Bankruptcy

Question 1

The trustee has certain rights afforded it under bankruptcy law. What are they?

Answer 1

The trustee steps into the shoes of the debtor and has:
Priority over an unperfected secured party to the debtor’s property,
The power to require persons holding the debtor’s property at the time the petition is filed to deliver the property to the trustee,
Ability to set aside a sale or transfer to take the debtor’s property back
The ability to use any grounds available to the debtor to insure the return of the debtor’s property.
Avoid certain statutory liens that first became effective against the debtor when the bankruptcy petition was filed or when the debtor became insolvent

Question 2

3 bankruptcy codes

Answer 2

Chapter 7- Liquidation (assets to trustee who tries to satisfy C claims
Chapter 11- Business Reorganization (D keeps operating while C meet to restructure, no trustee ususally
Chapter 13- Debt Adjustment Plan- D and trustee work a plan to restructure debts w/out C (only avail to individual D and small business)

Question 3

Voluntary bankrupcty

Answer 3

For 7, 11, 13
D files petition for order of relief
Need not be insolvent
Cannot file> insurance co’s, S/L, banks, credit unions, railroads

Question 4

Involuntary bankruptcy

Answer 4

For 7, 11
12 or more C need 3 signatures and unsecured claims of 15,775 or more in aggregate
Fewer than 12 C need 1 signature and unsecured claims of 15,775 or more
- D contests, just show not paying bills
- 20 to 40 days after order for relief, C meeting to question D
- C have 6 months to file proof of claim
- No involuntary>farmers, nonprofits, charitable orgs

Question 5

What is the period of time known as the involuntary gap creditor

Answer 5

From the time the petition was filed to when the order for relief is approved

Question 6

What are the exceptions to trustee in B having claims to prop rec’v after the filing date?

Answer 6

If D gains right to rec prop w/in 180 days from:
Inheritances
Life insurance proceeds 
Divorce property settlement 
(date D gets the right, not date rec'v)

Question 7

How does trustee in B deal with outstanding contracts of the D

Answer 7

Assume the contract and perform
Assume the contract and assign benefits to TP in exchange for payment
Reject (breach) contract

Question 8

Avoiding powers of Trustee

Answer 8

[FLAP}
Fraudulent transfers (w/in 2 years of filing petition)
Liens by statute (not those effective before bankruptcy)
After filing petition, transfer made by D (involuntary gap)
Preferential transfer of prop [I-WAIT]

Question 9

Preferential transfer and conditions

Answer 9

Excessive payments made to one C at expense of others:[I-WAIT]
Insolvent D when transfer was made
Within 90 days of filing petition
Antecedent debt (pre-existing) new value ok
Improves C position (C gets more than would have in bankruptcy)
Time increased from 90 days to 1 year for an insider (officer, close relative of D)
De min threshold 6,425

Question 10

Not preferential transfers

Answer 10

[C-CONAC]
Charity
Consumer debt less than 675
Ordinary course of business (utility, lease, etc)
New value
Alimony and child support
Continuation of installment payments

Question 11

Order of distribution of assets among creditors in chapter 7

Answer 11

-Secured C (Fully>excess returned to trustee, Partially>C gets collateral and general/unsecured C for the rest
-Priority claims {STOP-IT-Drunk driver]
Support and alimony
Trustee, attorney, accountant fees
Owed after petition (involuntary gap creditor)
Payroll (90 days) EBP (180 days up to 12,850 per EE)
Individual consumer deposits up to 2,850
Tax claims arising w/in 3 years of petition
Drunk driver injury claims
-General/Unsecured creditors (all remaining non-priority timely filed claims; claims exceeding amounts above; secured claims that exceeded value of collateral))
Any remaining after general goes to D

Question 12

Exceptions to chapter 7

Answer 12

D doesn’t owe anyone except these people:
[ACC-SLUT] has an [STD]
Alimony/child support
Credit card purchases for luxury goods (675 or more w/in 90 days of filing, cash advance 950 or more w/in 70 days, auto loans w/in 3 years)
Student loans (when payments aren’t yet owed)
Loans obtained by fraud
Unscheduled/unlisted debt
Tax claims w/in 3 years of filing
SOX violations
Taxes, debt incurred to pay
Drunk driver injuries

Question 13

Denial of discharge

Answer 13

D is denied and owed everyone

• Inadequate books/records
• Refusing to explain loss of assets
• Refusing to obey court
• Being discharged w/in 8 years
• Concealing property
• D must be an individual

Question 14

C who file against D w/out meeting the requirements may be liable for..

Answer 14

Damages, including
Court costs
Compensatory damages
Punitive damages