Mod 30 Bankruptcy Flashcards
Chapter 7 voluntary
Debtor files for a liquidation and trustee is appointed
Under Chapter 7 voluntary, husband and wife…
Husband and wife may file jointly
Under Chapter 7 voluntary, order of relief is…
Order of relief is same date as filing date
Under Chapter 7 voluntary, you can file even if…2
1 Can file even if solvent
2 all you need are debts of any amount
Chapter 7 Involuntary
Creditors file to force a liquidation and a trustee is appointed
Chapter 7 Involuntary, 12 or more creditors
Need 3 or more to file owed $15,325 in unsecured claims
Chapter 7 Involuntary, with less than 12 creditors
Need 1 or more to file owed $15,325 in unsecured claims
Chapter 7 Involuntary, if uncontested by debtor…
The order of relief is same date as filing date
Chapter 7 Involuntary, if contested by debtor
The order of relief comes after hearing has determined insolvency
Chapter 7 Involuntary, contested:
Test for insolvency is
Equitable insolvency
equitable insolvency
Not paying debts when due
Chapter 7 Involuntary, do not use insolvency in…
Bankruptcy Sense (assets - liabilities)
Chapter 7 Involuntary, 2 exempt parties
Farmers and charities
Chapter 7 Involuntary, if creditors improperly file, the debtor may collect…4
1 compensatory damages
2 court costs
3 attorney’s fees and
4 punitive damages
Chapter 11 Reorganization
Debtor submits a plan to restructure debtor’s debts for the purpose
Of allowing the debtor’s business to continue
Under Chapter 11 Reorganization, no…
Liquidation of business occurs
In a Chapter 11 Reorganization, a plan is submitted to…
an unsecured creditor’s committee (exclusive rights For 120 days)
In a Chapter 11 Reorganization, plan must be approved by…
At least 1 impaired class of creditors
In a Chapter 11 Reorganization, a trustee is…
Not usually needed (debtor acts as trustee)
In a Chapter 11 Reorganization, a reorganization can be…
Voluntary or involuntary
In a Chapter 11 Reorganization, plan won’t be confirmed until…
Full payment of administrative costs
In a Chapter 11 Reorganization, upon court’s final decree…
Debtor pays off debts according to plan
In a Chapter 11 Reorganization:
Upon court’s final decree, debtor pays off debts according to plan
Debtor is discharged from any other debts not covered by the plan
Neumonic for who can’t file under chapter 7
RIBS
4 parties that can’t file under chapter 7
1 railroads
2 insurance companies
3 banks
4 savings and loans
Filing under Chapter 7 or 11 acts as…2
1 an automatic stay and
2 stops all collection efforts
Filing under chapter 7 or 11 acts as an automatic stay and stops all collection efforts. What’s the exception?
An automatic stay doesn’t stop alimony and child support payments
Property as of filing date goes to…
Goes to trustee for creditors (includes are proceeds gained after
Filing)
Property as of filing date goes to trustee for creditors. 2 exemptions
1 social security and disability benefits are exempt
2 things necessary to live are exempt (house, car, furniture)
Debtor keeps most property gained after filing. 3 exceptions
1 property gained within 180 days after filing by divorce
2 inheritance or
3 by insurance goes to trustee
Property included in debtor’s estate:
With leases, the trustee can…2
1 Accept or reject
2 if no action in 60 days they are rejected
Trustee can avoid or disaffirm…
payments on property transfers done by debtor prior to filing
Preferential transfers define
Preferring 1 creditor over others
Preferential transfers can…
Be avoided
Preferential transfers can be avoided, to disaffirm prior payment…
5 tests must be met (TANIM)
5 tests to disaffirm prior payment:
TANIM
Transfer Antecedent debt Ninety days Insolvent More
5 tests of TANIM to disaffirm prior payment:
T
Must have a transfer of property that benefits a creditor
5 tests of TANIM to disaffirm prior payment:
A
Transfer must have been for an antecedent debt
Antecedent debt, define
Existing overdue debt
Transfer must have been for an antedecedent debt:
New debts are…2
1 New debts are not antecedent debts
2 they are a contemporaneous exchange for new value
Transfer must have been for an antedecedent debt:
Secured debts are…
Not antecedent debts, can’t prepay
Transfer must have been for an antedecedent debt:
Paying current bills in ordinary corse of business are…
Not antecedent debts, can’t prepay
Transfer must have been for an antedecedent debt:
Consumer debts of…
$650 or less aren’t antecedent debts
4 debts that are not antecedent debts
1 new debts
2 secured debts
3 paying current bills in ordinary course of business
4 consumer debts of $650 or less
5 tests of TANIM to disaffirm prior payment:
N
Transfer must have been made within Ninety days of filing date
5 tests of TANIM to disaffirm prior payment:
Transfer may be made within 1 year of filing date if…
Creditor was an insider
5 tests of TANIM to disaffirm prior payment:
I
Transfer must have been made while debtor was insolvent
5 tests of TANIM to disaffirm prior payment:
Insolvency is normally presumed if…
The transfer was made within 90 days
5 tests of TANIM to disaffirm prior payment:
M
Creditor received more than he would have received in bankruptcy
3 types of Bankruptcy
1 Chapter 7 voluntary
2 chapter 7 involuntary
3 chapter 11 reorganization
Fraudulent conveyances
Phony transfer by debtor to hide property from creditors
With fraudulent conveyances, a trustee can…
Can disaffirm if within 1 year within filing
Fraudulent conveyances are done secretly where the…
Debtor retains equitable title and usually retains possession
Debts are paid in the order of their priority neumonic
SAG-WEG-CTO-AM
If insufficient money to pay all debts within a given category…
Each debt within category receives a pro rata share of available
Funds
Categories of debts:
What does SAG-WEG-CTO-AM stand for?
1 secured creditors 2 administrative costs 3 Gap creditors 4 wages unpaid 5 employee benefits unpaid 6 grain producers and fisherman unpaid 7 consumer deposits 8 taxes 9 obligations 10 accidents 11 miscellaneous
Categories of debts SAG-WEG-CTO-AM:
S
1 secured creditors are paid up to the value of collateral
Secured creditors are paid up to the value of the collateral which is…
Category 10 for any deficiency
Categories of debts SAG-WEG-CTO-AM:
A, 2
2 Administrative Costs of bankruptcy and
Domestic support obligations
Domestic support obligations 2
Child support and alimony
Categories of debts SAG-WEG-CTO-AM:
G, 2
3 Gap creditors,
debts occurring after filing but before the order of relief
Categories of debts SAG-WEG-CTO-AM:
W, 2
4 Wages unpaid
Must be earned within 90 days prior to filing and maximum priority
Is $12,475 per employee
Categories of debts SAG-WEG-CTO-AM:
E, 2
5 employee benefits unpaid
Must be earned within 180 days prior to filing and maximum priority
Is $12,475 per employee
Categories of debts SAG-WEG-CTO-AM:
G, 2 (2nd G)
6 grain producers & fisherman unpaid
Maximum priority is $6,150 per individual
Categories of debts SAG-WEG-CTO-AM:
C 2
7 consumer deposits for goods and services not received
And maximum priority is $2775 per person
Categories of debts SAG-WEG-CTO-AM:
T
8 taxes
Categories of debts SAG-WEG-CTO-AM:
O
9 obligations to insured bank
Categories of debts SAG-WEG-CTO-AM:
A
10 accidents while under influence of drugs or alcohol
Categories of debts SAG-WEG-CTO-AM:
M
11 miscellaneous unsecured debts
Upon bankruptcy completion…
Most of debtor’s debts are discharged
Discharge of debtors:
Only individuals are discharged…
Corporations and partnerships are dissolved
Certain actions by debtor will preclude any discharge, this is known as…
Denial of discharge
Certain actions by debtor will preclude any discharge:
Received previous discharge…
Received previous discharge within 8 years of filing
Certain actions by debtor will preclude any discharge:
Unjustifiably failed to…
Failed to Keep adequate books and records
Certain actions by debtor will preclude any discharge:
Attempted to…
Attempted to hide assets within 1 year of filing
Certain actions by debtor will preclude any discharge:
Refusal to…2
1 refusal to explain a loss of assets or
2 refusal to obey a court order
Certain actions by debtor will preclude any discharge:
Making…
Making false oath or account
Even if a discharge is granted, certain…
Certain debts are not dischargeable
Even if discharge is granted, certain debts are non dischargeable, what is the neumonic
WAFTED
Even if discharge is granted, certain debts are non dischargeable, what does WAFTED stand for?
Willful Alimony Fraud Taxes Educational loans Debts
Even if discharge is granted, certain debts are non dischargeable, WAFTED:
W
Debts from causing Willful and malicious injury to others
Even if discharge is granted, certain debts are non dischargeable, WAFTED:
A
Debts concerning Alimony and child support
Even if discharge is granted, certain debts are non dischargeable, WAFTED:
F
Debts resulting from fraud
Even if discharge is granted, certain debts are non dischargeable, WAFTED:
T
Taxes owed within 3 years of filing
Even if discharge is granted, certain debts are non dischargeable, WAFTED:
E
Educational loans
Even if discharge is granted, certain debts are non dischargeable, WAFTED:
D
Debts unscheduled by the debtor and creditor had no notice of bankruptcy
Even if discharge is granted, certain debts are non dischargeable.
3 other debts (aside from WAFTED)
1 theft
2 embezzlement
3 debt from SOX
Preferential transfers made to insider within 12 months may be…
2) They are not…
Set aside
2) not preferential payments
Insiders are…5
1 close blood relatives 2 officers 3 directors 4 controlling stockholders of corporations 5 general partners of partnerships
Taxes after 3 years of filing are…
Discharged by bankruptcy
Additional debts mentioned in text book that are not discharged by bankruptcy:
Loans for…
Loans for payment of federal taxes
Congress amended the bankruptcy code making it noted difficult for…
Student loans to be discharged in bankruptcy
Additional debts mentioned in text book that are not discharged by bankruptcy:
Government fines…
Government fines and penalties imposed within prior 3 years
Additional debts mentioned in text book that are not discharged by bankruptcy:
Any debt violation under…
Any debt violation under securities laws
Additional debts mentioned in text book that are not discharged by bankruptcy:
Debts owed to…3
1 pension plans
2 profit sharing plans or
3 similar employee plans
Additional debts mentioned in text book that are not discharged by bankruptcy:
Homeowner…3
1 Homeowner association
2 condo or
3 cooperative fees
Debts adjustment plans Chapter 13 deals with…
Individuals
Debts Adjustment Plans- Chapter 13:
Initiated when…
Debtor files voluntary petition in bankruptcy court
Creditors may not file involuntary petition under…
Ch. 13
Debts Adjustment Plans- Chapter 13:
Filing a petition…2
1 stays all collection and
2 straight bankruptcy proceedings against debtor
Debts Adjustment Plans- Chapter 13:
Debtor has…
Exclusive right to propose plan
Debts Adjustment Plans- Chapter 13:
Debtor has exclusive right to propose plan. If debtor does not file plan…
Creditors may force debtor into involuntary proceedings under
Ch. 7
Debts Adjustment Plans- Chapter 13:
Plan will be approved…
Approved or denied by court without approval of unsecured
creditors
Debts Adjustment Plans- Chapter 13:
Plan will be confirmed or denied by court without approval of unsecured creditors. However unsecured creditors must…
Receive as much as they would get under chapter 7
Debts Adjustment Plans- Chapter 13:
Unsecured creditors must receive as much as they would get under Ch. 7 and…2
1 either be paid in full, or
2 have all debtor’s disposable income committed to plan
Debts Adjustment Plans- Chapter 13:
Plan may put claims in different classifications but may not…
Not Discriminate unfairly against any of designated classes
Debts Adjustment Plans- Chapter 13:
Each claimant within same classification must…
Receive same treatment
Debts Adjustment Plans- Chapter 13:
If debts to unsecured creditors are not paid in full, plan must…
Plan must commit to payments for 3 years
Debts Adjustment Plans- Chapter 13:
If debtor’s monthly income exceeds the state’s average median income, plan must…
Plan must make payment for 5 years
Court must appoint trustee in…
Ch. 13 cases
Debts Adjustment Plans- Chapter 13:
Debtor engaged in business may…
Continue to operate that business subject to limitations imposed
by court
Debts Adjustment Plans- Chapter 13:
Completion of plan…
Discharges debtor from debts dischargeable by law
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
Amends various parts of US Bankruptcy Code including…2
1 consumer bankruptcies and
2 business bankruptcies
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
Provisions under the new Act allow trade creditors to treat large portions, sometimes most or even all of…
Vendors’ claims as being administrative expenses
Treating vendor’s claims as administrative expenses…
Significantly increases their priority status
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
Creates a new bankruptcy code section at imposes limits on…2
1 limits on payment of severance pay or
2 limits on retention bonuses to key employees in a Ch. 11 case
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
Retention bonuses are only permitted if…
Key employees have good faith offers from other businesses at
Same or greater conpensation
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
For consumer cases, the time between discharges has been…
Increased
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
For consumer cases, the time between discharges has been increased so that the Bankruptcy Code will…2
1 Deny discharge to Ch 7 debtor
2 if that debtor received Ch 7 or Ch 11 in discharge in case filed
Within 8 years of pending case
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
For consumer cases, the time between discharges has been increased. Prior law said 6 years between…
Such discharges under Ch 7 and Ch. 11
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
Under the new act, Chapter 13 debtor’s have a few different time limitations…
When combined with various chapters
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:
Creates a new Chapter 15 of US Bankruptcy Code dealing with…
Cross border insolvency cases
Ch. 15 is meant to…
Make bankruptcy proceedings across international borders more functional
Ch. 15 favors and promotes…
cooperation and communication with both foreign courts and
Foreign representatives
In recent years, bankruptcy specialists have made much larger fees. Rising fees have elicited major objections coming from…3
1 federal watchdogs
2 organized labor
3 major creditors of bankrupt companies
A major complaint is that lawyers and other advisors have been…
Taking too many fees and leaving less money for others in the bankruptcy
