R8-M1 Bankruptcy 1

Question 1

what are 3 common types of bankruptcy under federal law?

Answer 1

• chapter 7: liquidation with trustee required
• chapter 13: adjustment of debts of individuals with regular income with trustee required
• chapter 11: reorganization: trustee NOT required but may be appointed in court

Question 2

what is dismissal or conversion of chapter 7?

Answer 2

• step 1: determine if income ins LOWER than the state median
  + if lower, chapter 7 liquidation is ok
  + if higher (includes spouse’s income), case will be dismiss or court may file a motion because the debtor has sufficient income to pay debts
• step 2: perform means test = (average monthly income - allowed expenses) x 60% and compare it with the thresholds ($9,075 and $15,150)
  + if means test is LESS than $9,075, the debtor may continue under chapter 7
  +if means test is $15,150 or more, presumption of abuse and the debtor usually will have to convert the case to chapter 13

Question 3

who may not be a debtor who file bankruptcy under chapter 7 and 11?

Answer 3

• chapter 7 (RIBS): railroads, savings instructions, insurance companies, banks, and small business investment companies
• chapter 11 (BIBS): stock/commodity brokers, insurance companies, banks, and small business investment companies

Question 4

what property included in bankruptcy estate?

Answer 4

at time of filing and within 180 days after filing date property (DIII)
- debtor’s estate at the time of filing
- after filing:
+ income generated from estate property
+ property receives from Divorce, Inheritance, Insurance, Interest of life insurance

Question 5

what is automatic stay or filing of a petition in bankruptcy (voluntary or involuntary)?

Answer 5

• stops the enforcement of all judgement liens and collections actions against the debtor

Question 6

what requirements must be met for debtors to file an voluntary bankruptcy petition chapter 7?

Answer 6

• does not need to be insolvent but must pass income tests
• may be filed by anyone who owes debts
• spouse may file jointly
• a debtor can obtain another voluntary discharge in bankruptcy after 8 years have passed
• certain debts are not discharged (WAFTED): Alimony, Taxes, Fraud, Educational loans, Fines and penalties owed to the govt, and Debts undisclosed in the bankruptcy petition

Question 7

what requirements must be met for creditors to file an involuntary bankruptcy petition chapter 7?

Answer 7

• not pay debts when due
• who must join? debtor owed unsecured creditors at least $18,600. fewer than 12 creditors (one or more owed 18,600). 12 or more creditors (3 owed 18,600)
• farmers and charities are ineligible

Question 8

what is fraudulent transfer?

Answer 8

• transfers made within 2 years go the bankruptcy filing date with an intent to hinder, delay, or defraud creditors or any transfer where debtor received less than equivalent value while the debtor was insolvent
• may be set aside by the trustee