US Bankruptcy Court Search

Definition

Bankruptcy Courts are federal courts that are organized under roughly the same structure as the US Federal District Courts. Bankruptcy searches are part of the due diligence process and are used to evaluate the credit worthiness of a debtor.   The person or entity filing for bankruptcy is called the petitioner, rather than a plaintiff or defendant.

Banks and other secured lenders file UCC financing statements in order to become part of the secured creditors class in the event of a bankruptcy (Article 9 of the UCC governs secured transactions, and the party filing a UCC financing statement is referred to as secured party).  When a bankruptcy is filed, creditors are paid based upon their classification as a secured or unsecured creditor, with secured creditors being paid first.

 

While bankruptcy is governed by Title 11 of the US Code, the rules of priority amongst competing creditors is determined by state law (Article 9 of the UCC).