"Bankruptcy courts often address causes of action and claims arising under or governed by state law. Often presented is the question of which state’s laws to apply. To be discussed here is the further question raised: how does a bankruptcy court make a choice of law determination?
In answering this question, the circuits have split. Some circuit courts have viewed choice of law determinations for a federal court having bankruptcy jurisdiction as a matter of substantive state law. In such instances, those courts have held that the federal court must employ the choice of law rule of the applicable forum state (“state rule”). Other courts have held that federal courts sitting in bankruptcy have the independent discretion to make choice of law determinations (“federal rule”). A third group of courts have sidestepped the issue by deciding either that the substantive choice of law outcome in each case would be the same under either the state or federal rule, or that the contractual choice of law provisions chosen by the parties must be honored. "