How Do US Federal Courts Work?

The United States federal court system has three main levels: district courts, circuit courts (often called “appeals courts”), and the U.S. Supreme Court, the final level of appeal. 

Federal courts are courts of limited jurisdiction, which means they can only rule on matters outlined by the U.S. Constitution. One of these matters, as it happens, is bankruptcy. Given the specialized nature of bankruptcy proceedings, however, Congress created bankruptcy courts — which operate and exist below the district court in the federal hierarchy. 

Bankruptcy courts have jurisdiction to hear bankruptcy proceedings and are run by specialized judges who have extensive bankruptcy experience. 

District Courts

District courts are the general trial courts of the federal system. Each district court also has an associated bankruptcy court.

Each state has at least one district court of its own, though many states have multiple districts. For instance, New York, California and Texas each have four, and Florida has three. These courts have jurisdiction to hear cases within their districts.

Circuit Courts

Once the federal district court has decided a case, the case can be appealed to a United States court of appeal, also known as a circuit court. 

A case heard in a bankruptcy court must be appealed to either a district court or bankruptcy appellate panel before it can be heard by a circuit court.

Twelve federal circuits divide the country into regions that determine each circuit court’s jurisdiction. 

Which circuit court your case is located in can have a major impact on the outcome of your case.

All district courts and bankruptcy courts within a judicial circuit defer to the decisions of that circuit court when deciding cases. This is because of a legal principle called stare decisis, which obligates courts to follow precedent. 

District courts are not bound to follow the decisions of circuit courts made in other circuits.

For example, the bankruptcy court for the Central District of California (Los Angeles) must follow a decision made by the 9th Circuit Court, which includes California and six other states; but the bankruptcy court for the Southern District of New York (Manhattan) does not.

Supreme Court of the United States

The Supreme Court of the United States is the highest court in the American judicial system and has the power to decide appeals on all cases brought in federal court, including bankruptcy and some cases brought up through state courts. 

After the federal circuit court or state supreme court has ruled on a case, either party may choose to appeal to the U.S. Supreme Court. 

Unlike the U.S. Courts of Appeals, however, the Supreme Court has discretion over its docket. Each year, the justices select fewer than 100 cases (under 1 percent of appeals) to hear. Save for a few exceptions, they are never required to review a case.

The process of appealing to the Supreme Court involves filing a writ of certiorari. This writ is, in short, a party’s argument for why the Supreme Court should accept the case. If the writ is granted, the Supreme Court will take briefs and hear oral arguments. 

If the writ is not granted, however, the lower court’s opinion stands. 

A case will likely only be heard if the Court believes it is of national importance. 

Bankruptcy cases are heard by the Supreme Court only in rare situations, such as those where constitutional questions are central to the decision.