Bankruptcy I - Post midterm Flashcards
Chapter 13 Eligibility
An individual with regular income that owes on the date of the filing of the petition less than $360,475 in unsecured debt and less than $1,081,400 in secured debt. If the debtor exceeds the debt ceilings or does not meet the other requirements, they are ineligible to file a Ch. 13 petition.
“Regular Income” for Ch. 13
Not limited to wages; can include child support, social security, business earnings, or any other income.
Chapter 13
An individual debtor with a regular source of income proposes and performs a payment plan.
Chapter 13 Secured Debts
Secured in the amount that they are equal to the value of the collateral in which they are secured. If the amount owed to the secured debtor is greater than the value of the collateral, then the amount in excess to the value of the collateral is considered over-secured. When there is an over-secured claim, then the over-secured portion shall be treated as an unsecured interest.
Ex: Car worth $10k and lien secured on the car is worth $25k, then the secured debt is $10k and unsecured debt is $15k.
Length of Ch. 13 plan
Required to have a lifetime of 36 months if the debtor makes less than or equal to the applicable median income.
If debtor makes more than the median income, they must formulate a plan with a total lifetime of 60 months.
Chapter 13 Trustee
Does not take possession of or liquidate the nonexempt property of the state, but rather acts as a disbursing agent, collecting and distributing the plan payments to creditors.
Property of the Ch. 13 Estate
In addition to property held at the time of petition, property acquired by the debtor during the Ch. 13 plan, including earnings, is also property of the estate. The debtor retains possession of the property of the estate unless the plan or confirmation order provides otherwise.
Chapter 13 timeline
- Debtor voluntarily files Ch. 13 petition
- Within 14 days after petition is filed, debtor is required to file her plan and schedules
- Debtor must start making payments to the trustee w/in 30 days after the case if filed
- 341(a) meeting of creditors is held btw. 21 and 50 days after the case is filed.
- Courts must hold a hearing on the confirmation of the plan w/in 45 days after the 341(a) hearing.
- Once plan is confirmed, trustee may begin disbursing to creditors the payments collected from the debtor.
- Discharge occurs when the debtor makes all of the payments required by the plan or the debtor qualifies for a hardship discharge.
Ch. 13 Plan Confirmation
In order for the Ch. 13 plan to be confirmed, it must meet the best efforts test and liquidation test (best interests test).
Additionally, domestic support must be current and debtor must have filed all necessary tax returns for the 4 years prior to the date of plan confirmation.
*Note - Prior to discharge, debtor will again have to show he is current with domestic support.
Best Efforts Test Ch. 13
Best efforts test - The debtor must devote all of his projected disposable income to the plan for the commitment period (3 or 5 years).
Projected Disposable Income = Projected monthly income - allowable expenses.
Projected Monthly Income - look at previous 6 months’ income excluding month of filing.
Allowable Expenses - if below median income, allowable expenses = reasonably necessary expenses of debtor and dependents. If more than median income, debtor is only entitled to the allowable expenses of their reasonable living expenses (as set by IRS), and moneys requires for: paying priority claims in full, monthly payments of interests secured in their property (mortgage or financed car), administrative expense debts, and special purpose debts (i.e. charity).
If the amount of the priority claims exceeds the amount that the debtor must pay to meet the disposable income req and best interest test, the minimum amount that the debtor must pay is the amount necessary to pay the priority claims.
If the debtor is behind on house or car payments and wants to keep the house or car, he will have to cure the default through the plan payments or pay the entire debt through the plan.
Chapter 11 Creditors
Any class of creditors which is impaired gets to vote. Impaired = time, method, amount, etc. of what/how they are paid is altered (even if for the better). Unsecured creditors are almost always impaired.
Majority of impaired creditors in an impaired class must vote yes (1/2 or more) and that majority must hold at least 2/3rds of the debt of that class.
For classes of creditors, claims and interests must be placed into classes based on the nature of the claims. Same or similar placed together. EX: Unsecured interests of no priority such as medical bills and credit card bills placed together. Secured claims typically separate classes.
