Bankruptcy

Question 0

Antecedent debt

Answer 0

Preexisting debt

Question 1

Ch. 7 and 11 generally may be any I, P, C except:

Answer 1

no RIBS

R- railroads
I - insurance
B - banks, brokers
S - savings and loans

Question 2

Which types of BK can be involuntary?

Answer 2

Ch. 7, 11

Not Ch. 13

Question 3

Preferential payment

Answer 3

When payoff *preexisting (antecedent) debt and show a particular creditor preference (give them more than they would’ve gotten under the BK code)
-generally look back 90 days (or 1 year if it’s an insider)

(Making a gift to charity is not paying debt, not a preferential payment bc charity is not a creditor – may be a fraudulent conveyance, but is not a preferential payment)

**key to preferential= prepay/ accelerate payments on existing loans

Not: contemporaneous exchange
Not: secured creditor (bc not getting “more than would have under BK” bc secured)

Question 4

Which types of BK is a trustee appointed?

Answer 4

Ch. 7 (liquidation) and Ch. 13 (reorganization)

Question 5

Certain debts will never go away

Answer 5

WAFTED

W - willful and malicious injury
- operating vehicle While intoxicated
A- Alimony, child support obligations
F - Fraud (debts incurred by fraud or false misrep),
- Fines and penalties
T - Taxes due within 3 years of filing
E - Embezzlement, larceny, fiduciary’s fraud,
- Educational loans (unless undue hardship)
D - Debts discharged in BK petition (forgot to list creditors) *in good faith

Question 6

Under Ch. 7, what effect does a BK discharge have on a judgment creditor when there is no BK estate?

Answer 6

The debtor is relieved of any personal liability to the judgment creditor

*under ch. 7, a discharge discharges most debts of a debtor, whether or not there is a BK estate from which to pay the debts

Question 7

Ch. 9 BK

Answer 7

Municipalities

*detroit

Question 8

Ch. 12 BK:

Answer 8

Farmers

Question 9

Ch. 15 BK

Answer 9

Commencement of Ancillary Proceeding
(Multinational)

Commenced by a “foreign representative” filing petition for recognition of a “foreign proceeding”

• principal door for foreign rep to come into U.S. BK court and tell us there’s another proceeding going on
• petition must show the existence of a foreign proceeding
• after notice and a hearing, U.S. court is authorized to issue order recognizing foreign proceeding (generally want to coordinate)

Question 10

Under liquidation provisions of Ch. 7, certain property acquired by debtor after the filing of the petition becomes part of the BK estate. The estate includes:

Answer 10

• Income generated from estate property and property the debtor receives from a bequest, devise, inheritances, property settlement, divorce, or beneficial interest in life insurance within 180 after filing the petition

Ex: inheritance received by debtor within 180 days of filing petition

NOT include: child support, SS payments, wages earned

Question 11

BK estate includes

Answer 11

Property debtor receives from request, devise, inheritance, property settlement, divorce decree or beneficial interest in a life insurance policy or death benefit plan within 180 DAYS after filing the petition.
In addition, the estate includes any income generated by estate property (rents, interest, dividends) after the petition is filed.
Earned* income after the case commences is generally excluded.

**govt benefits (SS, veterans benefits, unemployment comp, disability) are exempt property

** certain gifts received within 180 days after petition is filed are included within the estate, but one year period here is too long

Example of included: municipal bond interest received by the debtor within 180 days after filing the petition

Question 12

Which creditors must join in the filing of an involuntary petition:

Answer 12

If person has fewer than 12 creditors,
- any one or more of them with UNsecured and UNdisputed claims that aggregate at least $15,325 more than the value of any collateral securing the claim may file the petition

If person has more than 12 creditors
- must have at least 3

Question 13

A person may be petitioned involuntarily into bk if:

Answer 13

That personal is not paying debts as they become due

Question 14

What will follow the filing of a Ch. 7 petition?

Answer 14

Trustee appointed
Stay against creditor collection proceedings will go into effect.

*jn liquidation proceeding, after the petition is filed a trustee will be appointed and unless within 20 days after the filing of a creditor’s petition the debtor objects to the petition, an automatic stay against the creditor collection proceedings goes into effect. (if the debtor files the petition (voluntary), the automatic stay takes effect the date of filing).

Question 15

Creditors who do NOT timely file:

Answer 15

Are paid only if there is money left over after the general unsecured creditors whose claims were timely filed are paid (at the very end)

Question 16

Who must confirm a reorganization plan filed by the debtor?

Answer 16

Only the court can confirm a plan.
Creditors and security interest holders (SHs) vote whether to accept the plan. Also, secured party (unimpaired party) are presumed to have affirmed so their vote is not necessary. A plan need only be confirmed by 2/3 of the interests (2/3 of the outstanding shares, which may be held by fewer than 2/3 of the SHs). Finally, through the "cram down" provision of the code, a plan may be confirmed by a court even if only one impaired class votes to affirm the plan.

Question 17

Filing of an involuntary bk petition:

Answer 17

Stops the enforcement of judgment liens against property in the bk estate (the filing of a petition in bk invokes an automatic stay against all attempts to collect against most debts of the debtor)

• does not terminate liens (even on exempt property) but merely stays them
• not terminate security interests but merely stays them (temporarily prevents their enforcement)

*does not prevent debtor from incurring new debts

Question 18

What criteria must be met for creditors to file involuntary petition?

Answer 18

Debtor has not been paying its bona fide debts as they become due

Question 19

Does debtor need to be insolvent to file a voluntary bk petition?

Answer 19

No. Although debtor’s income may not exceed certain specified levels, insolvency is not a requirement

Question 20

Preferential payment occurs within how many days of filing the bk petition

Answer 20

90 days

Question 21

Transfer is not voidable as a preference if it:

Answer 21

Was made within the ordinary course of business of the debtor, according to the ordinary terms, for he purpose of repaying a debt incurred in the ordinary course of the debtor’s business (ex: payment of a utility bill)

*transfer is not voidable where there was a contemporaneous exchange for value

Question 22

Reasons for revoking a debtor’s discharge:

Answer 22

• failing to answer a material question on the bk petition if the Q has been approved by court (unless self incrimination)
• NOT for failing to list one creditor

Question 23

Creditors’ committee, if appointed, is made up of

Answer 23

Unsecured creditors

Question 24

Who can file a reorganization plan?

Answer 24

Debtor has the right to file the first plan of reorganization, but creditors can also file a plan

Question 25

Ch. 11 reorg requires

Answer 25

• filing of reorg plan
• confirmation of the plan by the court
• opportunity for each class of claims to accept the reorg plan (although it need not be accepted by all classes, such as unimpaired classes of security holders (secured creditors))

Question 26

How long must a creditor wait to file a reorg plan under Ch. 11?

Answer 26

Must wait 120 days to file a plan (unless a trustee has been appointed- usually doesn’t happen)

Question 27

Paid first under bk ch. 7

Answer 27

All perfected security interests are paid first. Since the security interest here was filed > 90 days before the bk, it is not a voidable preference (preferential payment)

Question 28

If the federal govt obtains a lien for taxes against the debtor’s estate before bk petition is filed:

Answer 28

The federal tax lien is treated as a secured interest

Question 29

Trustee in bk

Answer 29

Treated as a hypothetical lien creditor on all of the debtor’s property as of the date the bk petition is filed. Trustee is subordinate to all prior perfected security interests, incl statutory liens against the debtor’s property that were effective prior to the filing of a bk petition**

Question 30

Trustee in bk has the power to set aside preferences, which generally may be defined as a transfer that:

Answer 30

• is made for the benefit of a creditor on account of an antecedent debt
• made within 90 days of filing the bk petition
• made while debtor was insolvent (presumed within the 90 day period)
• enables the creditor to get more than the creditor would have received in the bk proceeding

*no exemption for loan made with proceeds used for business expenses

Question 31

A foreign entity may file under:

Answer 31

Ch. 15 (ancillary proceeding), or under Ch. Or 11

Automatic stay in Ch. 15 arises after petition for recognition is granted by the court

Question 32

Discrimination against foreign interests (in Ch. 15)

Answer 32

Is generally prohibited, but is allowed with regard to certain foreign govt tax liens

• US courts have an affirmative duty to cooperate with foreign courts

Question 33

If someone sells car to mother for $100 the week before filing for bk Ch. 7, regarding the sale of the car, the trustee may

Answer 33

Cancel it is a fraudulent transfer
-transfers made within 2 years of the filing date with intent* to hinder, delay, or defraud creditors or any transfer where the debtor received less than equivalent value while the debtor was insolvent are fraudulent transfers set aside by trustees

It’s NOT a voidable preference bc that’s a transfer made to the benefit of one *creditor over another creditor on account of an antecedent debt. Her mother was not a creditor (ie, no antecedent debt was involved).