The Bankruptcy Appellate Process

When it comes to bankruptcy, court judges are often called upon to render decisions when the debtor can’t agree with the trustee or a creditor and this is where the appellate process comes into play.

In some cases the issues are decided by a simple hearing, and in other cases by a separate lawsuit, called an adversary proceeding.

Bankruptcy rules dictate how the issues are heard and what process is used. In either case the bankruptcy court judge gets to decide the matter in question.

What if the judge rules against you?

The losing party to a bankruptcy court decision is normally entitled to an appeal.

One has to keep in mind though that not every decision made by the bankruptcy court is appealable. It is sometimes frustrating for a debtor to learn that only certain “final” orders of the bankruptcy court are appealable.

To add to the confusion, the federal appellate courts can’t seem to agree on what orders are appealable and which are not.

Example & case in point

Recently the Sixth Circuit Court of Appeals held that an appellate court lacks jurisdiction to entertain a non-certified appeal of an order rejecting a Chapter 13 bankruptcy plan, Lindsey v. Pinnacle National Bank et al (In re Lindsey), 2013 U.S. App. LEXIS 16680 (6th Cir. August 13, 2013).

While the Fourth Circuit Court of Appeals held that a bankruptcy court’s denial of confirmation is a final, appealable order, Mort Ranta v. Gorman, 2013 U.S. App. LEXIS 13426 (4th Cir. July 1, 2013).

The appeal process is less confusing than determining whether the order is final and appealable.

The litigant who files the appeal is known as the “appellant,” while the litigant responding to the appeal is the “appellee.”

The appellant must conclusively show that the bankruptcy court made a legal error that affected its decision.

Matters of judgment are not generally reviewed on appeal, unless the judge made a clear mistake. The appellate courts may use a variety of different reviewing standards to examine the appeal, including arbitrary and capricious, clearly erroneous, abuse of discretion, plain error, etc.

The reviewing court will not receive new evidence or question witnesses. The appellate court makes its decision based on the record of the case established by the bankruptcy court.

Bankruptcy is a federal legal process, so all bankruptcy court appeals are heard in the federal, not state courts. So for instance, if you’re reading this, you’re in Connecticut, but it wouldn’t be the Connecticut state courts that would be dealing with your appeal.

In most bankruptcy courts an appeal of a ruling by a bankruptcy judge may be taken to the district court. Several courts of appeals have established a bankruptcy appellate panel (BAP) consisting of three bankruptcy judges to hear appeals directly from the bankruptcy courts. This applies to Connecticut and every other American state.

If the issue is not finally resolved by either the district court or the BAP, the appellant may appeal to the appropriate federal circuit court of appeals. There are eleven numbered United States courts of appeals and one in the District of Columbia:

1. 1st Circuit (Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island)
2. 2nd Circuit (New York, Connecticut, and Vermont)
3. 3rd Circuit (Delaware, New Jersey, Pennsylvania, and Virgin Islands)
4. 4th Circuit (Maryland, North Carolina, South Carolina, Virginia, and West Virginia)
5. 5th Circuit (Louisiana, Mississippi, and Texas)
6. 6th Circuit (Kentucky, Michigan, Ohio, and Tennessee)
7. 7th Circuit (Illinois, Indiana, and Wisconsin)
8. 8th Circuit (Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota)
9. 9th Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington)
10. 10th Circuit (Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming)
11. 11th Circuit (Alabama, Florida, and Georgia)

Cases heard by the circuit court of appeals are decided by panels of three judges working together. The appellant and appellee present legal arguments to the panel, in writing, in a document called a “brief”.

In some cases the appellate court may hear oral arguments. Each side is given a short time — usually about 15 minutes — to present arguments to the court.

Appeals decision is usually the final decision

Yes it’s true; the court of appeals decision is usually the final decision in a case. The court may affirm the lower court decision, it may reverse the decision, or it may remand the case back to the trial court for additional proceedings.

In rare cases the decision by the three member panel of appellate judges may be reviewed en banc, that is, by a larger group of judges (usually all) of the court of appeals for the circuit.

The court of appeals decision usually will be the final word in the case, unless it sends the case back to the trial court for additional proceedings, or the parties ask the U.S. Supreme Court to review the case.

Not every bankruptcy appeal is heard

The Supreme Court is not obligated to hear every case that is appealed to it.

A losing litigant may ask the Supreme Court to review the case by filing a “writ of certiorari”.

The Supreme Court typically will only agree to hear a case only when it involves an unusually important legal principle, or when two or more federal appellate courts have interpreted a law differently. When the Supreme Court hears a case, the parties are required to file written briefs and the Court may hear oral argument.