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Supreme Court Upholds Consent Jurisdiction for Bankruptcy Cases

The Supreme Court ruled on May 29 that bankruptcy judges, in Texas and across the U.S., may issue final orders and judgments if the parties to the action consent to the bankruptcy court's jurisdiction. Minor issues remain in the case, Wellness International v. Sharif, but the ruling should allow the bankruptcy courts to continue to operate normally going forward.

The primary points of discussion involved the jurisdiction of the bankruptcy courts. Specifically at issue were whether the court could determine, with jurisdictional consent of the relevant parties, that assets held in trust were actually property of the bankruptcy estate and whether bankruptcy judges had jurisdiction over the dispute at all, as their offices are not established by Article III of the Constitution.

The majority opinion declined to address the latter issue, finding that the consent of the parties was enough to cure any problems with the decision. The ruling is consistent with previous Supreme Court rulings that have upheld consent jurisdiction in the context of magistrate judges. There are reasons to believe that most parties to bankruptcy cases will consent to the jurisdiction of the bankruptcy courts. For example, a party who does not consent may be forced to proceed in district court, where there is no reason to expect a more favorable outcome.

The dissenting opinion focused on the constitutional issue as the more important of the two. The ruling is both a practical solution to a problem for the bankruptcy courts and consistent with precedent. Parties to bankruptcy cases should feel little or no impact as a result of the Wellness ruling. Individuals who have questions about the ruling or personal bankruptcy in general may wish to consult an attorney for advice. A Houston bankruptcy attorney may be able to help those who are struggling with debt to decide among the options available for debt reduction or elimination.

Contact Guzman Law Firm today for legal help with your bankruptcy problems!

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