M - 2 - Bankruptcy: Part 2 Flashcards
What are some of the objections creditors can use against a Chapter 7 discharge?
They can raise an objection to a discharge - Say the debtor was acting in bad faith, then none of the debts will be discharged. Defraud creditors, concealment of property. Failing to keep good books and records. You had a prior discharge in the past 8 years. 8 years must pass.
Second is that just some debts cannot be discharged - WAFTED
What is the difference between discharged and disovled?
Invividuals are discharged and companies are disovled.
What does WAFTED stand for?
W - Willful and malicious injury - Any injuries’ that were malicious and willful, will not be discharged.
A - Alimony -
F - Fraud and Fines and Penalties you owe the government
T - Taxes, if they are due within the past 3 years. If more than 3 years then maybe.
E - Education loans, unless there are undue hardship.
D - Debts undisclosed in bankruptcy petition.
Can a debtor ask the court to not discharge a loan, and keep it since they want to pay it?
Yes, as long as it is made prior to discharge.
In what order are the creditors paid in bankruptcy?
Secured Claimants
Priority Claimants - These have sub claimants and the order for that is “SAG WEG CTI”
General creditors who filed claims on time
For the secured claimant, do they get the money back on the value of the loan, or the value of the collateral?
They get their money back on the value of the collateral. If the collateral is less than the loan, than the creditor goes to the back of the line to get the rest of the money.
Once the secured creditors and then priority creditors are paid. How are the general creditors paid?
If there is money left, and there are still general creditors who filed on time. The remaining creditors get paid at a pro rata percentage.
What does SAG WEG CTI stand for?
S - Support obligations owed to spouses and children
A - Administration costs of the bankruptcy, filing fees, court fees, etc.
G - GAP claims, if the claim was involuntary, then the court has to determine if it is a legit claim. The costs cover that period of approval.
W - Wages of employees for sums of 15,150 within 180 days of bankruptcy.
E - Employee benefits, whatever is left of the 15,150
G - Grain farmers and fisherman (up to 7,475).
C - Consumer deposits up to 3,350
T - Tax claims, taxes
I - Personal injury from intoxicated driving. Not dischargeable.
For chapter 11 bankruptcy, normally that entails some reorganization. What is the creditors committee?
This is a committee of unsecured creditors usually consisting of the seven largest unsecured creditors against the debtor. They help with the reorganization of the debtor. Not always needed if the business is small and has less than 2.6 million in debts.
For chapter 11 bankruptcy, normally that entails some reorganization. What is the creditors committee for corporations?
Same as regular creditors committee, just made up of shareholders.
What can the creditors committee do?
Consult with the debtor
Investigate the debtors finances
Participate in the preparation of reorganization.
Is a trustee required in a chapter 11 case?
No, only if the debtor is deemed incompetent’s. Normally debtor is the best person to run the business, so no trustee is appointed.
When can the debtor submit a reogranization plan for chapter 11? Can other parties submit this plan?
Debtor has four months to submit this plan (120 days).
A trustee can submit the plan if it has been appointed.
If the debtor has not filed within 120 days someone else can.
Or if the debtor has a plan, but has not obtained acceptance of every impaired class within 180 days.
Who can vote on the plan?
Creditors for non corporations, and shareholders for corporations.
Don’t need unanimous consent.
ALL creditors or stockholders can vote on the plan, but the court will approve it or not.
At least two thirds of the amounts for shareholders or creditors.
What are the contents of the reorganization plan?
Calssify all the claims
Describe treatment to be accorded to each impaired class
Treat each class identically
Establish ways to implement the plan.
