Business Law Chap 32

Front 1

Chap 32 Sentence

Back 1

Purpose of Bankruptcy and Definitions and Parties, their Choices, in Chapter 7 Procedures, Rehabilitation Plans and Interplay

Front 2

2 Primary Purposes of Bankruptcy

Back 2

1.Provide Fresh start for honest debtor overburdened
2.Equitable treatment for creditors.

Front 3

History of Bankruptcy

Back 3

1. Initially in England to protect creditors
2. U.S. revoked 1st two laws due to high numbers of Bankruptcy.
3. 1 million/year today

Front 4

Basic Definition
Liquidation Proceeding.

Back 4

1. All nonexempt assets of debtor are sold to pay unsecured creditors
2. Exempt property kept by debtor in Chap 7 by state or fed law

Front 5

Basic Definition:
Rehabilitation

Back 5

Bankruptcy proceeding where debtor may potentially keep nonexempt assets and pay creditors by installments.

Front 6

Basic Definition:
Bankruptcy Estate

Back 6

nonexempt property collected by the trustee for distribution in chap 7 to creditors.

Front 7

Basic Definition:
Claim

Back 7

Document filed by Bankruptcy court demonstrating right to receive money/property from bankruptcy estate.

Front 8

Basic Definition:
Secured Claim/Unsecured Claim

Back 8

Secured: Creditor has perfected security interest with debtors property as collateral.
Unsecured: no security interest or unperfected

Front 9

Basic Definition:
Allowed Claim

Back 9

Claim approved by Bankruptcy judge.

Front 10

Basic Definition:
Dividend

Back 10

Payment to creditor from plan payments or bankruptcy estate

Front 11

Basic Definition:
Workouts

Back 11

Negotiations with creditors outside the bankruptcy process to restructure debt

Front 12

Basic Definition:
Corporate v/s Consumer Bankruptcy

Back 12

Consumer: primary issue is dischargeabilty
Corporate primary issue is division of assets.

Front 13

Parties of Bankruptcy

Back 13

1. Debtor
2. Creditor
3. Trustee

Front 14

Debtor

Back 14

Person filing for bankruptcy or subject of involuntary bankruptcy proceeding.

Front 15

Creditors

Back 15

An individual or entity owed money or property by the bankruptcy debtor

Front 16

3 primary purposes of the trustee

Back 16

1. Review bankruptcy petition and examines the debtor under oath to verity balance sheet
2. Collects non-exempt assets
3. Collects plan pmts to distribute to creditors under Chap 12 & 13

Front 17

Choices in Bankruptcy

Back 17

1. Chap 7 Liquidation
2. Chap 11 Reorganization
3. Chap 12 Family Farmer debt adj
4. Chap 13 Individual debt adj.

Front 18

Chapter 7

Back 18

Liquidation of nonexempt assets to discharge debtor from debts without further payment.

Front 19

Chapter 7 eligibility

Back 19

Individuals and businesses but exclude railroads and financial institutions.

Front 20

Substantial abuse of Chapter 7

Back 20

Results in dissmissal of petition. Debtor must comply with bankruptcy law and must have inadequate disposable income
Disposable = NI - expenses

Front 21

Chapter 11 eligibility

Back 21

Anyone who gets chapter 11 + railroads.

Front 22

Chapter 11 Reorganization

Back 22

Restructures debt and debtor receives discharge of debt after fulfilling plan payments.

Front 23

Chapter 12 eligibility and Process

Back 23

Family Farmers may adjust debt payments into plan and discharge after pmts made.

Front 24

Chapter 13 Eligibility

Back 24

Individuals: (non businesses).

Front 25

Chapter 13 Debt adjustment plan

Back 25

Adjust debt pmts and receive a super discharge after paying plan pmts.

Front 26

5 Stages of Chapter 7

Back 26

1. Petition
2. Automatic Stay
3. First Meeting
4. Period for Claims and Challenges
5. Discharge

Front 27

Chapter 7 Petition steps

Back 27

1. Means test
2. Credit Counseling within 180 days

Front 28

Chapter 7 Petition Means Test

Back 28

1. Requirement for consumers (nonbusiness)
2. Income > state median income for over 5 years then abuse is presumed &:
-Can pay more than 10,000 or
Can pay 25% of debt and pmt would be at least 6000

Front 29

Missouri Median Income

Back 29

1 person 40,000
2 people 51,000
3 People 58,000
4 people 70,000

Front 30

Chapter 7 Petition credit Counseling requirement

Back 30

Must be within 180 days of filing and is prerequisite for discharge.

Front 31

Automatic Stay

Back 31

Issued upon filing the petition.
is a court order that stops all collection activity upon notice to include passive collections such as garnishment and automatic deductions

Front 32

Automatic Stay does not include

Back 32

support debts

Front 33

Automatic stay is not available to

Back 33

limited or unavailable for debtor with recent bankruptcy fillings.
1. one filing in last year stay only lasts 30 days unless judge says otherwise
2. If > 1 filing dismissed in last year no stay unless judge says so.

Front 34

What is 1st meeting of creditors

Back 34

Opportunity of trustee and creditors to examine the debtor under oath. Debtor and Trustee presence is required.

Front 35

Period of Claims and Challenges

Back 35

1st meeting of creditors begins period of filing claims and challenges to dischargeability of some debts

Front 36

Claims and challenges requirements

Back 36

Claims filed within 90 days of 1st meeting
Challenges must be filed within 60 days of first meeting

Front 37

Discharge

Back 37

Relives debtor of obligation to pay but many types of dischargeable debt.

Front 38

4 Avoidance powers of trustee

Back 38

1.Power to avoid liens under unperfected or perfected after petition
2. Avoid post-petition transfers
3. Avoid fraudulent transfers
4. Avoid Preferences

Front 39

Avoidance of fraudulent transfer

Back 39

may avoid transfers with inadequate consideration within last 2 years before petition. up to 15% of Gross inc is not fraud.

Front 40

Avoidance of preferences

Back 40

Preference is paying a creditor more than their fair share of estate. Money is set aside and put into estate so priorities under code may be taken

Front 41

5 Steps to prove preference

Back 41

1. Transfer to benefit of creditor and must be 600 in consumer and 5850 in commercial
2. On account of pr-exsisiting debt (not ordinary course of bus or simultaneous exchange)
3. Within required time period (1 year to insiders and 90 days to others before petition).
4. Debtor was insolvent AND
5. Creditor received more than had it gone through court.

Front 42

Asset Cases

Back 42

nonexempt assets made available.

Front 43

Exemptions are:

Back 43

made by state or federal law.

Front 44

Missouri exemptions

Back 44

Household goods 3000/debtor
Automobile 3000/debtor
Homestead 15000 equity
WildCard 1250 + 350/unmarried minor dependent.

Front 45

Exemptions to receiving exemptions.

Back 45

Bankruptcy planning and debt evasion.

Front 46

Title of nonexempt assets at petition

Back 46

transferred to trustee immediately

Front 47

To receive pmts

Back 47

Creditors must file claims.

Front 48

6 priorities of unsecured creditors in asset cases SAWTIG

Back 48

1. Domestic support obligations
2. Admin expenses for Bankrupt
3. Unpaid wages/commiss within 180 days of petition up to 11,725
4. Taxes within 3 years of peti
5. Claims for death injuries while driving intoxicated.
6. General Unsecured Creditors
Must pay in order (nondiscrimination)

Front 49

Reaffirmation, Redemption or Surrender

Back 49

Secured Creditors entitled to protection of interest in bankrupt by:
1. debtor must reaffirm with reaffirmation agreement
2. Redeem the collateral by paying FMV
3. Surrender collateral

Front 50

Automatic stay and secured creditors

Back 50

Debtor has 45 days to repay creditor or creditor is free of automatic stay.

Front 51

6 Non-Dischargeable debts

Back 51

1. Claims on back taxes (3 years)
2. Fraud debts (600 luxury goods within 90 days, 875 cash within 70 days)
3. Domestic Support
4. Property Damage or personal injury claims INTENTIONALLY caused
5. Student Loans
6 Judgements.

Front 52

4 Objections to discharge

Back 52

Any granted, debtor obligated to ALL DEBT.
1. Concealment or destruction of records
2. Discharge filed within 8 years (6 in chap 12 or 13)
3. Didn't complete Financial management course
4. Possible felony conviction

Front 53

Involuntary Cases allowed in

Back 53

Chapter 7 and 11 when debtor insolvent. not paying debts

Front 54

Involuntary Case requirement

Back 54

12 creditors and at least 3 must file if less than 12 one or must and at least 14,500 total owed and debtor not a farmer getting 50% of income from farm or charity.

Front 55

Involuntary not allowed in

Back 55

Chapter 12 or 13.

Front 56

Rehabilitation plans eligibility

Back 56

Chap 7 peps and railroads

Front 57

Rehabilitation requirements

Back 57

chap 11 reorganization plan filed within 120 days of petition.

Front 58

Chap 11 Business Reorganization trustee

Back 58

1.Debtor acts as trustee if competent and honest

Front 59

Chap 11 Reorganization creditors

Back 59

Divided into classes of how will be paid.
1. Over secured
2. Under secured
3. Priority.
4. General Unsecured

Front 60

Chap 11Adequate Protection

Back 60

Secured creditors must receive PV of collateral or be paid in full.
Retained collateral must be insured
Installment payments must include interest

Front 61

Chap 11 Nondiscrimination

Back 61

may not treat lower priority creditor as higher priority creditor and same level must be treated the same

Front 62

Chap 11 Confirmation

Back 62

Approval by vote or cramdown by court plan.
1. may not discriminate
2. Provides adequate protection
3. is feasible

Front 63

Chapter 13 Wage earners eligibility

Back 63

1. Individuals with regular income (non-busieness)
2. Debtor must meet debt limits of 360,000 unsecured debt indexed to inflation and secured debt of 1,000,000

Front 64

For confirmation the debtor must meet 6 requirements

Back 64

1. file a plan in 15 days of filing
2. petition and no discharge in chap 13 within 2 years or another chap within 4 years
3. Pay all disposable income to trustee for 3-5 years or pay debts in full (must be in 5y if over median inc)
4. Provide adequate protection (no lien stripping on car loans purchased more than 2 and 1/2 years prior)
5. meet best interest of creditors test (unsecured receive as much as would in chap 7)
6. All priority creditors paid in full

Front 65

Chapter 13 debtor receives

Back 65

super discharge of all debts dischargeable in chap 7 including
1. Marital debts from divorce
2. Debts incurred to pay nondischargeable debts
3. Debts non-dischargeable in previous bankrupt
4. Intentional damage to property or person.

Front 66

Chapter 12 Family Farmer procedures

Back 66

Same as chap 13

Front 67

Chap 12 eligibility

Back 67

Family Farmer
1. Farm entity at least 50%
2. Income and debt @least 50%
3. debt limit of 3.8 million

Front 68

Chapter 12 filing

Back 68

90 days for filing plan

Front 69

Chapter 12 adequate protection, rules, disposable calc

Back 69

Relaxed rules
Farm expenses deducted for disposable income as with fishers under chap 12

Front 70

Interplay Voluntary conversion

Back 70

1. debtor may convert between chapters that debtor is qualified for

Front 71

Interplay involuntary conversion

Back 71

Creditor may force to most suitable for them except:
1. in chapter 12 or 13 unless substantial abuse, then maybe 13.
2. No involuntary conversion against farmers or charities.