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8 Cards in this Set
- Front
- Back
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Automatic Stay
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one of the most important protections given to the debtor upon the commencement of a bankruptcy case is the automatic stay; it prevents creditors from pursuing remedies against the debtor or is assets; stay arises by operation of law as soon as the petition for bankruptcy is filed; filing prohibits any act to collect, assess, or recover a claim against the debtor that arose before commencement of the bankruptcy case
if creditor willfully violates automatic stay, creditor will be liable for damages, attorney's fees, and even punitive damages |
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Outside Scope of Automatic Stay
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Automatic stay doesn't apply to:
1. prosecution of criminal cases 2. cases brought to establish paternity or domestic support obligations 3. cases regarding child custody or visitation, or domestic violence 4. collection of a domestic support obligation from non-estate property 5. reporting overdue child support obligations to a consumer reporting agency 6. taking steps to maintain perfection of an interest in property 7. assessment of tax or demand for tax returns, or tax audit |
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Exceptions to Discharge
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At some point, bankruptcy proceeding may result in a discharge of a debtor's debts; however, certain debts aren't discharged in Chapter 7 cases
Non-dischargeable debts include: 1. most tax claims 2. most liabilities for obtaining money or property by false representation or fraud, embezzlement, and larceny 3. debs to obtain luxury goods (boats, jewelry) if debts aggregate over $550 to a single creditor, and this aggregate amount of debt incurred within 90 days of the order 4. cash advances obtained by consumer under an open-ended credit plan, if debts incurred within 70 days of the order for relief and exceed aggregate amount of $825 5. debts for domestic support obligations 6. liabilities arising from willful and malicious injury 7. education loan unless repayment would impose "undue hardship" for debt to survive |
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Chapter 7
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Most common type of bankruptcy case involves liquidation of debtor's assets by a trustee to pay creditors' claims; in liquidations involving individual debtors, debtor usually gets a "fresh start" by receiving a discharge of debts; liquidation for corporation usually results in termination of the business
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Order of Distribution - Chapter 7
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After estate liquidated and valid lienors (secured creditors) receive value of their collateral, remainder is distributed in the following order:
1. Priority claims according to rank 2. Allowed unsecured claims for which timely proofs of clams were filed 3. Allowed unsecured claims for which proofs of claims were filed late 4. Claims for fines, penalties, forfeitures or punitive damages 5. Claims for interest that accrues after petition is filed 6. If surplus remains, then to the debtor |
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Chapter 11
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Debtors (usually business debtors) often want to avoid liquidation (so they can stay in business); Chap 11 is designed to help debtor rehabilitate his failing business by extending, reducing, or otherwise adjusting debts and reorganizing the business; debtors in Chap 11 cases usually remain in possession of their assets, thus avoiding liquidation (and enabling business to operate)
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Chapter 13
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Individuals may wish to keep assets (which would be lost in liquidation) by paying off their debts in accordance with plan approved by the court; Chap 13 permits debtor to propose a plan that extends and/or reduces the balance of his obligations; Chap 13 gives the debtor a discharge, but only after all plan payments are made
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Texas Homestead Exemption
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Especially generous to debtors in Texas; basically, homestead exemption allows debtor to retain her home without limitation as to value; however, as is the case for personal property, a valid security interest will generally trump the exemption amount; thus, if a person purchases a home by obtaining a loan, and the creditor obtains a perfected security interest in the home (ex. mortgage), the creditor would be able to reach the home in bankruptcy, notwithstanding the state exemption
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