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Business Law > Ch 31 Bankruptcy > Flashcards

Ch 31 Bankruptcy Flashcards

1
Q

Bankruptcy relief is provided under what law?

A

Federal law

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2
Q

Which [article, section] of the US Constitution gave Congress the power to establish federal bankruptcy legislation?

A

Article 1, Section 8 of US Constitution

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3
Q

What are the two main goals of bankruptcy law in the US?

A

1) Protect debtor by giving him/her a fresh start w/o creditors’ claims
2) Ensure equitable treatment of creditors who are competing for a debtor’s assets

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4
Q

Bankruptcy court judges are appointed for terms of how many years?

A

14 years

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5
Q

What rules do bankruptcy courts follow?

A

Federal Rules of Bankruptcy Procedure (rather than Fed Rules of Civil Procedure)

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6
Q

The Bankruptcy Code is contained in which title of the US Code?

A

Title 11

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7
Q

How many chapters does the Bankruptcy Code have?

A

8 chapters

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8
Q

Which three chapters of the Bankruptcy Code apply to all kinds of bankruptcies?

A

Chapter 1, 3, and 5

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9
Q

Which chapter of the code 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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10
Q

Which chapter of the Code governs reorganizations?

A

Chapter 11

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11
Q

Which chapter of the Code provides for the adjustment of debts by persons with regular incomes (for family farmers and family fishermen)?

A

Chapter 12

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12
Q

Which chapter of the Code provides for the adjustment of debts by persons with regular incomes (for individuals)?

A

Chapter 13

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13
Q

Does a municipality need to be insolvent to file for bankruptcy relief under the Bankruptcy Code?

A

Yes

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14
Q

Does a general debtor need to be insolvent to file for bankruptcy relief under the Bankruptcy Code?

A

NO

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15
Q

What do you call a debtor whose debts result primarily from the purchase of goods for personal, family, or household use?

A

Consumer-debtor

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16
Q

What is liquidation under Chapter 7 of the Bankruptcy Code also known as?

A

Ordinary OR straight bankruptcy

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17
Q

To whom does a debtor in a liquidation bankruptcy turn all assets over to?

A

Bankruptcy trustee

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18
Q

Define bankruptcy trustee.

A

Person appointed by court to manage debtor’s funds

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19
Q

What does a bankruptcy trustee do?

A
  • Sell nonexempt assets

- Distributes proceeds to creditors

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20
Q

Can an investment company licensed by the Small Business Administration be debtors in a liquidation proceeding?

A

NO (other chapters of the Code apply to them)

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21
Q

What do you file to commence a straight bankruptcy?

A

A voluntary or an involuntary petition in bankruptcy (doc that is filed w/ bankruptcy court to initiate bankruptcy proceedings)

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22
Q

Debtors filing a Ch. 7 petition must include a certificate proving that they have received individual or group counseling from an approved agency within the last ______ days.

A

180 days (roughly six months)

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23
Q

Who can petition for Chapters 12 and 13 bankruptcy?

A

Debtor (voluntary) only

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24
Q

Who can petition for Ch. 11 bankruptcy?

A

Debtors (voluntary) OR creditors (involuntary)

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25
Q

What is the purpose of Chapter 11 bankruptcy?

A

Reorganization

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26
Q

What is the purpose of Ch. 12 and Ch. 13 bankruptcy?

A

Adjustment

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27
Q

What is the purpose of Ch. 7 bankruptcy?

A

Liquidation

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28
Q

What is the advantage of Ch. 7 bankruptcy?

A
  • On liquidation and distribution, most debts are discharged and debtor has an opportunity for a fresh start
29
Q

What is the advantage of Ch. 11 bankruptcy?

A
  • Debtor continues in business
  • Creditors can either accept the plan, or it can be “crammed down” on them
  • Plan allows for the reorganization and liquidation of debts over the plan period
30
Q

What is the advantage of Ch. 12 and Ch. 13 bankruptcy?

A
  • Debtor continues in business or possession of assets

- If plan is approved, most debts are discharged after the plan period

31
Q

In Ch. 7 bankruptcy, what are the procedures leading to discharge?

A
  • Nonexempt property is sold and the proceeds are distributed (in order) to priority groups
  • Dischargeable debts are terminated
32
Q

In Ch. 11 bankruptcy, what are the procedures leading to discharge?

A
  • Plan is submitted

- If plan is approved and followed, debts are discharged

33
Q

In Ch. 12 and 13 bankruptcy, what are the procedures leading to discharge?

A
  • Plan is submitted and must be approved if the value of the property to be distributed = the amount of the claims or if the debtor turns over disposable income for a 3-year or 5-year period
  • If plan is followed, debts are discharged
34
Q

Are railroads eligible to be a debtor in Ch. 11 bankruptcy?

A

YES

35
Q

What are the two main types of law?

A

Criminal and civil

36
Q

What are the two main types of personal bankruptcies?

A

1) Ch. 7 (quick and easy; lucky and eliminate debts)

2) Ch. 13 (long and hard; unlucky and repay debts)

37
Q

Do priority debts ever go away?

A

NO

38
Q

What are the two types of business bankruptcies?

A

1) Ch. 7 (just a liquidation)

2) Ch. 11 (reorganization; basically creditors take over company)

39
Q

What chapter of the Code covers municipal bankruptcies?

A

Ch. 9

40
Q

What chapter of the Code covers farmer bankruptcies?

A

Ch. 12

41
Q

To qualify for chapter 7, what must you show the judge?

A

1) No Ch. 7 in last eight years

2) Monthly income

42
Q

True or false.

Bankruptcies fall under criminal law.

A

FALSE (under civil law)

43
Q

What are the five major categories of exemptions (things protected in bankruptcies)?

A

1) Equity (= FMV less mortgage) in your residence ($17,600 per person exemption limit)
2) Personal property (furniture, cars, jewelry) has $9,000 per person exemption limit
3) Life insurance (100% protected)
4) Retirement funds (100% protected)
5) Money (cash, savings, checking, stocks, bonds) has $300 per person limit

44
Q

What are the four main bankruptcy procedures?

A

1) Fill out paperwork
2) Pay lawyers $$$ ($700-$1,000 for Ch. 7 bankruptcy OR $4,000 for Ch. 13 bankruptcy)
3) Take a class and get a certificate
4) Documents (pay stubs, tax returns, credit report, etc.)

45
Q

What happens when you file for Ch. 7?

A

1) Automatic stay (all collection activity is stopped) goes into effect
2) Trustee (reps your creditors) is appointed
4) Notice to creditors
4) Bankruptcy estate is created
5) Hearing
6) Proof of claim is filed
7) Take a second class and get certificate
8) Discharge

46
Q

What differs when you file for Ch. 13?

A

You have 60 months of payments before you get your discharge

47
Q

Codes are divided into what?

A

Titles

48
Q

Within Title 11, how many chapters are there?

A

8 chapters

49
Q

In Ch. 7 bankruptcy, the trustee sells non-exempt property and distributes the proceeds. Up to how many percent of the proceeds can the trustee keep?

A

30%

50
Q

In filing a Ch. 7 petition, what does an involuntary bankruptcy mean?

A

Brought by the creditors

51
Q

Ch. 7 Voluntary Bankruptcy

In how many different places must a petitioner (debtor) sign?

A

Nine

52
Q

Ch. 7 Voluntary Bankruptcy

Once you file for Ch. 7, what does the Court issue?

A

Order for Relief (aka automatic stay)

53
Q

Ch. 7 Voluntary Bankruptcy

After the Court issues a Order for Relief, what does the clerk of the Court do?

A

Gives trustee and creditors mailed notice of the order within 20 days

54
Q

Ch. 7 Involuntary Bankruptcy

If there are 12 or more creditors, there needs to be how many creditors with unsecured claims totaling at least a threshold amount ($14,425) to join in petition?

A

three or more

55
Q

Ch. 7 Involuntary Bankruptcy

If the petition is unwarranted, what penalties may be imposed on a creditor?

A

Punitive damages

56
Q

What is the most valuable part of any bankruptcy?

A

Automatic stay (either voluntary or involuntary; creditors cannot commence or continue most legal actions; all collection activity is stopped)

57
Q

If a creditor violates an automatic stay, what can there be?

A

Damages for violations of stay like sanctions

58
Q

What does a debtor’s estate include?

A
  • All debtor’s legal and equitable interests in property presently held
  • Property transferred in a “voidable” transaction (can’t sell your Ferrari to your brother for $1 to transfer title)
  • Property which debtor becomes entitled to w/i 180 days after filing (e.g. life insurance or inheritance)
  • Proceeds and profits from the property of the estate
  • After-acquired property such as life insurance death proceeds, property settements
59
Q

Shortly after debtor files, what does the court set?

A
  • Meeting of creditors
  • Debtor is examined under oath about his debts and assets
  • This is called a “341” hearing which is very informal
60
Q

Is a debtor permitted to transfer or make a payment that favors - or gives a preference to - one creditor over another?

A

NO

61
Q

Once the trustee has collected payments, then he/she distributes it. For consumer debtors, if you have secured debt, what must you tell the court?

A

What you intend to do w/ that debt (keep or surrender)

62
Q

If debtor surrenders the secured property, the creditor can keep or sell. If the creditor keeps it, what is it called?

A

Full satisfaction of debt

63
Q

If debtor surrenders the secured property, the creditor can keep or sell. If the creditor sells it at a loss, what can they do?

A
  • Can become unsecured creditor for deficiency
64
Q

What is discharge?

A

Official order by court that your debts are gone

65
Q

Which section of the code lists debts that are non-dischargeable?

A

Sec. 532 of Code lists 18 debts that are nondischargeble

66
Q

Why would a debtor reaffirm a debt?

A
  • Keep important supplier happy
  • Keep family harmony
  • Etc.
67
Q

What do you call a sped-up Ch. 11 for small business debtors whose liabilities do not exceed $2 million and who do not own or manage real estate?

A

“Fast tract” Ch. 11

68
Q

What is another term used to refer to Ch. 11 bankruptcies?

A

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