Legal Definitions - noncore proceeding

A noncore proceeding is a legal dispute that arises within the context of a bankruptcy case but is not considered central to the fundamental administration of the bankruptcy itself. While related to the bankruptcy, these proceedings often involve claims or issues that would typically be heard in a state court, such as contract disputes, personal injury claims, or property disputes, where one of the parties happens to be in bankruptcy.

Because they are "noncore," a bankruptcy judge's authority to issue final judgments in these matters is generally more limited than in "core proceedings," which directly concern the bankruptcy process (like determining debts or approving a reorganization plan). In noncore proceedings, a bankruptcy judge typically submits proposed findings and recommendations to a federal district court judge for final approval, unless all parties agree to allow the bankruptcy judge to issue a final order.

Here are some examples:

• Example 1: Pre-Bankruptcy Contract Dispute

  A small manufacturing company, Widgets Inc., files for Chapter 11 bankruptcy. Before filing, Widgets Inc. had a pending lawsuit in state court against Parts Co. for breach of a supply contract, claiming Parts Co. delivered defective components. When Widgets Inc. filed for bankruptcy, this lawsuit was moved to the bankruptcy court.

  This lawsuit is a noncore proceeding because it is fundamentally a contract dispute governed by state law, which existed independently of the bankruptcy filing. While the outcome will affect Widgets Inc.'s assets and liabilities within the bankruptcy, it is not a matter directly related to the administration of the bankruptcy estate itself. The bankruptcy judge would hear the evidence and make recommendations, but a district court judge would typically issue the final judgment unless both Widgets Inc. and Parts Co. consented to the bankruptcy judge's final ruling.

• Example 2: Personal Injury Claim Against the Debtor

  Sarah files for Chapter 7 bankruptcy. Two months before her bankruptcy filing, she was involved in a car accident where another driver, Mark, was injured. Mark subsequently sues Sarah for negligence and damages.

  Mark's personal injury lawsuit against Sarah is a noncore proceeding. This claim existed prior to her bankruptcy and is based on state tort law, not bankruptcy law. Because Sarah is now a debtor in bankruptcy, this lawsuit becomes part of the bankruptcy court's jurisdiction as it affects her assets and potential liabilities. However, the bankruptcy judge would likely issue proposed findings to the district court for a final decision on Sarah's liability and the amount of damages.

• Example 3: Dispute Over Pre-Bankruptcy Property Rights

  A real estate developer, BuildRight LLC, files for bankruptcy. Prior to bankruptcy, BuildRight LLC was involved in a dispute with an adjacent landowner, Ms. Chen, over the exact boundary line between their properties and an easement for a shared driveway. Ms. Chen had initiated a lawsuit in state court to clarify these property rights.

  This property dispute is a noncore proceeding. The legal issues concern state property law and existed before BuildRight LLC's bankruptcy. Although the outcome will impact the value and extent of BuildRight LLC's assets available to creditors, the core legal questions are not about the bankruptcy process itself. The bankruptcy court would hear the matter, but the bankruptcy judge would typically submit proposed findings and conclusions to a federal district court judge for a final decision on the property boundaries and easement rights.