Chapter 39

Chapter 39 - Chapter 39 Bankruptcy BUL 3350 Chapter 39 1...

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Unformatted text preview: Chapter 39: Bankruptcy BUL 3350 - Chapter 39 1 Topics Covered in this Chapter I. Federal Bankruptcy Law Federal A. Case Administration-Chapter 3 B. Creditors, the Debtor, and the B. C. Liquidation–Chapter 7 C. D. Reorganization–Chapter 11 E. Adjustment of Debts of Individuals-Ch. 13 II. Creditors' Rights & Debtors’ Relief II. Creditors' Outside of Bankruptcy Outside A. Creditors' Rights B. Debtor's Relief BUL 3350 - Chapter 39 2 Case Administration– Ch. 3 Commencement of the Case - the filing Commencement of a voluntary or involuntary petition begins jurisdiction of the bankruptcy court. court. • Voluntary Petitions - available to any Voluntary debtor even if solvent. debtor • Involuntary Petitions - may be filed only Involuntary under Chapter 7 or 11 if the debtor is generally not paying his debts as they become due. become BUL 3350 - Chapter 39 3 Case Administration Dismissal - the court may dismiss a case for Dismissal cause after notice and a hearing; under Chapters 12 and 13 the debtor has an absolute right to have his case dismissed. right Automatic Stay - prevents attempts by Automatic creditors to recover claims against the debtor. creditors Trustee - responsible for collecting, liquidating, Trustee and distributing the debtor's estate. and Meeting of Creditors - debtor must appear Meeting and submit to an examination of her financial situation. situation. BUL 3350 - Chapter 39 4 Creditors, the Debtor, and the Estate—Ch. 5 Creditor - any entity that has a claim against Creditor the debtor. the Claim - a right to payment. Claim right • Secured Claim - claim with a lien on property of the Secured debtor. debtor. • Unsecured Claim - portion of a claim that exceeds Unsecured the value of any property securing that claim. the Priority of Claims - the right of certain claims Priority to be paid before claims of lesser rank. to BUL 3350 - Chapter 39 5 Debtors Debtor's Duties - the debtor must file Debtor's specified information, cooperate with the trustee, and surrender all property of the estate. estate. Debtor's Exemptions - determined by Debtor's State or Federal law, depending upon the State. the Discharge - relief from liability for all Discharge debts except those the Bankruptcy Code specifies as not dischargeable. specifies BUL 3350 - Chapter 39 6 BUL 3350 - Chapter 39 7 The Estate All legal and equitable interests of the All debtor in nonexempt property. debtor BUL 3350 - Chapter 39 8 Trustee as Lien Creditor Trustee gains the rights and powers of Trustee creditor with judicial lien (an interest in property, obtained by court action, to secure payment of a debt). secure BUL 3350 - Chapter 39 9 Voidable Preferences Bankruptcy Code invalidates certain Bankruptcy preferential transfers made before the date of bankruptcy from the debtor to favored creditors. favored BUL 3350 - Chapter 39 10 BUL 3350 - Chapter 39 11 Fraudulent Transfers Trustee may avoid fraudulent transfers Trustee made on or within TWO years before the date of bankruptcy. date BUL 3350 - Chapter 39 12 Statutory Liens Trustee may avoid statutory liens which Trustee first become effective on insolvency, are not perfected at commencement of case, or are for rent. or BUL 3350 - Chapter 39 13 Liquidation Chapter 7 Proceedings • Proceedings under Chapter 7 apply to all debtors except railroads, insurance companies, banks, savings and loan associations, homestead associations, and credit unions. Begins with an interim trustee, who can become permanent trustee if the creditors do not select someone else. Trustee collects and sells property, investigates the debtor’s financial affairs, examines claims, decides whether to oppose a discharge of debts and makes reports. A committee of 311 unsecured creditors makes recommendations to the trustee. The debtor may convert a case under Chapter 7 to Chapter 11 or 13; however any waiver of this right is unenforceable. Moreover, on request of a party in interest and after notice and a hearing, the court may convert a case under Chapter 7 to Chapter 11. The court may also convert a case under Chapter 7 to Chapter 13, but this can occur only upon the debtor’s request. Any conversion to another chapter can only occur if the debtor may also be a debtor under that chapter. Section 706. The court may dismiss a Chapter 7 case for cause after notice and a hearing. In a case filed by an individual debtor whose debts are primarily consumer debts, the court may dismiss a case or, with the debtor’s consent, convert the case to one under Chapter 11 or 13, if the court finds that granting relief would be an abuse of the provisions of Chapter 7. BUL 3350 - Chapter 39 14 Conversion • Dismissal • Chapter 7 Liquidation Distribution of the Estate - in this order: Distribution (1)-secured creditors, (2)-creditors entitled to a priority, (3)-unsecured creditors, and (4)-the debtor. creditors, Discharge - granted by the court unless Discharge the debtor has committed an offense under the Bankruptcy Code or has received a discharge within six years. received BUL 3350 - Chapter 39 15 Reorganization—Chapter 11 Reorganization—Chapter Purpose - to preserve a distressed entity Purpose and its value as a going concern. and Proceedings - debtor usually remains in Proceedings possession of the property of the estate. possession BUL 3350 - Chapter 39 16 Plan Acceptance of Plan -requires a requires specified proportion of creditors to approve the plan. approve Confirmation of Plan - requires (1)Confirmation requires good faith, (2)-feasibility, (3)-cash good payments to some creditors, and usually (4)-acceptance by creditors. (4)-acceptance Effect of Confirmation - binds debtor Effect and creditors and discharges the debtor. and BUL 3350 - Chapter 39 17 Adjustment of Debts of Individuals—Ch. 13 Purpose - to permit an individual debtor to file a repayment plan to discharge most debts. repayment Confirmation of Plan - requires (1) good faith, Confirmation (2) that the value of property distributed to creditors be not less than the amount that would be paid them under Chapter 7, (3) that secured creditors accept the plan, and (4) that the debtor be able to make all payments and comply with the plan. comply Discharge - after a debtor completes all Discharge payments under the plan. payments BUL 3350 - Chapter 39 18 Comparison of Bankruptcy Comparison Proceedings Proceedings Chapter 7 Objective Liquidation Eligible Debtors Most debtors Chapter 11 Reorganization Most debtors, including railroads Chapter 12 Adjustment Chapter 13 Adjustment Family farmer Individual with who meets certain regular income debt limitations who meets certain debt limitations Voluntary Voluntary Appointed Type of Petition Trustee Voluntary or involuntary Usually selected by creditors; otherwise appointed Voluntary or involuntary Only if court orders Appointed appointment for cause; creditors then may select trustee BUL 3350 - Chapter 39 19 Collection and Distribution of the Collection Debtor’s Estate Debtor’s All of debtor’s nonexempt property Property subject to trustee’s right as a lien creditor Voidable preferences Fraudulent transfers Statutory liens BUL 3350 - Chapter 39 Secured creditors Creditors with priority Debtor’s Estate Administered by Trustee Unsecured creditors who file claims on time Unsecured creditors who file claims tardily Debtor receives remaining assets 20 Creditors' Rights Outside of Bankruptcy Prejudgment Remedies - include attachment and garnishment. attachment Postjudgment Remedies - include writ Postjudgment of execution and garnishment. of BUL 3350 - Chapter 39 21 Debtor's Relief Outside of Bankruptcy Compositions - agreement between debtor and two or more of her creditors that each will take a portion of his claim as full payment. as Assignment for Benefit of Creditors Assignment -voluntary transfer by the debtor of some voluntary or all of his property to a trustee, who applies the property to the payment of all the debtor's debts. the BUL 3350 - Chapter 39 22 Debtor's Relief Outside of Bankruptcy Statutory Assignment - provides a Statutory voluntary release of balance of claims from creditors who accept partial payments made by the trustee for the debtor. debtor. Equity Receivership - receiver is a Equity disinterested person appointed by the court to collect and preserve the debtor's assets and income and to dispose of them at the direction of the court. them BUL 3350 - Chapter 39 23 ...
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