The Constitution gives the federal government control over bankruptcy matters, but it doesn’t specifically create bankruptcy courts and judges. Instead, Congress used its power to do so, and under 28 U.S.C. § 157, it grants bankruptcy judges their power over bankruptcy cases. Specifically, they may hear all cases and “core” proceedings arising under title 11, the Bankruptcy Code.
So a bankruptcy court can hear and rule on cases filed according to the bankruptcy rules, but what makes a proceeding a “core” proceeding? It offers sixteen examples, which I’ll summarize:
- Matters concerning the administration of the bankruptcy estate
- Proceedings relating to claims or exemptions against the estate, e.g. whether they should be allowed or their values
- Orders to turn over property of the estate
- Proceedings relating to preference actions
- Proceedings relating to the automatic stay
- Objections to discharges
- Lien priority disputes
- Plan confirmations
- Orders relating to leased property
- Orders approving property sales under certain circumstances
- Recognition of foreign proceedings under chapter 15
Importantly, the statute’s list of proceedings is not exhaustive. Many other bankruptcy situations can be “core” proceedings, so the law authorizes bankruptcy judges or interested parties to file their own motions to make such determinations. Moreover, simply because state law can affect a proceeding’s resolution does not mean the bankruptcy court can deem it a non-core proceeding. Other factors must come into play.
If a proceeding is not a core proceeding but relates to a title 11 bankruptcy case, then the bankruptcy court can hear it but not decide it unless the parties consent. Otherwise, the bankruptcy court then submits proposed findings of fact to the federal district court, which issues a final order.
What are examples of non-core proceedings? A debtor might be able to recover money from a personal injury lawsuit, so the recovery might become property of the bankruptcy estate. In other situations debtors file bankruptcy while they are in the middle of divorce. The divorce would not be a core proceeding because it happens in state court, but property relating to it might appear in a non-core bankruptcy proceeding.
Whether a proceeding is core or non-core probably won’t affect most debtors, but sometimes there can be a disagreement as to whether a bankruptcy court should be deciding a matter. In these circumstances an experienced New York bankruptcy lawyer can help you determine whether to keep part of your case in or out of bankruptcy court.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
