Page 26 - Bankruptcy Volume 1

judge could be reviewing and ruling on his or her own administration. It was believed that the bankrupt-
cy court should primarily be concerned with judicial matters and that the administration of the case and
supervision of the trustees should be delegated to a separate entity, which ultimately became the Office
of the U.S. Trustee. Headed by an attorney, the Office of the U.S. Trustee has specific duties in areas in-
volving fraud, dishonesty, and efficient case management. The U.S. Trustee is generally the party who
moves that the court appoint examiners or trustees. Once the court orders the appointment, the U.S.
Trustee is specifically mandated the responsibility for choosing trustees or examiners. The U.S. Trustee
is also involved in monitoring the appointment and payment of professionals in bankruptcy cases. The
U.S. Trustee and supporting staff are hired and supervised by the Department of Justice. As noted previ-
ously, the U.S. Trustee is responsible for appointing the committees in Chapter 11. In Chapter 11 cases,
the U.S. Trustee monitors plans, disclosure statements, actions of appointed committees, and the pro-
gress of the case; files comments with the court; and takes action to prevent undue delay.

The Playing Field

Bankruptcies are administered in the bankruptcy court and are governed by a federal bankruptcy judge.
Bankruptcy judges, appointed through Article I of the Constitution, are not appointed for life, unlike
federal district court judges. The term of a bankruptcy judge appointment is fourteen years. At the end of
that period, a bankruptcy judge can reapply and be reappointed for another fourteen-year period.

Although the Judicial Code gives some discretion to the district court to retain a few bankruptcy matters
or cases, bankruptcy judges hear almost all bankruptcy cases. Section 157(b) of Title 28 of the USC (the
judicial title) provides that the bankruptcy judge may hear and decide core proceedings arising in a case
referred to the bankruptcy court by the district court. Core proceedings include such matters as allow-
ance of claims, objections to discharge, confirmation of plan, and disposal of debtor’s property. Core
proceedings generally do not include personal injury tort and wrongful death claims heard either in the
district court in the district in which the bankruptcy case is pending or in the district where the claim
arose, as determined by the district court wherein the bankruptcy case is pending.

Adversary proceedings that arise in the bankruptcy case are clearly within the bankruptcy court’s juris-
diction. On the other hand, adversary proceedings that are merely related to the bankruptcy case may be
but are not necessarily within the bankruptcy court’s jurisdiction. Questions of jurisdiction are extremely
complex; however, such questions are predominantly legal issues and are ordinarily of little concern to
the accountant. Although the bankruptcy court may have jurisdiction with respect to a related-to matter,
there may be other courts that also have jurisdiction for these matters. In other words, related-to jurisdic-
tion is not necessarily exclusive jurisdiction. By contrast, the bankruptcy court (as an adjunct of the dis-
trict court) has exclusive jurisdiction for bankruptcy cases (and core proceedings thereunder) as well as
for adversary proceedings arising out of bankruptcy cases.

Bankruptcy appeals are heard in the first instance by the district court or by a panel of three bankruptcy
judges. 28 USC 158(b) provides that the judicial council of a circuit must establish a bankruptcy appel-
late panel (BAP) of bankruptcy judges from districts within the circuit, unless there are insufficient judi-
cial resources available or the establishment of the panel will result in undue delay or increased cost to
parties involved in the cases. Section 158(b) was added by the Bankruptcy Reform Act of 1994. Appeals
of the district court or BAP decisions are heard by the appropriate circuit courts of appeals. Not every
decision from a district court or BAP is immediately appealable. Many such decisions relate only to in-
termediate steps in the bankruptcy process. Most such interlocutory appeals will not be permitted until
the case reaches a further stage of resolution.

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