Supreme Court Elaborates on Bankruptcy Jurisdiction

Recently the United States Supreme Court clarified the powers of the bankruptcy court to rule on many issues that arise during a bankruptcy case. The case, Executive Benefits Insurance Agency v. Peter H. Arkison, concerned the bankruptcy court’s authority to decide non-bankruptcy issues that impact or relate to the bankruptcy case.

Many citizens are not aware that while bankruptcy court judges have jurisdiction over bankruptcy issues, they are not “Article III” judges described in the U.S Constitution like other federal judges, are not confirmed by the Senate, and do not serve a life term. Instead, bankruptcy judges are appointed by federal appeals court judges and serve 14-year terms. Consequently, in 2011 the Supreme Court ruled in the Anna Nicole Smith inheritance case (Stern v. Marshall) that bankruptcy courts do not have the constitutional authority to issue final rulings on certain legal claims, unlike Article III federal district court judges.

In a unanimous opinion delivered by Judge Clarence Thomas, the court said that, while the Constitution does not permit a bankruptcy court to enter final judgment on a bankruptcy-related claim, the relevant statute nevertheless permits a bankruptcy court to issue proposed findings of fact and conclusions of law to be reviewed by a district court. The Supremes did not comment on whether a bankruptcy judge may issue a final judgment in a case where the parties consent to litigation in the bankruptcy court. Several courts of appeal have allowed the bankruptcy court this jurisdiction after consent, but the question has not been finally resolved.

Navigating through the bankruptcy process requires a skilled and experienced guide. If you are experiencing serious financial difficulties, consult with a bankruptcy attorney to learn how the federal bankruptcy laws can help provide you with a fresh financial start.