8.1 & 8.2 - Bankruptcy Flashcards
What are the 6 basic types of bankruptcy cases?
Chapter 7: liquidation
Chapter 9: municipal debt adjustment
Chapter 11: reorganization
Chapter 12: family farmers and regular income
Chapter 13: adjustment of debts of individuals with regular income
Chapter 15: ancillary and other cross-border cases
In what type of bankruptcy case is a trustee not required? What cases is one required?
Chapter 11not required
Chapter 7 and 13 required
In what type of case does the trustee collect the debtor’s assets, liquidate them, and use the proceeds to pay off creditors to the extent possible?
Chapter 7
If the debtor is an artificial entity (corporation), is the case discharged?
No - dissolved
In what type of case does the debtor repay all or a portion of his debts between a 3 - 5 year period?
Chapter 13
In what type of case does the debtor remain in possession of his or her assets and a plan of reorganization is adopted?
Chapter 11
What type of case was adopted to promote a uniform and coordinated legal regime for cross-border insolvency cases
Chapter 15
If an individual filing under chapter 7 liquidation has monthly income greater than the state median income, the state or any interested creditor can:
File a motion to dismiss the case either under the means test or for general abuse because the debtor has sufficient income to pay debts
This is used to determine whether creditor would be better off under a chapter 13 five year reorganization:
Means test
What the formula to calculate the means test?
(Average monthly income - allowed expenses) X 60
If < 9,075 then chapter 7 is ok
If 60 times the debtors average monthly income minus allowable expenses is less than 9,075 then:
The debtor may continue under chapter 7
If 60 times the debtors average monthly income minus allowable expenses is more than 9,075 then:
There is presumption of abuse and the debtor usually will have to convert the case to chapter 13
What types of companies may not file under chapter 7?
Railroads
Insurance companies
Banks
Small business investment companies
What companies may not file for bankruptcy under chapter 11?
Stockbroker
Insurance companies
Banks
Small business investment companies
When a bankruptcy petition is filed in either a voluntary case or an involuntary case, what becomes effective against most creditors?
Automatic stay
What does an automatic stay do?
Stops almost all collection efforts
The automatic stay does not apply to what?
Criminal prosecution
Paternity suits
Cases brought to establish or collect spousal or child support obligations
After a petition is filed, a debtor must file:
- List of creditors
- Schedule of assets and liabilities
- Schedule of current income and expenditures
- Statement of the debtor’s financial affairs
- Copies of pay stubs received within 60 days before filing
- Copies of federal tax returns from the last tax year
If an individual debtor fails to file any of the required information (list of creditors, schedules, etc.) within 45 days of filing the petition, then:
Th case is automatically dismissed on the 46th day
A voluntary case under chapter 7 and chapter 11 is commenced by:
The debtor filing a petition for relief
A filed voluntary petition constitutes:
An order for relief (means a case may proceed unless court orders otherwise)
May petition a debtor involuntarily into bankruptcy proceedings under chapter 7 or chapter 11:
Unsecured creditors
Grounds for an involuntary petition are:
Creditors must show that the debtor generally is not paying debts as they become due
Who may not be petitioned involuntarily into bankruptcy?
Farmers and nonprofit charitable organizations
Which creditors may petition a debtor involuntarily into bankruptcy?
Creditors who are owed, individually or in aggregate, at least $18,600 in unsecured undisputed debt
If a debtor has fewer than 12 creditors, who may petition a debtor involuntarily into bankruptcy?
Any creditor who is owed at least $18,600 in unsecured debt
If a debtor has 12 or more creditors, who may petition a debtor involuntarily into bankruptcy?
At least 3 creditors who are owed at least $18,600 in aggregate in unsecured undisputed debt
Ordinarily, after 20 to 40 days after the order for relief, what is held?
Section 341 meeting (meeting of the creditors)
Who must be given noticed of the section 341 meeting?
Interest parties
Creditors
Bankruptcy trustee
Debtor
The debtor’s estate generally includes:
All of the debtors real an personal property at the time of filing
Income generated from estate property received within 180 days after filing
Property he debtor received rom divorce, inheritance, or insurance within 180 days after filing
What is money the debtor earns after a petition is filed?
Post-petition earnings
What items are excluded from the bankruptcy estate?
Post-petition earnings and basic household items needed to live
The trustee has priority over all creditors except for:
Creditors with prior perfected security interest
Creditors with prior statutory or judicial liens
Any transfer made with intent to hinder, delay, o defraud creditors or any transfer in which the debtor received less than equivalent value while the debtor was insolvent is a:
Fraudulent transfer
Who has the power to set aside fraudulent transfers made within 2 years of the filing date?
The trustee
When the payment is “set aside” the payment is:
Taken back from the creditor who received it and becomes part of the bankruptcy estate
Who has the power to set aside preferences?
The trustee
The is a transfer made to or for the benefit of a creditor. It is made within 90 days prior to the filing of the petition (or 1 year if creditor is an officer of the org. or close relative). Made while the debtor is insolvent and results in the creditor receiving more than the creditor would have received under the bankruptcy code:
Preferential payment
A payment is a preference only if it:
Is for an antecedent debt (preexisting debt)
A contemporaneous exchange for new value is not a :
Preference
Payment to a fully secured creditor is not a preference because:
The creditor would have received the collateral and been paid in full anyway
Claims include:
All rights to payment from the debtors estate
To have a claim allowed, what must unsecured creditors and shareholders do?
Unsecured creditors must file a proof of claim
Shareholders must file a proof of interest
An unsecured creditor who fails to timely file a claim may:
Not take part in the distribution of the debtors estate
The goal of federal bankruptcy law is to:
Give an honest debtor a fresh start financially by discharging most debts owed by the debtor
The goal of federal bankruptcy law is to:
Give an honest debtor a fresh start financially by discharging most debts owed by the debtor
Who receives a discharge of debt? Who’s debts are dissolved?
Discharge: individuals
Dissolved: artificial entities
The following will prevent the debtor from receiving any discharge:
- Fraudulent transfers or concealment of property
- Unjustifiably failed to keep books on record
- Had a prior discharge within 8 years
Certain debts of an individual are not discharged under chapters 7 or chapters 11, those debts are called:
The expectations to discharge
What debts are not discharged under chapter 7 or chapter 11?
Willful and malicious injury
Alimony
Fraud
Fines and penalties owed to the government
Taxes
Educational loans
Debts undisclosed in the bankruptcy petition
If a debtor does not want a particular debt discharged in bankruptcy, what must they do?
Reaffirm such debts only if the agreement to reaffirm was made before the granting of the discharge
There are 3 basic categories of claimants paid in the following order:
- Secured claimants
- Priority claimants
- General creditors who filed their claims on time
If there is not sufficient money to pay all creditors of a particular level, the creditors:
Share on a pro rata basis
Priority claimants include the following from highest to lowest priority:
- Support owed to spouses and children
- Administration expenses including filing and court fees
- Claims that accrue in the ordinary course of business after petition is filed but before order of relief is granted
- Wage claims of employees earned within 180 days of bankruptcy (up to 15,150)
- Employee benefits (up to remaining 15,150 after wages)
- Grain farmers and fishermen (up to 7,475)
- Consumer deposits (up to 3,350)
- Tax claims
- Injury claims arising from intoxicated driving
In a chapter 11 case shortly after the order of relief is effective, a committee of unsecured creditors is appointed usually consisting of:
Willing persons holding the 7 largest unsecured claims against the debtor
Who can elect to be treated as a small business under chapter 11 case?
A person engaged in business other than real estate with debts not exceeding 2.6 million
If the debtor is a corporation, an equity security holders committee may be appointed consisting of:
The seven largest holders of the equity securities to ensure that the equity security holders receive adequate representation
Unless a trustee has been appointed, the debtor has an exclusive right to file a reorganization plan during:
The first 120 days after the order for relief is effective
Other interest parties may file a reorganization plan if:
- A trustee has been appointed
- Debtor has not filed a plan within 120 days
- Debtor has filed a plan but not obtained the acceptance of every impaired class within 180 days
A chapter 11 reorganization plan must:
- Classify all claims
- Describe the treatment
- Treat each claimant
- Establish ways to implement the plan
Class of impaired claims is deemed accepted if:
It is accepted by creditors holding at least 2/3 amount and more than 1/2 of the number of claims
And
It is accepted by stockholders holding at least 2/3 in the amount of the allowed claims
How is a chapter 15 ancillary case commenced?
By a foreign representative filing a petition for recognition of a foreign proceeding
Who is authorized to operate the debtors business under a chapter 15 ancillary case?
A foreign representative
