Chapter 32: Bankruptcy Law

Question 1

Automatic stay

Answer 1

court order as a result of bankruptcy that states all collection activity be stopped

Question 2

bankruptcy estate

Answer 2

the assets that are collected from a debtor who files for bankruptcy

Question 3

Creditor

Answer 3

an entity to which a debtor owes money

Question 4

Creditors’ meeting

Answer 4

a meeting of all the creditors listed in the Chapter 7 required schedule for liquidation

Question 5

Debtor

Answer 5

a party that owes money to another party

Question 6

Discharge

Answer 6

a written federal court order signed by a bankruptcy judge which states that the debtor is immune from creditor actions to collect debt; i.e., a release from liability

Question 7

primary purposes of bankruptcy (2)

Answer 7

1. to provide a fresh start from an honest debtor overburdened with debt
2. provide equitable, fair treatment to creditors

Question 8

liquidation proceeding

Answer 8

a bankruptcy case in which the nonexempt assets of the debtor are sold to pay unsecured creditors

Question 9

exempt property

Answer 9

property that the debtor is allowed to keep in a ch 7 liquidation, under either state or federal law

Question 10

rehabilitation

Answer 10

a bankruptcy proceeding in which a debtor may potentially retain nonexempt assets and pay creditors in installments

Question 11

claim (secured and unsecured)

Answer 11

document filed with the bankruptcy court demonstrating a right to receive money or property from the bankruptcy estate

secured - perfected security interest with debtors property as collateral
unsecured - creditor has no security interest or unperfected security interest

Question 12

Chapter 7 - Liquidation

Answer 12

nonexempt assets are sold to repay creditors and the debtor is discharged from obligation to pay most debts without any other payment to unsecured creditors, the debtor keeps exempt assets

individuals and business entities are eligible - NOT railroads or financial institutions

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Question 13

chapter 11 - reorganization

Answer 13

reorganization chapter used primarily by businesses to restructure debt, the debtor receives a discharge after fulfilling the plan including paying the plan payments

chapter 7 + railroads are eligible

Question 14

chapter 12 - family farmer

Answer 14

used to adjust the farmers debt payments, the debtor must be a family farmer and will receive discharge after paying the plan payments

Question 15

chapter 13 - individual debt adjustment

Answer 15

only individuals are allowed to adjust debt payments, the debtor receives a super discharge after paying the plan payments

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Question 16

avoidance power

Answer 16

the power of the trustee to extinguish claims and liens and to set aside transfers to increase the bankruptcy estate

Question 17

4 avoidance powers of the trustee

Answer 17

1. power to avoid liens by using his status as perfected, secured creditor
2. the power to avoid post-petition transfers -> transfers by the debtor of non-exempt assets after the bankruptcy petition is filed because the trustee now holds title
3. avoidance of fraudulent transfers
4. avoidance of preferences

Question 18

preference

Answer 18

prior to bankruptcy a creditor is paid more than its bankruptcy share of the debtors assets

Question 19

fraudulent transfers

Answer 19

transfers made by the debtor for less than adequate consideration within 2 years before filing

Question 20

5 steps to proving preferences

Answer 20

the debtor made a transfer or transfers of money or property:

1. to or for the benefit of the creditors
2. on account of a pre-existing debt
3. within the required time period
4. where the debtor was insolvent after the transfer
5. where the creditor received more than it would have in chapter 7 bankruptcy proceeding if the transfer had not been made

Question 21

MO assets exemptions

Answer 21

debtors are allowed to keep the following assets:

• household goods: $3000 for a single; $6000 for married
• automobile: $3000 for single; $6000 for married
• homestead: $15,000 equity on land
• head of household: $1250 + $350 for each dependent
• tools of trade: $3000
• mobile home: $5000

Question 22

6 priorities (order of payment) of unsecured creditors

Answer 22

1. domestic support obligations
2. administrative expenses: filing fees trustee’s fees, fees of those hired by the trustee
3. unpaid wages or commissions earned within 180 days of the bankruptcy filing up to $11,725
4. taxes generally and income taxes which accrued three years of the bankruptcy filing
5. claims for death or injuries resulting from driving while intoxicated
6. general unsecured creditors

Question 23

6 nondischargeable debts

Answer 23

1. claims for back taxes
2. claims where the debtor obtained money or property through fraud
3. domestic support obligations, including most divorce property settlement obligations (priority)
4. property damage or personal injury claims intentionally caused by the debtor
5. student loans unless payment is an undue hardship
6. judgments against the debtor as a result of DWI (priority)

Question 24

4 objections to discharge

Answer 24

1. concealment or destruction of property or financial records
2. discharge in a ch 7 bankruptcy case filed within 8 years before the current bankruptcy filing; 6 year if ch 12 or 13
3. failure to complete the required financial management course
4. possible felony conviction

Question 25

involuntary bankruptcy

Answer 25

creditors file proceeding against debtor; creditors who file must be owed at least $14,425 in the aggregate; the debtor must not be a farmer