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What does a Bankruptcy Judge do?

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  • Written By: Alexis W.
  • Edited By: Andrew Jones
  • Last Modified Date: 08 November 2016
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A bankruptcy judge oversees legal actions, in which a person or company files for bankruptcy. Within the United States, and most other countries, there are specific rules and laws associated with what happens when people are unable to pay their debts. Bankruptcy provides a way out for people who cannot pay their bills, and who are too far in debt to ever begin to be able to pay them off. Not everyone can just declare bankruptcy, and a bankruptcy judge enforces the laws to determine whether bankruptcy is the appropriate action, and whether it is allowed under the law.

In the United States, bankruptcy laws are governed by federal law. Therefore, a bankruptcy judge is a federal judge as opposed to a state judge. This means that he follows federal rules of court procedure in regards to how motions must be presented, the types of cases that he hears, and the way arguments are structured. This also means that if a bankruptcy judge allows a person declare bankruptcy, that person is protected against creditors throughout the whole country, and not just in his state.

A bankruptcy judge will hear arguments from an attorney representing a person who wants to file for bankruptcy. The attorney must demonstrate that the person truly is bankrupt under the definition of the law. The judge will then evaluate the evidence to determine whether the person meets the definition of bankruptcy set forth by federal guidelines.

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In the United States, there are several different types of bankruptcy. For example, Chapter 7 bankruptcy is a complete bankruptcy in which a person has the majority of their debts forgiven. Chapter 13 bankruptcy requires the bankrupt party repay a portion of their debt as part of a payment plan, while Chapter 11 bankruptcy is mainly used for business bankruptcies.

A judge will determine whether the parties filed for the appropriate type of bankruptcy. He will do this by assessing their financial situation. For example, a person must have income below a certain level in order to qualify for Chapter 7 bankruptcy.

The bankruptcy judge will then hear from the creditors who have a claim on the assets of the bankrupt person. The bankruptcy judge will decide how assets, if any, are distributed to creditors. The law sets forth rules regarding who gets paid first, and the judge will determine who falls into which category under the rules, and how the assets should be distributed to those parties.

If the party filing bankruptcy has filed for Chapter 13 bankruptcy or Chapter 11 bankruptcy, the judge will also have to rule on the specific provisions. For example, for Chapter 13 bankruptcy, the judge will make a determination in regard to the payment plan that is set up by which the debtor pays back some of the creditors. In chapter 11 bankruptcy, the judge will have to sign off on, or review and rule on the restructuring of the business if it intends to remain open.

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Soulfox
Post 2

@Vincenzo -- in the United States, few debtors have to appear before bankruptcy judges. The process is pretty straightforward. There is a trustee who oversees the estates of people filing for bankruptcy. That trustee is usually an attorney well versed in bankruptcy law and will only file an objection to a case if he or she believes the debtor is not eligible to file bankruptcy, is hiding assets or has otherwise put together a petition that doesn't comply with the law.

You also have creditors who can object to a case if they believe the debtor won't pay what they owe under the law under a filing. For example, a debtor may file a Chapter 13 plan promising to pay

$18,000 on a car while the creditor says the fair market value of the vehicle is $20,000. That creditor can object to the plan and request a hearing before a bankruptcy judge.

It is not uncommon for the trustee or creditors to file objections and ask for hearings. However, most of those concerns are put to rest by the debtor's attorney outside of court through negotiation, providing documentation showing the debtor is acting properly, etc. Judge's generally only hear difficult cases and there aren't just a whole lot of those.

Vincenzo
Post 1

But how likely is it for a debtor to actually go before a bankruptcy judge? In the United States, there are a lot of bankruptcies filed but relatively few judges. That would mean that judges would be swamped if they had to hear a lot of bankruptcy cases, wouldn't it?

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