R7 Bankruptcy 2 (S)

Question 1

Involuntary Cases

Answer 1

Unsecured creditors may petition a debtor involuntarily into bankruptcy proceedings under Chapter 7 or 11

Generally not paying debts when due

Ineligible debtors - Farmers and Charities

Owed at least $15,325

Does not constitute an order for relief

Question 2

Who must join petition of involuntary case

Answer 2

Only creditors who are owed, individually or in the aggregate, at least $15,325 in unsecured, undisputed debt

Fewer than 12 creditors - one or more creditors who are owed $15,325

12 or more creditors - three owed $15,325

Question 3

Involuntary Case Gap

Answer 3

The gap between the filing and the order for relief in an involuntary case

Persons who become creditors of the debtor during this time period are given high priority in recovering against the debtor’s estate

Question 4

Dismissal of Petition - Damages

Answer 4

If creditors improperly filed an involuntary petition a court may award a debtor compensatory damages, court costs, attorney fees, and punitive damages if bad faith can be shown

Question 5

Section 341 Meeting

Answer 5

Ordinarily within 20-40 days after the order for relief, a meeting of the creditors is held. The notice must include the name, address, and social security number of the debtor as well as the automatic stay and final dates for filing claims. The debtor must attend

Question 6

Property of Bankruptcy Estate (DII)

Answer 6

Generally includes all of the debtors real and personal property at the time of filing

It also includes property the debtor receives from Divorce, Inheritance, or Insurance within 180 days after filing the petition

Question 7

Property Excluded from Bankruptcy Estate

Answer 7

Spendthrift trusts, Educational IRAs and State Tuition Programs

Generally things necessary to live (unless specific PMSI, mortgage, or lien on property)

An individual debtor is entitled to exempt certain property under the Bankruptcy Code

The Code also allows states to adopt their own exemptions

Question 8

Exemptions on Bankruptcy Estate Property

Answer 8

Homestead
Motor vehicle
Household goods, crops, animals
Health aids
Government benefits

Question 9

Trustee’s Power as a Hypothetical Lien Creditor

Answer 9

Trustee is hypothetical lien creditor as of filing date

The trustee has priority over all creditors except creditors with a perfected security interest or prior statutory or judicial liens

Question 10

Power over Fraudulent Transfer

Answer 10

The trustee has power to set aside fraudulent transfer made within 2 years of the filing date

Question 11

Fraudulent Transfer

Answer 11

Any transfer made with intent to hinder, delay, or defraud creditors or any transfer where the debtor received less than equivalent value while the debtor was insolvent

Question 12

Trustee can Disaffirm Preferences

Answer 12

The trustee has the power to set aside preferences. When payment is set aside, the payment is taken back from the creditor who received it and it becomes part of the bankruptcy estate

Question 13

Preferential Payment

Answer 13

Transfer made to or for the benefit of a creditor

On account of an antecedent debt of the debtor

Made within 90 days of the filing of the petition or one year if the creditor is an insider

Results in the creditor receiving more than they would have received under the bankruptcy code

Question 14

Purpose of Preferential Transfer Rules

Answer 14

Prevent one creditor from receiving an unfairly large repayment relative to other creditors

Question 15

Antecedent (Preexisting) Debt

Answer 15

A payment is a preference only if it is for an antecedent (preexisting) debt

A contemporaneous exchange for value is not a preference

Question 16

Payment to a fully secured creditor

Answer 16

Payment to a fully secured creditor is not a preference, because the creditor would have received the collateral and been paid in full anyways