R7 Bankruptcy 1 (S) Flashcards
Chapter 13 Adjustments of Debts of Individuals with Regular Income
The debtor repays all or a portion ofhis debts over a three-year period to a maximum of a five-year period
Not liquidation
Chapter 7 Liquidation
A trustee is appointed
The trustee colects the debtor’s assets, liquidates them, and uses the proceeds to pay off creditors to the extent possible
If the debtor is an individual, the debtor’s debts are then discharged
An artificial entity is dissolved
Chapter 11 Reorganization
No liquidation and trustee is not appointed
Dismissal or Conversion of a Chapter 7 Case
A chapter 7 case by an individual consumer debtor may be dismissed or converted to a chapter 13 case upon a finding that granting relief under Chapter 7 would constitute abuse
Calculation of Debtor’s Income
Current Monthly Income: Average of 6 months preceding filing
If equal to or less than state median income chapter 7 is permitted
Otherwise means test is applied
Deductions
Means Test
Current monthly income divided by 60
If less than $7,475 - Chapter 7 Permitted
If $12,745 or more - Presumption of Abuse
If less than $12,745 but more than $12,745 - Abuse only if 25% of nonpriority claims
Allowable Deductions for Means Test
Living expenses
Health and Disability insurance
Care of elderly, disabled, or chronically ill
Rebutting the Presumption of Abuse
Serious illness or call to active military duty
Chapter 7 may not be dismissed or converted based on means testing if the debtor is a disabled veteran whose indebtedness occurred primarily while he as on active duty or performing homeland defense activities
General Abuse Test
Bad Faith
Only be raised by court, trustee, or bankruptcy administrator
Who may be a debtor for chapter 7 (RIBS)
Individuals, partnerships, and corporations
No Railroads Insurance companies Banks Savings institutions
Who is a debtor under chapter 11
Individuals, partnership, and corporations No Insurance companies Banks Savings Institutions
Credit Counseling if Debtor is an Individual
Must occur no more than 180 days before filing bankruptcy petition
Debtors filing under Chapter 7 and 13 must complete a financial management course before their debts are discharged
Duties of Debt Relief Agencies
Agencies that are paid compensation to assist consumer debtors in filing bankruptcy petitions must enter into a written contract with debtor and may not advise a person to incur more debt in anticipation of bankruptcy filing
Automatic Stay
When a bankruptcy petition is filed in either a voluntary or involuntary case, an automatic stay becomes effective against most creditors Stops almost all collection efforts Does not apply to criminal prosecutions, paternity suits, and child support cases
Duties of Debtor
After a petition is filed a debtor must file
list of all creditors and their addresses
schedule of assets and liabilities (FMV)
schedule of current income and expenditures
Copies of pay stubs
Statement of monthly net income
Copies of Federal tax returns
Voluntary Cases
Debtor files for order of relief
Debtor need not be insolvent - but must pass income tests
Spouses may file jointly
Constitutes an automatic order for relief
