Bankruptcy Flashcards
Describe chapter 7 bankruptcy
It’s a liquidation- turning assets into cash to pay debts
Applies to all debtors except: railroads, banking institutions, insurance companies.
Describe chapter 11 bankruptcy
It’s a reorganization.
Usually meant for business, but any chapter 7 debtor qualifies, railroads are covered, but not stockbrokers or commodity brokers.
What other chapters are there?
Chapter 13; reorganization for individual debtors only, with ceilings on the amount of debt owed.
Chapter 12: family farmer reorganization.
Chapter 9: municipality reorganization.
What is a stay and when does it occur?
A stay effectively stops credits from pursuing their claims against the debtor, except in bankruptcy court. It occurs as soon as a petition is filed for bankruptcy.
Ways to enter into bankruptcy?
Voluntarily or involuntarily forced by creditors.
For voluntary petitions, what number of creditors are required?
No specific number of creditors required.
For involuntary petitions, what number of creditors are required?
If 12 or more creditors: at least 3 creditors must file, and have a combined claim of $15,325 or more.
If less than 12 creditors: only 1 (but there can be more) creditor need to file. Claims must be $15,325 or more.
The $15,325 requirement must:
Must be undisputed claims
Unsecured, or in excess of any security being held
Adjusted every 3 years for inflation.
Who cannot be forced into bankruptcy?
Debtors owing less than $15,325
Farmers
Charitable Organizations.
If debtor contests to involuntary petition, it will be granted regardless if:
debtor not paying debts as they become due OR within 120 days prior to the filing of the petition, a custodian, or a receiver took possession of substantially all the debtor’s assets.
If debtor successfully dismisses petition, debtor may receive:
Attorney’s fees and court costs
Compensatory damages
Punitive damages, if petition was filed in bad faith.
What is the job of the trustee?
Investigates and presides over the financial affairs of the debtor.
Has debtor’s assets appraised.
Examines the validity of creditors’ claims.
May properly dispose of assets
May employ held as necessary.
What property is included in debtor’s estate?
All property interest at the time of the filing.
Certain property acquired within 180 days after the filing dater:
-inheritance
-life insurance proceeds
-from settlement agreement with spouse
Rents, royalties, or other proceeds from estate property
Property acquired by the trustee or estate.
What income sources are exempt form debtor’s estate?
Alimony, child support, and maintenance payments.
Public aid
Social security
Unemployment
What are the preferences in bankruptcy?
Where a debtor makes payment or give security interest
on pre-existing debt, which allows creditor to receive more than creditor would have received in Chapter 7.
Transfer occurs within 90 days prior to the filing.
