Bankruptcy Flashcards
This is a document that discharges the debtor from having to pay certain debts
an Order of Relief
This is the date that you file a petition for bankruptcy
Filing Date
What date is the order of relief effective?
The same date as the filing date
T/F
You can voluntarily file for Chapter 7 bankruptcy as long as you are insolvent
FALSE
You can voluntarily file for Chapter 7 bankruptcy even if solvent, you just need debts of any amount
Chapter 7 Bankruptcy relates to ______
liquidation
In both a voluntary and an involuntary chapter 7 liquidation bankruptcy, a ______ is appointed
Trustee
This is when your assets are greater than your liabilities
Solvency
If there are 12 or more secured or unsecured creditors trying to force a chapter 7 liquidation bankruptcy, there needs to be ___ or more creditors to file who are owed ____ in _____ claims
3
$15,325
Unsecured
If there are less than 12 secured or unsecured creditors trying to force a chapter 7 liquidation bankruptcy, there needs to be ___ or more creditors to file who are owed ____ in _____ claims
1
$15,325
Unsecured
T/F
A debtor can contest an involuntary chapter 7 liquidation
TRUE
If the involuntary chapter 7 liquidation is uncontested, when is the order of relief effective?
The same date as the filing date
If the involuntary chapter 7 liquidation is contested, when is the order of relief effective?
After a hearing has determined Equitable Insolvency
This is when a debtor is not paying their debts when due, it doesn’t necessarily mean that their debts are greater than their assets
Equitable Insolvency
T/F
Farmers & Charities are exempt from Chapter 7 involuntary liquidation
TRUE
If creditors improperly file a chapter 7 involuntary liquidation, the debtor may collect what types of damages?
Compensatory Damages, Court Costs, Attorney’s Fees, and Punitive Damages
In Chapter 7 liquidation, failure to list a creditor in a petition filing will result in what?
The debtor being denied discharge of that debt
In Chapter 7 liquidation, failure to explain loss of assets will result in what?
The debtor being denied discharge of all debts
How is Chapter 7 bankruptcy different from Chapter 11 bankruptcy?
Chapter 7 is liquidation
Chapter 11 is reorganization
In this type of bankruptcy, the debtor submits a plan to restructure their debt for the purpose of allowing the debtor’s business to continue
Chapter 11 Reorganization
Who is the Chapter 11 reorganization plan submitted to? How long do they have exclusive rights to this?
an Unsecured Creditor’s Committee
120 Days
Who must approve the Chapter 11 Reorganization Plan?
at least 1 impaired class of creditors
T/F
Like in Chapter 7 Liquidation Bankruptcy, Chapter 11 Reorganization Bankruptcy has trustees
FALSE
The debtor usually acts as their own trustee
T/F
Unlike a Chapter 7 Liquidation Bankruptcy, a Chapter 11 Reorganization cannot be involuntary, it can only be voluntary
FALSE
Chapter 11 Reorganization can be both voluntary and involuntary
T/F
Chapter 11 Reorganization Plans must be approved as soon as possible
FALSE
They won’t be confirmed until full payment of administrative costs
Who cannot file under Chapter 7? (RIBS)
Railroads
Insurance companies
Banks
Savings & Loans
Filing under Chapter 7 or 11 acts as an ______ which ______
Automatic Stay
Stops all Collection Efforts
T/F
Filing under Chapter 7 or 11 acts as an automatic stay which stops all collection efforts, therefore the debtor will temporarily/indefinitely be relieved from payments such as alimony, child support payments, and other debts
FALSE
An Automatic Stay doesn’t stop alimony and child support payments.
What items are exempt from being sent to the trustee for creditors as of the filing date?
1) Social Security & Disability Benefits
2) Things necessary to live (house, car, furniture)
Debtors keep most property that they gain after filing. What are 3 exceptions to this that go to the trustee?
Property gained within 180 days after filing of petition for bankruptcy by:
1) Divorce
2) Inheritance
3) Insurance
T/F
Trustee can get items/money back that was given away by the debtor before the filing
TRUE
To disaffirm a prior payment, what 5 tests must be met (TANIM)
T - must have a Transfer of property that benefits a creditor
A - transfer must have been for an Antecedent debt (existing, overdue debt)
N - transfer must have been made within Ninety days of the filing date
I - transfer must have been made while debtor was Insolvent
M - creditor received More than they would have received in bankruptcy
T/F
Converting unsecured debt to secured debt within 90 days is a preferential treatment
TRUE
This is an existing, overdue debt
Antecedent Debt
T/F
New debts are antecedent debts
FALSE
New dates, by definition are a contemporaneous exchange for NEW value, not an existing or overdue debt.
T/F
You can make a transfer to prepay a secured debt without it being considered a preferential transfer
FALSE
Secured debts are not considered antecedent debts, you can’t prepay them.
T/F
You can prepay current bills in the ordinary course of business
FALSE
Current bills are not considered antecedent debts, and you can’t prepay a current bill (like your utility bills) because that is considered a preferential transfer
T/F
Consumer debts of $1000 or less are not considered antecedent debts
FALSE
Consumer debts of $650 or less are not antecedent debts
To disaffirm a prior payment, the transfer must have been made within 90 days prior to the filing date. What is the exception?
If the creditor is an insider (close relative, partner) then the timing is extended to within 1 year prior to the filing date
To disaffirm a prior payment, the transfer must have been made while the debtor was insolvent. How is insolvency determined in this case?
Insolvency is normally presumed if the transfer was made within the prior 90 days
These are phony transfers by the debtor to hide property from creditors
Fraudulent Conveyances
What is the mnemonic for the 11 categories of debts in the order of their priority?
SAG - WEG - CTO - AM
What categories does SAG consist of?
S - Secured creditors (paid up to the value of the collateral)
A - Administrative costs of the bankruptcy proceedings and domestic support obligations (such as child support and alimony)
G - Gap creditors
What happens if there is a deficiency when secured creditors are paid up to the value of the collateral? (Sag)
The deficiency is paid in the Miscellaneous unsecured debts category (aM)
These are debts occurring after the filing but before the order of relief
Gap Creditors
What categories does WEG consist of?
W - Wages unpaid
E - Employee Benefits Unpaid
G - Grain Producers & Fisherman Unpaid
For Wages unpaid (Weg), what is the maximum priority?
$12,475 per employee
For Wages unpaid (Weg), how recently must they have been earned?
Within 90 days prior to filing
For Employee benefits unpaid (wEg), what is the maximum priority?
$12,475 per employee
For Employee benefits unpaid (wEg), how recently must they have been earned?
Within 180 days prior to filing
For Grain producers and fisherman unpaid (weG), what is the maxiumum priority?
$6,150 per individual
What categories does CTO consist of?
C - Consumer deposits for goods/services not received
T - Taxes
O - Obligations to insured banks
For Consumer deposits for goods/services not received (Cto), what is the maximum priority?
$2775 per
What categories does AM consist of?
A - Accidents while under the influence of drugs/alcohol
M - Miscellaneous unsecured debts
T/F
Upon bankruptcy completion, individuals, corporations, and partnerships are discharged of their debts
FALSE
Only individuals are discharged
Corporations and Partnerships are dissolved
Receiving a previous discharge of debts within the last _____ year(s) of filing will preclude a debtor from receiving a discharge of their current debt
8
T/F
Unjustifiably failing to keep adequate books and records is only a recommendation and will not result in a denial of discharge for a debtor
FALSE
This will preclude a debtor from any discharge
Attempting to hide assets within ____ year(s) of filing will preclude a debtor from receiving a discharge of their current debt
1
Refusal to do what two things will preclude a debtor from receiving a discharge of their current debt
1) Explain a loss of assets
2) Obey a court order
Making a false oath or account on the petition for bankruptcy will have what result on the debtor?
This will preclude a debtor from receiving a discharge of their current debt
What debts are non-dischargeable (WAFTED)
W - debts from causing Willful and malicious injury to others
A - debts concerning Alimony and child support
F - debts resulting from Fraud, theft, embezzlement
T - taxes owed within 3 years of filing
E - Educational loans
D - Debts unscheduled by the debtor, and creditor had no notice of bankruptcy
T/F
In addition to the WAFTED non-dischargeable debts, any debt from the Sarbanes Oxley will not be discharged
TRUE
T/F
Corporations and Partnerships can receive a discharge under Chapter 7 of the Federal Bankruptcy Code
FALSE
T/F
If an individual, 10 months before the bankruptcy proceedings, obtained credit by using false information on the credit application they would not receive a general discharge in bankruptcy
FALSE
This would cause the specific debt to be non-dischargeable, but it would not prevent a general discharge of all debts
T/F
A Chapter 11 Bankruptcy commencement can be voluntary or involuntary
TRUE
T/F
Under a Chapter 11 Bankruptcy proceeding, a trustee must always be appointed
FALSE
T/F
Under a Chapter 11 Bankruptcy proceeding, the debtor must be insolvent if the petition is filed voluntarily
FALSE
T/F
Individuals, in general need not have regular income under Chapter 13 proceedings
FALSE
General income is required
T/F
Under Chapter 13 proceedings creditors may not file involuntary petitions
TRUE
T/F
Under Chapter 13 proceedings the debtor initiates the proceedings when they file a voluntary petition in a bankruptcy court
TRUE
T/F
Under the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005, death caused while intoxicated when operating an aircraft is non-dischargeable in bankruptcy
TRUE
T/F
Under the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005, injury caused while intoxicated when operating any motor vehicle is non-dischargeable in bankruptcy
TRUE
T/F
Under the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005, debts for homeowner association fees is non-dischargeable in bankruptcy
TRUE
