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6 II. THE BANKRUPTCY COURT SYSTEM A. Bankruptcy Courts and Judges The creation of separate bankruptcy courts is a relatively recent occurrence when compared to the long history of bankruptcy law in the United States. Under the Bankruptcy Act of 1898 (which was amended numerous times and governed bankruptcy cases for approximately eighty years), the district court was vested with jurisdiction over bankruptcy cases. The district court, in turn, routinely referred bankruptcy matters to "referees in bankruptcy." Although the referee exercised much of the judicial authority of the district court, the district court remained the "court of bankruptcy." Bankruptcy courts are essentially "courts of equity and their proceedings are inherently proceedings in equity." Local Loan Co. v. Hunt, 292 U.S. 234, 240 (1934); Pepper v. Litton, 308 U.S. 295 (1939) (discussing the bankruptcy court's broad equitable powers). However, these equitable powers "must and can only be exercised within the confines of the Bankruptcy Code." Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206 (1988). Pursuant to the Judicial Code, each judicial district in the United States has established within it a separate bankruptcy court, which is a unit of the district court. 28 U.S.C. § 151. Bankruptcy judges, who receive their power through Article I (rather than Article III) of the United States Constitution, 2 are appointed to the bankruptcy court by the applicable United States Court of Appeals and sit for a term of fourteen years. 28 U.S.C. § 152(a). As discussed below under Jurisdiction and Venue, the bankruptcy judge's authority still derives, at least in part, from the district court. 2 By creating the bankruptcy courts pursuant to Article I of the Constitution (legislative power) rather than Article III (judicial power), the powers granted to bankruptcy judges (including their tenure and the scope of the matters they can determine) are restricted as compared to Article III judges.

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