Jeffrey M. Rosenblum, P.C.
A Fresh Start

Supreme Court issues ruling on bankruptcy judges

The U.S. Supreme Court has recently released its decision on a case involving the ability of bankruptcy judges to make determinations on matters involving state law. In Wellness International Network, Ltd. v. Sharif, the majority of the court ruled that these non-Article III judges can issue final orders with the consent of the parties, and in so doing cleared up some of the confusion that had arisen after the 2011 Supreme Court decision in Stern v. Marshall.

The recent case involved the question of whether a bankruptcy judge could make a final ruling on whether assets allegedly held in trust should properly be deemed property of the bankruptcy estate. The court looked at two issues, one of which was whether such a ruling would be binding given the fact that bankruptcy judges purportedly lack the constitutional power to make one. The second question was whether the consent of the parties to abide by a bankruptcy court ruling, which had been obtained, would govern. The majority of the court based its decision on the latter question, and held that the consent would indeed cure whatever problem would otherwise exist.

If the parties had not consented, the matter would have been instead handled by a federal district judge who has the Article III authority. Some observers question whether withholding consent could make a difference, as the bankruptcy judge would most likely still hear the matter and then turn its findings of fact and legal conclusions to a district court for review anyway.

While this recent ruling centered on a fairly arcane topic, many people still view bankruptcy as a way to get out from under overwhelming financial obligations. An attorney who has experience in these matters can outline the various eligibility requirements that are associated with Chapter 7 and Chapter 13 to a client who is seeking debt relief.

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