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The Federal Nature of Bankruptcy Law

All bankruptcy cases are filed in Federal Bankruptcy Court. Article I Section 8 of the United States Constitution grants the federal government exclusive right to enact laws pertaining to bankruptcy. Therefore the States are prohibited from enacting there own bankruptcy laws.

Currently we are operating under the Bankruptcy Code of 1978. It has been amended several times since 1978 with the most substantial revision coming in 2005, under the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA).

Bankruptcy law and the bankruptcy process appears to vary from state to state because of several factors. First, in the Bankruptcy Code our Congress allowed each state the option of using federal law to determine what property can be kept or retained by an individual debtor in bankruptcy or to “opt out” and use its own state laws to determine what property is exempt. In addition the bankruptcy court will use state law to determine several points of law required to be resolved in a bankruptcy case. Some examples are as follows. Was a valid lien placed on property? Was a contract made between the parties? Was the amount of money required to be paid to former spouse under the terms of a divorce decree support or a debt?

A bankruptcy attorney needs to know not only the Bankruptcy Code but also a vast body of law to resolve the many issues that arise during the course of a bankruptcy case.

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