Bankruptcies are handled by a special federal court because of a provision in Article I, Section 8 of the United States Constitution makes Congress responsible for enacting “uniform laws on the subject of bankruptcies.” There is a bankruptcy court for each court district of the United States. A Detroit Bankruptcy Attorney will be familiar with the local bankruptcy court.
These courts are controlled by bankruptcy judges appointed by the President of the United States. They have the power to determine all aspects of the outcome of the bankruptcy litigation. However, much of the process follows black letter rules without any room for discretion. Because of this, much of it is handled entirely by a trustee appointed by the court. A debtor will only see a judge in rare circumstances when complications arise in a case. If such situations arise, a Detroit Bankruptcy Attorney should be consulted.
The only proceeding the creditor regularly attends is a meeting with the trustee and the creditors. This meeting has two primary purposes. The first is to allow the creditors to ask the debtor questions about their income, assets, and other factors affecting their ability to repay the debt so that the creditors can be assured of being treated fairly. The second is to ensure that the debtor is aware of all the possible consequences of bankruptcy, and the different options available. These options could include other types of bankruptcy as well as non-bankruptcy options such as repayment agreements.
Following this meeting, the trustee determines which of the creditors assets must be sold off to raise money to pay the debtors and which assets they are allowed to keep. This is determined by strict statutory rules enacted by each state (although the court itself is federal, Congress has given states the power to create their own property exemptions). Upon conclusion of this process, the debt is discharged, meaning that whether or not the creditors were paid in full, they debtor has satisfied their obligation and the creditors may no longer attempt to collect on the debt. This discharge is permanent unless reversed for reasons such as the debtor lying to the court to obtain it or hiding assets during the process in order to pay less.
