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BUL3350-Ch 39 outline

BUL3350-Ch 39 outline - Chapter 39 Bankruptcy-For...

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Chapter 39: Bankruptcy -For businesses as well as individuals, relief from overly burdensome debt and from the threat of impending lawsuits by creditors is frequently necessary for economic survival. *The most adaptable and frequently employed method of debtor relief-- one that also affords protection to creditors -- is a proceeding in a Federal court under Federal bankruptcy law. FEDERAL BANKRUPTCY LAW U.S. bankruptcy law serves a dual purpose: 1) To effect a quick, equitable distribution of the debtor’s property among creditors 2) To discharge the debtor from the debts, enabling the debtor to rehabilitate itself and start afresh. Bankruptcy Code consists of Chapters 1, 3, 5, 7, 9, 11, 12 and 13. Straight, or ordinary bankruptcy (Chapter 7) provides for the liquidation of the debtor’s property. The others provide for the reorganization and adjustment of the debtor’s debts. o Chapter 7- applies to all debtors with exception of railroads, insurance companies, banks, saving and loan associations, licensed small business investment companies and credit unions. o Chapter 11- applies to railroads and any person who may be a debtor under Chapter 7. o Chapter 9- applies only to municipalities that are generally authorized to be debtors under that chapter, but are insolvent. o Chapter 12- applies to individuals (and spouses) who are engaged in farming. o Chapter 12- individuals who owe unsecured debts > $336,900 and secured debts > $1,010,650. o Chapter 15- covers transnational insolvencies. Case Administration- Chapter 3 Commencement of the Case The filing of a voluntary or involuntary petition commences a bankruptcy case. Voluntary Petitions: more than 99% are filed voluntary. Any person is eligible. By filing a petition constitutes and automatic order for relief. The petition must include a list of all creditors (secured and unsecured), a list of all property the debtor owns, list of property that the debtor claims to be exempt, and a statement of the debtor’s affairs. 2005 Act added requirement that all debtors receive credit counseling within the 180-day period before filing the petition.
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o Does not apply to 1) debtor who is exempted by the court, 2) resides in a district for which the US deems not reasonably able to provide adequate services to the additional individuals who would seek credit counseling. Involuntary Petitions: may only be filed under Chapter 7 or 11. May be filed by 1) by three or more creditors who have undisputed unsecured claims that total $13,475 or more. 2) if the debtor has fewer than 12 creditors, which one creditor totaling $13,475 or more. Does NOT operate as an order for relief. Debtor has the right to answer. If debtor does not timely contest, the court will enter an order for relief against the debtor. If the debtor timely opposes the petition, the court ma enter an order of relief ONLY 1) if the debtor is generally not paying his undisputed debts as they become due, or 2) if, within 120 days before the filing of the petition, a custodian assignee or general receiver was appointed or took possession of substantially all of the debtor’s property.
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BUL3350-Ch 39 outline - Chapter 39 Bankruptcy-For...

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