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41 Cards in this Set
- Front
- Back
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Pre-requisite for Bankruptcy
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Individuals are ineligible to file under any bankruptcy chapter unless they participated in individual or group briefing from an approved non-profit counseling agency
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General Features of Chapter 13
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1) Voluntary
2) Debts may be extended or reduced 3) Plan can only be approved if it meets the best interest of the creditors |
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Best Interest of the Creditors test
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Creditor must receive in present value terms at least as much as they would if debtor were liquidated under Chapter 7
Example: $2000 over three years is less than $6000 up front If creditor can show that he’d get $6000 under Chapter 7, plan won’t be approved |
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Limitations of Chapter 13
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1) Only individuals with regular income
2) Debt limits -- (unsecured debts less than $336,900; secured less than $1 million) |
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General Features of Chapter 11
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Chapter used to rehabilitate business by extending, reducing, modifying debtors obligations
Generally used by big companies Debtor may continue to operate his business Plan can only be approved if it meets the best interest of the creditor test |
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Chapter 11 is only relevant if the question mentions
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1) A business
2) A voluntary filing |
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Chapter 11 or 13 Requirements for plan of reorganization
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1) Approval by creditors
2) Confirmation by a judge |
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Effect of Chapter 7 Bankruptcy
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Non-exempt assets are liquidated
Debts are discharged |
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Chapter 7 Dismissal for Abuse
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Results in dismissal and conversion to Chapter 11 or 13
Establishing Abuse: 1) Filed in bad faith; OR 2) Means test |
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Chapter 7 Means test
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1) Applies when debtor's income is greater than the median family income in state where he files;
2) Presumption that Chapter 13 should apply if debtor's income would allow him to pay a) 25% of unsecured claims or $6575 (whichever is more); or b) $10,950 3) Presumption can be rebutted by showing special circumstances |
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Who may file Chapter 7?
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1) Voluntary -- individual or business
2) Creditor -- if debtor is eligible for voluntary filing |
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Rule as to who can file an involuntary petition under Chapter 7
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If debtor has 12 or more creditors:
3 or more with aggregate unsecured or under-secured claims of at least $13,475 may file Fewer than 12 Creditors 1 or more whose unsecured or under-secured claims aggregate $13,475 may file |
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Grounds for filing involuntary petition under Chapter 7
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Debtor is not paying debts as they come due
i.e, regularly missing a significant number of payments Debts in bona fide dispute don’t count |
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Debtor's duties upon filing of petition
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Must file several documents, including:
1) List of creditors 2) Schedule of assets and liabilities 3) Schedule of income and current expenditures 4) Other documents proving this information Note: Voluntary bankruptcy filing dismissed if info not provided in 45 days |
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Automatic Stay
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Halts Collection Activities from the Time of the Bankruptcy is Filed
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Possible penalties for violating automatic stay?
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o Damages
o Attorney’s Fees o Punitive Damages |
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Activities that violate the automatic stay
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Utility creditors cutting off services
Filing collection suits and liens Foreclosure of liens Government collection activity Collection phone calls |
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Exceptions to the automatic stay
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1) Criminal prosecutions
2) Domestic support modifications 3) Regulatory Enforcement 4) Civil actions for: paternity, child custody, dissolution of marriage 5) Assessment of tax 6) Steps to perfect a secured interest 7) Eviction based on illegal activity |
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Duration of the automatic stay
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Continues for the duration of the bankruptcy
Unless: Creditor requests that the stay be lifted and is granted relief |
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Grounds for lifting automatic stay
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1) Lack of Adequate protection (note: secured creditors are entitled to protection against a decline in the value of the collateral during the life the AS)
2) Lack of Equity (secured creditor can request the court to lift the AS with respect to some item of encumbered property if: Debtor has no equity in the property AND Property is not necessary to an effective reorganization Equity = value of collateral exceeds value of the debt 3) Scheme to defraud |
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What makes up the bankruptcy estate?
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All property acquired prior to the bankruptcy, including exempt property, is part of the bankruptcy estate
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Utah rule on exemptions
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1) Only state exemptions apply
2) Only stop UNSECURED creditors 3) Creditors with liens are not stopped by exemptions |
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Utah exemptions
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1) Household goods (home furnishings up to $500)
2) Alimony 3) Child Support 4) Health aids 5) Professional books (up to $3500) 6) One car -- up to $2000 7) Qualified retirement plan 8) Insurance proceeds 9) Animals, books, musical instruments -- $500 |
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Utah wages eligible for garnishment under bankruptcy
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50% of the disposable earnings for a writ to enforce payment of a judgment for failure to support dependent children OR
25% of the D’s disposable earnings for any other judgment; OR The amount by which the D’s disposable earnings for a pay period exceeds the number of weeks in that pay period multiplied by 30 times the federal minimum hourly wage in effect Whichever is LESS Homestead exemption |
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Utah Homestead Exemption
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Single Person: up to $20,000 in value if the property is primary residence
Joint owners: up to $40,000 in value for primary residence NOTE: Valid Security interest in home will PREVAIL against the homestead exemption |
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Federal Exemption Limitations
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Residency: To claim a state’s exemptions, a debtor must be a resident of that state for 2 years before filing
Bad Acts: Homestead exemption limited to $136,875 if debtor has been convicted of a felony demonstrating that the filing was an abuse |
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Powers of a Trustee
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1) Hypothetical Lien Creditor
2) Hypothetical Bona Fide Purchaser of Real Estate 3) Claiming the Rights of other Creditors 4) Power over Fraudulent Transfers 5) Power to Avoid Preferential Transfers 6) Power as to Executory Contracts |
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Trustee as Hypothetical Lien Creditor
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Trustee treated as having a hypothetical judicial lien on the date of bankruptcy filing
May trump any property interest held by a creditor that could be trumped by a judicial lien In effect, any creditor whose interest is not perfected will become an unsecured creditor |
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Trustee as Hypothetical Bona Fide Purchaser of Real Estate
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Trustee is given the rights of a bona fide purchaser of the debtor’s real property
Wins out in property claims of competing purchasers or mortgage holders |
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Trustee Claiming the Rights of other Creditors
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Can avoid any transfer that would be voidable under non-bankruptcy law by an ACTUAL unsecured creditor w/ an allowable claim
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Trustee’s Power over Fraudulent Transfers
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May avoid transfers that are fraudulent under state law
Grounds for finding fraudulent transfer: 1) Fraudulent intent (transfer made to hinder, delay, or defraud creditors) 2) Transfers for less than reasonably equivalent value are fraudulent IF: a) Transfer made debtor insolvent; b) D engaged in business with unreasonably small amount of capital; c) D intended to incur debts that would be beyond their ability to pay; d) Transfer made to benefit insider (relative, partner, controlling shareholder) |
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Trustees vs. Statutory Liens
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Generally, statutory liens (eg. Mechanic’s liens) are valid against a trustee
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Trustee’s Power to Avoid Preferential Transfers
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Trustee may get back transfers and payments to preferred creditors and distribute them among all creditors
5 elements of a voidable preference (ALL must be present) 1)Transfer to or for the benefit of a creditor 2) D is insolvent 3) On account of antecedent debt 4) Within 90 days of bankruptcy 5) Enables creditor to receive more that it would have by way of its dividend in bankruptcy liquidation |
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Learn Exceptions to Voidable Transfers
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Seriously
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Trustee’s power as to Executory Contracts
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Trustee has power to assume, reject, or assign executory contracts upon the approval of the Bankruptcy Court
Must pay damages for rejection -- treated as general unsecure debt Court will approve assignment if assignee can give adequate assurances of performance |
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Hierarchy and Ranking of Bankruptcy Claims
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1) Secured Claims and Secured Judicial Lien Holders
2) Priority Unsecured Claims (Unsecured Claims in order of high to low priority) 3) General non-secured claims |
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Priority Unsecured Claims -- Rankings
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Learn these dammit
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General Rule regarding discharge
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Debtor will be discharged of obligations and be given a fresh start
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Global Objections to Discharge
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1) Debtor is not a person (corporations and partnerships dissolve)
2) Concealment of property/Fraud 3) Failure to keep books and records 4) Commission of a bankruptcy crime 5) Failure to explain loss of assets 6) Refusal to obey court orders or answer questions 7) Etc., etc., etc., |
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Debts not dischargable
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Lots of them...learn most of them
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Rule Regarding Reaffirmation of discharge debts
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1) reaffirmation agreement must have been made BEFORE the granting of a discharge
2) Creditor must provide debtor with disclosures regarding debt and rights to discharge 3) Agreement must be filed with court 4) Individual debtor – hearing advising debtor of his rights 5) Consumer debt – court must determine that: A) agreement does not impose an undue hardship on debtor B) it is in the best interest of debtor |
