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Chapter 35 - Bankruptcy

Chapter 35 - Bankruptcy - Chapter 35 Bankruptcy I...

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Chapter 35 – Bankruptcy I. Bankruptcy Law a. The Federal Law i. Bankruptcy Courts: 1. Court of special jurisdiction to determine bankruptcy issues b. Types of Bankruptcy Proceedings i. Liquidation or Chapter 7 Bankruptcy 1. One in which all of the debtor’s assets (with some exemptions) will be liquidated to pay debts a. Those debts that remain unpaid or are paid only partially are discharged, with some exceptions 2. Debtor who declared Chapter 7 begins again with a nearly clean slate 3. Available to individuals, partnerships, and corporations ii. Reorganization or Chapter 11 Bankruptcy 1. A way for a debtor to reorganize and continue a business with protection from overwhelming debts and without the requirement of liquidation iii. Chapter 13 Bankruptcy or Payment Plans or Consumer Debt Adjustment Plans 1. Provides consumers and individual form of reorganization a. Must owe unsecured debts of less than $336,900 and secured debts of less than $1,010,650 and have regular income II. How Bankruptcy is Declared a. Declaration of Voluntary Bankruptcy i. Begun when the debtor files a petition with the bankruptcy court 1. Debtor must file a schedule of current income and current expenditures unless the court excuses this filing ii. Means Test:
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1. Measures the debtor’s ability to pay by computing the debtor’s disposable income a. Only those debtors who fall below their state’s median disposable income will be able to continue in a Chapter 7 proceeding i. Otherwise required to do Chapter 13 2. If the agency/lawyer advises them to do something that causes the court to declare that there has been bankruptcy abuse, the lawyer/debt relief agency is responsible as well b. Declaration of Involuntary Bankruptcy i. Eligibility: 1. An involuntary bankruptcy is begun when creditors file a petition with the bankruptcy court a. May be commenced against any individual, partnership, or corporation, except those excluded from filing voluntary petitions ii. Number and Claims of Petitioning Creditors: 1. If there are 12 or more creditors, at least 3 of those creditors whose unsecured and undisputed claims total $13,475 or more must sign a petition 2. If there are fewer than 12 creditors, excluding employees or insiders, any creditor whose unsecured claim is at least $13,475 may sign the petition a. If a creditor holds security for a claim, only the amount of the claim in excess of the value of the security is counted iii. Grounds for Relief for Involuntary Case:
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Chapter 35 - Bankruptcy - Chapter 35 Bankruptcy I...

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