Is Bankruptcy Federal or State law? The answer is both and more! The majority of bankruptcy law is Federal Law. Bankruptcy is authorized by the US Constitution Article 1, Section 8, Clause 4 which authorizes the Federal Government to authorize “uniform laws on the subject of bankruptcy”. Since 1801 the Federal Government has enacted bankruptcy laws. In the last 50 years the biggest changes have been the 1978 Amendments and the 2005 Amendment.
However, bankruptcy law is not all Federal law. The reason for this is that bankruptcy law encompasses state law exemptions in most states. In South Carolina we use South Carolina State law exemptions. Exemption laws are used in bankruptcy to determine what Debtor’s property is protected in bankruptcy.
Finally, there are other laws or rules that govern bankruptcy court. Every bankruptcy court in the United States has what is called as “Local Rules”. Local Rules are mostly procedural guidelines that each Bankruptcy District has in place to make their Court run more efficiently. Local Rules do not replace federal or state law and are subordinate to both of them