Promulgated by federal law, there are three main forms of bankruptcy relief, known as Chapter 7, Chapter 11 and Chapter 13. In a Chapter 7 bankruptcy ("liquidation"), an appointed trustee liquidates the non-exempt property of the debtor and distributes it among the creditors. Then the debt is discharged, meaning the debtor is relived of personal liability.
The U.S. bankruptcy court system provides for the settlement of debt before a specialized federal tribunal. The trial court level is made up of Bankruptcy Courts in geographical districts such as the U.S. Bankruptcy Court for the Southern District of New York. In many circuits, the first level of appeal is the federal district court for that district, but in the 1st, 6th, 8th, 9th and 10th Circuits, the appellant also has the option of taking the matter to a Bankruptcy Appellate Panel. The second level of appeal is the appropriate Circuit Court of Appeals, followed by the U.S. Supreme Court.
Federal Sources of Primary Law:
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