The bankruptcy process can be very complicated so at the Winter Park, Florida, law firm Lanigan and Lanigan, P.L., we want to make sure you know and understand the court process. Hence, it is important to understand the way in which bankruptcy jurisdiction is channeled to the bankruptcy and district court.
The Bankruptcy Code is a federal law created by Congress and falls within the realm of federal courts. Under 28 U.S.C. 1334, jurisdiction over bankruptcy is conferred to the district court. This jurisdiction covers the bankruptcy case itself as well as matters arising under the Code and relating to the case. The district court then refers these matters to the bankruptcy court where most of the litigation occurs.
However, the final disposition of the bankruptcy litigation depends on the nature of the rights in issue. This is because bankruptcy judges do not have Article III status under the U.S. Constitution and thus cannot adjudicate matters that do not arise out of the bankruptcy code itself.
Bankruptcy Core Proceedings vs. Non-Core Proceedings
As a result, the bankruptcy code makes a distinction between “core” proceedings and “non-core” proceedings to determine if a bankruptcy court has the power to render a judgment on an issue or whether it must give recommendation to the district court. A core proceeding has been defined as one that, “invokes a substantive right provided by Title 11…that, by nature could arise only in the context of a bankruptcy case.” In re Wood, 825 F. 2d 90, 97 (5th Crt. 1987).
On the other hand, if it is not a core proceeding and is related to the bankruptcy case the bankruptcy judge may hear it but cannot enter an order.
Therefore, the district court retains ultimate control over the bankruptcy case. The bankruptcy court may not render a final judgment in matters that are merely related to the bankruptcy case and require the resolution of non-bankruptcy rights. In summary, section 1334 confers bankruptcy jurisdiction on the district court and the code empowers that court to refer its bankruptcy powers to the bankruptcy court. Although the district court makes a general referral of all bankruptcy matters to the bankruptcy court, it retains final say over all proceedings beyond the bankruptcy case and its core.