R7 Bankruptcy 3 (S) Flashcards
Transfers that cannot be set aside by trustee
Transfers in the ordinary course of business
PMSI perfected within 30 days
Consumer payments under $600
Domestic support obligations
Claims against the bankruptcy estate
Unsecured creditors must file a proof of claim with the bankruptcy court
Equity security holders must file a proof of interest with the bankruptcy court
An unsecured creditor who fails to timely file a claim may not take part in the distribution of the debtor’s estate
Goal of Chapter 7 Liquidation
To give an honest debtor a fresh start financially by discharging most debts owed by the debtor
Objections to Discharge Dishonest Debtor under Chapter 7
Debtor is not an individual
Fraudulent transfers
Unjustifiably failed to keep books and records
Prior discharge within 8 years
Commission of bankruptcy crime
Failure to explain loss of assets
Refusal to Obey orders or answer questions
Improper conduct in an insider case
Failure to complete financial management course
Exceptions to Discharge under Chapter 7
WAFTED
Willful and malicious injury (unless arose from negligent torts)
Alimony, maintenance, support, settlements from marital separation
Fraudulent debts
Taxes due within 3 years of filing
Embezzlement, larceny, and fiduciary’s fraud
Debts undisclosed in bankruptcy petition
Reaffirmation of Discharged Debts
The debtor may reaffirm debts only if the following requirements are met
The agreement to reaffirm the debt was made before the granting of the discharge
The agreement contains a clear and conspicuous provisions that the debtor has the right to rescind the agreement at anytime prior to discharge
The reaffirmation is not required by law
Distribution of Debtor’s Estate - Payment and Priorities
- Secured claimants
- Priority claimants
- General creditors who filed their claims on time
Payments are made in full to secured claimants tot the extent of the value of the collateral securing their claims
If their is not sufficient money to pay all creditors at a particular level, the creditors share pro rate
Priority Claimants (SAG WEG CTI)
Support obligation to spouse and children Administrative expenses Gap claims in involuntary cases Wage claims up to $12,475 Employee benefit plans up to $12,475 Gain farmers and fishermen up to $6,150 Consumer deposits up to $2,775 Tax claims Injury (personal) claims arising from intoxicated driving
Creation of Creditor’s Committee
Usually consisting of willing persons holding the 7 largest unsecured claims against the debtor
Creation of Equity Holders’ Security Committee
If the debtor is a corporation, an equity security holders’ committee may be appointed consisting of the seven largest holders of the equity securities
Powers of Committees
Consult with the debtor
Investigate the debtor’s finances
Participate in preparing the reorganization plan
Debtor Generally Remains in Possession
In chapter 7 liquidations, a trustee is appointed to take over the debtor’s assets
In chapter 11 reorganization case, trustee is generally not appointed unless there is a showing of fraud, dishonesty, incompetence, or gross mismanagement on the part of the debtor’s estate
Chapter 11 Reorganization Plan
The debtor may file a reorganization plan at any time under Chapter 11 during the bankruptcy case
Unless a trustee is appointed, the debtor has the exclusive right to file a plan during the first 120 days after the order of relief is effective. Other interested parties may file a plan if
A trustee has been appointed
Debtor has not filed a plan within the first 120 days of relief
Acceptance of Reorganization by Creditors and Stockholders
Accepted by 2/3 of amount; not unanimous
Confirmation of the plan by court
The court will confirm the plan if it is accepted by all impaired classes
