Bankruptcy court is a special court, and the power of a bankruptcy judge is generally limited to bankruptcy matters. Congress has granted bankruptcy judges jurisdiction over certain issues, called core proceedings. This means the judge has the power to preside over and enter judgments on these issues.
But sometimes issues arise in a bankruptcy case that are not technically bankruptcy matters. These are called non-core proceedings. Sometimes a bankruptcy judge can hear and make decisions on non-core proceedings -- but only when the issues at hand relate directly to the bankruptcy case. If the judge makes a decision in a non-core proceeding, the decision cannot become a final judgment unless all parties consent. If the parties don't consent, the bankruptcy judge submits proposed findings of fact and conclusions to the district court.
So what is a core proceeding, and what is a non-core proceeding?
Core Bankruptcy Proceedings
Core proceedings are proceedings or issues that are entirely related to the bankruptcy case. The bankruptcy judge presides over these issues. Core proceedings in a bankruptcy case include:
- Matters concerning estate administration. For example, the court has jurisdiction over the trustee's duties in administering the estate.
- Matters concerning creditors' claims. For example, if the trustee objects to a creditor's claim, the court has jurisdiction over the objection.
- Matters concerning the debtor's exemptions. For example, if the trustee objects to the debtor's exemptions, the court has jurisdiction over the objection.
- Matters concerning the debtor or the trustee obtaining credit. For example, in a Chapter 13 case, the debtor must seek court permission before incurring debt.
- Matters concerning the debtor or other parties turning over property to the estate. For example, if another person is holding property of the debtor, the court can order that person to turn that property over to the trustee.
- Proceedings to determine, avoid or recover preferences. The trustee can seek to recover money the debtor paid to creditors during the preference period, and the court will have jurisdiction over the matter.
- Proceedings to determine, avoid or recover fraudulent transfers. The trustee can seek to recover money the debtor fraudulently transferred, and the court will have jurisdiction over the matter.
- Motions to terminate, modify, or annul the automatic stay. For example, if a creditor files a motion to lift the automatic stay so the creditor can foreclose or repossess, the court will hear the motion.
- Proceedings to determine dischargeability or to object to dischargeability of certain debts. For example, if a creditor objects to the debtor's discharging its particular debt, the bankruptcy court would hear the objection.
- Proceedings to determine the validity, extent or priority of liens.
- Confirmation of bankruptcy plans, such as the plan you file in a Chapter 13 case.
- Matters concerning the use or lease of bankruptcy estate property.
- Matters concerning the sale of bankruptcy estate property.
This list is non-exhaustive; core proceedings also include any other proceedings that involve the administration of the bankruptcy estate.
Non-core proceedings are proceedings that do not arise under bankruptcy law, even if some of the issues in the case relate to the bankruptcy. For example, if the bankruptcy debtor is in the middle of a divorce, the divorce is a non-core proceeding. Although the debtor's property affects the bankruptcy estate, the bankruptcy judge cannot determine the outcome of a divorce case. Similarly, if a bankruptcy debtor is involved in a personal injury lawsuit, the bankruptcy court has no control over the personal injury case, even though the proceeds may be bankruptcy estate property.
When a bankruptcy case involves a number of core and non-core issues combined, the bankruptcy judge must determine issue by issue whether he or she has jurisdiction over each one.