Bankruptcy

Question 1

what are the models of bankrupcy

Answer 1

1. Sellout (or liquidation) Chapter 7: available assets are sold and proceeds given to creditors.
2. Payout: i will promise to pay you from future income over time.

Question 2

chapter 7 bankrupcy

Answer 2

• 70% of all bankruptcy cases.
• quickely resolved
• trustee (fiduciary) looks for non-exempt assets to sell.
• federal law has it own exempt property list (just like the states)
• secured debts are not discharged, no are other

Question 3

Chapter 13

Answer 3

• payout instead of sellout
• generally debtor keeps assets but promises to pay for nonexempt assets under a plan.
• debtor: pays all secured and unsecured claim according to the plan
• pays for 3 to 5 years out of disposable income
• once complete the rest of their debt is wiped out.
• trustee: tries to get more disposable income for the plan.

Question 4

common issues with chapt 13 bankruptcy

Answer 4

• value of collateral v. value of secured claims
• priority treatment of some claims
• did debtor contribute all disposable income to plan
• value of exempt property as it bears on minimum contributions.

Question 5

Chapter 11 bankruptcy

Answer 5

• payout style
• available to individuals, but almost alway businesses.
• plan must pay secured claims in full (up to value of collateral)
• allows for restructuring of debts
• debtor will pay portion of debts over time.
• pay it priority claims in full.
• will usually pay distributions to unsecured creditors