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BLAW > Bankruptcy Law > Flashcards

Bankruptcy Law Flashcards

1
Q

Constitutional Authority

A

Artile 1, Section 8 of the US constitution gives congress the power to establish “uniform laws on the subject of bankruptcies throughout the United States.”

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2
Q

Bankruptcy Courts

A

Bankruptcy proceedings are held in federal bankruptcy courts, which are under the authority of the United States Districts Courts

Banlruptcy court judges are appointed for terms of 14 years. A bankruptcy court can conduct a jury trial if the appropriate district court has authorized it and the parties to the bankruptcy consent

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3
Q

Chapter 7 or 11 Bankruptcy:Liquidation provides for liquidation proceedings (the selling of all nonexempt assets and the distribution of the proceeds to the debtor’s creditors)

A

Chapter 7

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4
Q

Chapter 7 or 11 Bankruptcy: Reorganization

A

Chapter 11

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5
Q

Bankruptcy Case Trustee

A

Individual appointed by the court to manage the debtor’s funds

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6
Q

Eligibility

A

Any “person” - including individuals, partnerships, and corp - can file as a debtor in a bankruptcy proceedings. A husband and wife may file jointly under a single petition. However, railroads, insurance companies, banks, savings and loans asssociation, investment companies, licensed by the Small Business Administration, and credit unions cannot be debtors in a liquidation banruptcy

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7
Q

Chapter 7: Liquidation proceedings Banruptcy: A bankruptcy is intitiated with the filing of a ___ in the US banruptcy Court. Once this is filed, there is an ___ ___ granted for all debts - thus, creditors are not permitted to collect pre-petition debts

A

Chapter 7: Liquidation proceedings Banruptcy: A bankruptcy is intitiated with the filing of a petition in the US banruptcy Court. Once this is filed, there is an automatic stay granted for all debts - thus, creditors are not permitted to collect pre-petition debts

Before debtors can file a petition, they must receive credit counseling from an approved nonprofit aagency withiin the 180 day period preceding the date of filing

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8
Q

Before debtors can file a petition, they must receive credit counseling from an approved nonprofit aagency withiin the ___ day period preceding the date of filing

A

Before debtors can file a petition, they must receive credit counseling from an approved nonprofit aagency withiin the 180 day period preceding the date of filing

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9
Q

Within 45 days of the filing of the petition, debtors must file the following schedules:: What is required on the creditor list in a bankruptcy filing?

A

A: The creditor list must include both secured and unsecured creditors, their addresses, and the amount of debt owed to each.

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10
Q

Within 45 days of the filing of the petition, debtors must file the following schedules:: : What financial documentation about the debtor’s situation must be filed?

A

A: Debtors must file a statement of financial affairs and a list of current income and expenses.

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11
Q

Within 45 days of the filing of the petition, debtors must file the following schedules:: : What documentation is required for credit counseling in a bankruptcy petition?

A

A: A certificate of credit counseling is required.

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12
Q

Within 45 days of the filing of the petition, debtors must file the following schedules:: What employment-related proof must debtors submit?

A

A: Proof of payments received from employers within 60 days prior to filing.

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13
Q

Within 45 days of the filing of the petition, debtors must file the following schedules:: What document must debtors submit regarding income calculation?

A

A: A statement of monthly income, itemized to show the calculation.

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14
Q

Within 45 days of the filing of the petition, debtors must file the following schedules::: What tax-related document is required with a bankruptcy petition?

A

A: copy of the debtor’s federal income tax return for the most recent year ending before the filing.

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15
Q

Bankruptcy “Means Test”

A

A debtor must pass a test to ensure that the use of Chapter 7 bankruptcy proceedings will not result in abuse. Generally, when a debtor’s income is below the median income of the geographic are in which a person lives, the debtor is allowed to file a chapter 7 bankruptcy claim. If above, then a formula is utilized whether the person will have sufficient disposable income in the future to repay at least some of his or her unsecured debts. If it is difficult to do so, then the “means test” will likely be passed

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16
Q

Example Chapter 7: At 33 years old, Lisa Hebbring owned a home and a car, but had $11,124 in credit-card debt.
Hebbring was earning $49,000 per year when she filed for Chapter 7 bankruptcy. Her petition listed
monthly net income of $2,813 and expenditures of $2897, for a deficit of $84.
In calculating her income, Hebbring excluded a $313 monthly deduction for contributions to retirement
plans. The U.S. trustee filed a motion to dismiss Hebbring’s petition due to substantial abuse, claiming
that the retirement contributions should be disallowed.

A

Example: At 33 years old, Lisa Hebbring owned a home and a car, but had $11,124 in credit-card debt.
Hebbring was earning $49,000 per year when she filed for Chapter 7 bankruptcy. Her petition listed
monthly net income of $2,813 and expenditures of $2897, for a deficit of $84.
In calculating her income, Hebbring excluded a $313 monthly deduction for contributions to retirement
plans. The U.S. trustee filed a motion to dismiss Hebbring’s petition due to substantial abuse, claiming
that the retirement contributions should be disallowed. The court agreed and dismissed the Chapter 7
petition. Because Hebbring’s retirement contributions were not reasonably necessary based on her age
and financial circumstances, the court found that she was capable of paying her unsecured debts.

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17
Q

Automatic Stay Provisison, Creditor Violations of Automatic Stay, Adeequate Protection Doctrine: The filing of a bankruptcy petition suspends all actions by creditors against the debtor

A

The filing of a bankruptcy petition automatically stays (suspends) all actions by creditors against the debtor

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18
Q

Exceptions to Automatic Stay:
-Domestic-support obligations
-Lawsuits filed by creditors to collect debts.
-Foreclosure proceedings on the debtor’s property.
-Repossession of the debtor’s property by creditors.
-Proceedings against a debtor related to divorce
-Collection calls and communications from creditors.
-Investigations by a security regulatory agency (such as an investigation into insider trading).
-Certain statutory liens for property taxes.

A

A: Examples include:

Lawsuits filed by creditors to collect debts.
Foreclosure proceedings on the debtor’s property.
Repossession of the debtor’s property by creditors.
Collection calls and communications from creditors

Exceptions to Automatic Stay:
1) Domestic-support obligations, which include any debt owed to or recoverable by a spouse, a
former spouse, a child of the debtor, that child’s parent or guardian, or a governmental unit.
2) Proceedings against a debtor related to divorce, child custody or visitation, domestic violence, and
support enforcement.
3) Investigations by a security regulatory agency (such as an investigation into insider trading).
4) Certain statutory liens for property taxes.

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19
Q

Automatic Stay Provisison, Creditor Violations of Automatic Stay, Adeequate Protection Doctrine: Any individual injured by a willful violation of the automatic
stay may recover actual damages against the creditor, including costs, attorneys’ fees, and possibly
punitive damages

A

creditors violations of automatic stay

20
Q

Automatic Stay Provisison, Creditor Violations of Automatic Stay, Adeequate Protection Doctrine: Protects secured creditors from losing their security as a result of the
automatic stay.

A

adequate protections doctrine

21
Q

Automatic Stay Provisison, Creditor Violations of Automatic Stay, Adeequate Protection Doctrine: The bankruptcy court can require the debtor or trustee to
make periodic cash payments or a one-time cash payment. The court can also require the debtor or
trustee to provide additional collateral or replacement liens to the extent that the stay may actually
cause the value of the property to decrease

A

Adequate Protection Doctrine

22
Q

Banruptcy Estate, Trustee Powers, and Preferences: Result of filing for banpruptcy petition, consisting of all the debtor’s interest in property currently held, wherever located

A

bakruptcy estate

23
Q

Bankruptcy Estate: What happens with acquired property after filing for bankruptcy petition

A

certain after-acquired property to which the debtor become entiteled withing 180 days after filing may also become part of the bankruptcy estate. Such after-acquired property includes gifts, inheritancy, property settlement (from divorce_, and life insurance death proceeds

24
Q

Banruptcy Estate, Trustee Powers, and Preferences: Require person holding the debtor’s property at the time the petition is filed to deliver the property to the trustee

A

Trustee Powers To enable the trustee to implement this power, the code provides that teh trustee has rights equivalent to those of certain other parties, such as a creditor who has a judicial lien. This power of a trustee, which is equivalent to that of a lien creditor, is known as strong- arm power.

25
Q

Banruptcy Estate, Trustee Powers, and Preferences: Powers of Avoidance Enable to set aside a sale or other transfer of the debtor’s property and take the property back for the debtor’s property and take the property back for the debtor’s estate

A

Trustee Powers

26
Q

Banruptcy Estate, Trustee Powers, and Preferences: Not permitted to make payment that supports one creditor over another.

A

Preferences. The trustee is allowed to recover payments made both voluntarily and involuntarily to one creditor in preference over another

27
Q

To have made a recoverable preferential payment, an insolvenet debtor must have transferred property, for a preexisting debt, within ___ days before filing of the bankruptcy petition

A

90

28
Q

What is an insider preference?

A

A: An insider preference occurs when a debtor makes a preferential transfer to an “insider,” such as a close relative, partner, officer, or director of a corporation.

29
Q

How far back can a trustee recover insider preferences?

A

A: For insider preferences, the trustee’s avoidance power extends to transfers made within one year before the bankruptcy filing.

30
Q

A bankruptcy trustee may avoid fraudulent transfers or obligations if
they

A

1) were made within 2 years prior to the filing of the petition; or 2) were made with actual intent to hinder, delay, or defraud a creditor.

31
Q

Fraud or Not? Example: April is planning to petition for bankruptcy, so she sells her gold jewelry, worth $10,000, to
a friend for $500. The friend agrees that in the future he will “sell” the jewelry back to April for the
same amount.

A

Fraudulent Transfer

32
Q

Workouts, Best Interest of the Creditors, Debtor in Possession, Creditor’s Comittee, Deasibility, Reorganization Plan Acceptance, Cram-Down Provision: In some cases, in order to avoid bankruptcy, creditors may prefer private, negotiated adjustments of creditor-debtor relationships

A

Workouts

33
Q

Workouts, Best Interest of the Creditors, Debtor in Possession, Creditor’s Comittee, Deasibility, Reorganization Plan Acceptance, Cram-Down Provision: Once a Chapter 11 petition has been filed, a bankruptcy court during a hearing can dismiss or suspend proceedings at any time;. The code allows a bankruptcy court, after notice and a hearing to dismiss a case under reorganization “for cause: when there is no reasonable likelihood of rehabiliation.

A

Best Interest of Creditors

34
Q

Workouts, Best Interest of the Creditors, Debtor in Possession, Creditor’s Comittee, Deasibility, Reorganization Plan Acceptance, Cram-Down Provision:During chapter 11 bankruptcy, a debtor generally continues to operate the business. The court, howvere may appoint a trustee (often referred to as a receiver) to operate the debtor’s business

A

debtor in possession. The debtor in possession is entitled to avoid preferential payments made to creditors and fraudulent transfers of assets. The debtor in possession can also excercise a trustee’s strong arm powers. The debtor in possession has the powers to decide whether to cancel or assume executory contracts or unexpired leases

35
Q

Workouts, Best Interest of the Creditors, Debtor in Possession, Creditor’s Comittee, Deasibility, Reorganization Plan Acceptance, Cram-Down Provision:Main role is develop a reorganization plan. The plan must be fair and equitable

A

Creditor’s Comittee, Deasibility,

36
Q

Workouts, Best Interest of the Creditors, Debtor in Possession, Creditor’s Comittee, Deasibility, Reorganization Plan Acceptance, Cram-Down Provision:

A

Workouts, Best Interest of the Creditors, Debtor in Possession, Creditor’s Comittee, Deasibility, Reorganization Plan Acceptance, Cram-Down Provision:

37
Q

What are the the items that are designated by the reorganization plan

A

Designate classes of claims and interest

38
Q

The treatement of what items are specified by the reorganization plan

A

The treatement to be afforded to the classes of creditors (the plan must provide the same treatment for all claims in a particular case)

39
Q

Reorganization plans provides a adequate measn of what

A

an adequate means for the plan’s execution (individual debtors are required to utilize post petition assets as necessary to execute the plan)

40
Q

Reorganization plan offeres payment of what and time frame

A

payment of tax claims over a 5 year period

41
Q

Workouts, Best Interest of the Creditors, Debtor in Possession, Creditor’s Comittee, Deasibility, Reorganization Plan Acceptance, Cram-Down Provision:Quality of Reorganization plan if is offers a reaonsable assurance of success

A

feasilibilty

42
Q

once the reorganization has been developed, submitted to each class of creditors for acceptance. For the plan to be adopted who must accept it.

A

Each class must accepts it. This is when a majority of the creditors in the class, represententing two-thirds of teh amount of total claim, vote to approve it

43
Q

Workouts, Best Interest of the Creditors, Debtor in Possession, Creditor’s Comittee, Deasibility, Reorganization Plan Acceptance, Cram-Down Provision: A bankruptcy court may confirm a plan over the the objections of a class of creidtors with demonstration that the plan does not discriminate unfairly against any creditors and is fair and equitable

A

cram-down provisison

44
Q

Backruptcy Fraud, Bust- out schemes bleed out schemes: Prohibits devising or intending to devise a artifice by misconduct by ) afiling a bakruptcy petition; 2) filing a document in a bakruptcy preceeding; or 3) making a false statement, claim or promise (a) in relationship to a bankruptcy proceeding either before or after the filing of the petition; or (b) in relation to a proceeding falsely asserted to be pending under the bankruptcy code.

A

bankruptcy fraud a defendant convicted may be imprisoned for up to 5 years

45
Q

Backruptcy Fraud, Bust- out schemes bleed out schemes: an individual obtains goods on credit, then disposes of the goods (for cash) then doesn’t pay the suplliers. In some cases, the inidvidual will build up good with smaller orders that are paid but then larger are never paid (and the inidivudal has no intention of paying off the goods)

A

bust-out schemes

46
Q

Backruptcy Fraud, Bust- out schemes bleed out schemes: Where company insiders use expenditures over a long period of time.

A

Bleed out schemes

47
Q
A

BLAW (10 decks)

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