gets denied wrongfully. A creditor needs to have the ability to appeal the decision immediately. Otherwise, the creditor could lose out on its share of distributions. It could be too late for the claimant to receive anything.
  • Will the appeal affect assets that can be used to pay creditor claims? Many of the issues in a bankruptcy case concern property. For instance, disputes might involve whether an item is a part of the bankruptcy estate, its value, who owns it, the validity and extent of any lien interests, and whether the debtor can claim a property exemption for it. Each one of these issues can affect whether the property is available for the bankruptcy trustee appointed to oversee the case (or the debtor) to use to pay creditors. A wrong decision could cause irreparable damage to someone that loses the asset or to the creditors that would have benefited from it.
  • Will further fact-finding be necessary? Most bankruptcy decisions get appealed first to the U.S. District Court or a bankruptcy appellate panel. Depending on the issue, the reviewing court might require additional facts before making a decision. If there isn’t enough in the record for the appealing court to make a determination, the more likely the decision will not be considered appealable.
  • How will the court’s decision affect other matters in the case? Depending on the nature of the issue, some decisions are more likely to be appealable if they don’t impact the rest of the matter. Some decisions are more likely to be appealable if they will have a significant effect on other issues, how the case will proceed, or the number of parties affected. For instance, if the trustee challenges the debtor’s claim of exemption (the right to keep certain property), the decision will affect the heart of the case because if the trustee’s position is correct, additional funds will be available to pay creditor claims.

Appealing Other Orders

In rare situations, a party can appeal an order that is not final, but only if the U.S. District Court or the bankruptcy appellate panel grants the party's motion for leave to appeal. The court that will handle the appeal will consider whether the existing law is unclear or whether an appeal is important in advancing the overall litigation case.

Appealing a case without the help of an attorney is unusual. For tips on hiring counsel, read What to Look for in a Bankruptcy Litigation Lawyer.

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