Chapter 31

Question 1

Goals of bankruptcy

Answer 1

1. To protect a debtor by giving him or her a fresh start without creditors claims
2. To ensure equitable treatment of creditors who are competing for a debtors assets

Question 2

Bankruptcy proceedings are held in

Answer 2

Federal courts

Question 3

Bankruptcy court judges are appointed for

Answer 3

14 years

Question 4

Bankruptcy code is in which code

Answer 4

Title 11

Question 5

Liquidation

Answer 5

The sale of all of the nonexempt assets of a debtor and the distribution of the proceeds to the debtors creditors

• chapter 7
• ordinary or straight bankruptcy

Question 6

Chapter 11

Answer 6

Governs regulations

Question 7

Chapter 12/13

Answer 7

Provides adjustments of debts by persons with regular incomes

Question 8

Does a debtor need to be insolvent?

Answer 8

No (except for a municipality)

Question 9

Consumer-debtor

Answer 9

An individual whose debts are primarily consumer debts (debts for purchases made primarily for personal or household use)
- clerk must give written notice

Question 10

Bankruptcy trustee

Answer 10

A person who is either appointed by the US Department of justice or by creditors in bankruptcy cases.

Question 11

Petition in bankruptcy

Answer 11

The document that is filed with a bankruptcy court to initiate bankruptcy proceedings. The official forms required for a petition in bankruptcy must be completed accurately, sworn to under oath, and signed by the debtor

• if debtor files petition: voluntary
• if 1+ creditors file to force the debtor into bankruptcy its involuntary

Question 12

Voluntary bankruptcy law

Answer 12

Before debtors can file a petition, they must receive credit counseling from an approved nonprofit agency within the 180 day period preceding the date of filing

Question 13

Voluntary petition scheduled

Answer 13

1. A list of secured/unsecured creditors, addresses, amount of debt owed to each
2. A statement of the financial affairs of the debtor
3. A list of all property owned by the debtor including property that the debtor claims is exempt
4. A list of current income and expenses
5. A certificate of credit counseling
6. Proof of payments received from employers within 60 days prior to filing
7. A statement of the amount of monthly income
8. A copy of the debtors federal income tax return for the most recent year

Question 14

Automatic dismissal of the petition

Answer 14

With the exception of tax returns, failure to file the required schedules within 45 days after filing the petition (unless an extension is granted)

Question 15

How long do they have to provide a copy of most recent tax returns

Answer 15

Up to 7 days before the date of the first creditors meeting

Question 16

US trustee

Answer 16

A gov official who performs certain administrative tasks that a bankruptcy judge would otherwise have to perform

Question 17

Tax returns during bankruptcy

Answer 17

A debtor may be required to file a tax return at the end of each tax year while the case is pending and provide a copy to the court

Question 18

How does the court determine eligibility for chapter 7

Answer 18

A means test

• to prevent rich people from taking advantage
• forces more people to file for chapter 13
• avg monthly income in recent months is compared with the median income in that area, if it’s below they can file with chapter 7
• if it’s above, further calculations have to be made to see if they will have sufficient income in the future to repay some of the debts

Question 19

Disposable income

Answer 19

Calculated by subtracting living expenses and secured debt payments from monthly income

Question 20

Other cases why a court might dismiss chapter 7

Answer 20

1. Debtor has been convinced of a violent crime or drug trafficking offense
2. If the debtor fails to pay domestic support obligations

Question 21

Order for relief

Answer 21

A courts grant of assistance to a complaint. In bankruptcy proceedings, the order relieves the debtor of the immediate obligation to pay the debts listed in the bankruptcy petition

Question 22

Involuntary bankruptcy law

Answer 22

• can’t be filed against a charity or farmer

- not to be used as everyday debt collection device

Question 23

Requirements for involuntary bankruptcy

Answer 23

1. If the debtor has 12 or more creditors, 3 or more of these creditors totaling at least 15,325 must join the petition
2. If the debtor has fewer than 12 creditors one or more creditor having claim of 15325 or more may file

Question 24

Automatic stay

Answer 24

The suspension of virtually all litigation and other action by creditors against the debtor or the debtors property; the stay is effective the moment the debtor files a petition in bankruptcy

• creditors cannot contact the debtor
• if a creditor knowingly violates the debtor can receive damages

Question 25

Adequate protection doctrine

Answer 25

A doctrine that protects secured creditors from losing their security as a result of an automatic stay on legal proceedings by creditors against the debtor once the debtor petitions for bankruptcy relief. - debtor can be required to make cash payments or to provide additional collateral

Question 26

Exceptions to automatic stay

Answer 26

1. Collection efforts can continue for domestic support obligations 2. Proceedings against the debtor related to divorce, child custody, domestic violence are not stayed 3. Investigations by a securities regulatory agency can continue 4. Certain statuatory liens for property taxes are not stayed

Question 27

If requests for relief from the automatic stay are granted

Answer 27

The stay will terminate 60 days after the request

Question 28

The automatic stay on secured property terminates

Answer 28

45 days after the creditors meeting

Question 29

If the debtor has two or more bankruptcy petitions dismissed during the prior year

Answer 29

Court assumes bad faith and automatic stay does not go into effect until good faith is proved

Question 30

Estate in bankruptcy

Answer 30

All of the debtors interests in property currently held 1. Community property (jointly owned by husband/wife) 2. Property transferred in a transaction voidable by the trustee 3. Proceeds and profits from the property of the estate

Question 31

Gifts, inheritance, settlements from divorce, life insurance proceeds the debtor receives within 180 days of filing

Answer 31

Becomes part of the estate | - other than that the debtor can keep

Question 32

Preference

Answer 32

Property transfers or payments made by the debtor that favor one creditor over others. - debtor can't have preference - if there is, the trustee can recover those payments

Question 33

Preferred creditor

Answer 33

One who has received a preferential transfer from a debtor | - can generally be held accountable for value of the property

Question 34

Insider

Answer 34

A corporate director of officer with access to confidential info and a duty not to disclose that info in violation of insider trading laws and has a close relationship with a debtor

Question 35

To be a preference the transfer must be

Answer 35

Made for something other than current consideration | - payments for services within 15 days is NOT a preference

Question 36

Fraudulent transfers

Answer 36

1. Were made within two years prior to the filing of the petition 2. Were made with actual intent to hinder, delay, or defraud a creditor

Question 37

Property exempt from bankruptcy code

Answer 37

1. Up to 22975 in equity in the debtors residence and burial plot 2. Interest in car up to 3675 3. Interest up to 550 of a household good and furnishing item 4. Interest in jewelry up to 1550 5. Interest in tools for trade up to 2300 6. Life insurance owned by debtor 7. Prescribed health aids 8. Right to receive social security 9. Right to receive personal injury awards

Question 38

Homestead exemption is only available if

Answer 38

The debtor has lived in the state for 2 years before filing the bankruptcy petition

Question 39

Creditors meeting

Answer 39

After the order of relief has been granted trustee calls a meeting. Judge does not attend. Debtor is required to attend and submit to examination.

Question 40

Things that cannot be discharged (forgiven)

Answer 40

1. Taxes 2. Fraud 3. Domestic support obligations 4. Government fines 5. Student loans (unless undue hardship) 6. A lot more

Question 41

Reaffirmation agreement

Answer 41

An agreement between a debtor and a creditor in which the debtor reaffirms or promises to pay a debt dischargable in bankruptcy. To be enforceable, the agreement must be made prior to the discharge of the debt by the court

Question 42

Reorganizations

Answer 42

Creditors and debtor formulate a plan under which the debtor pays a portion of the debts and is discharged of the remainder

Question 43

workouts

Answer 43

Private negotiated adjustments of creditor-debtor relations | - sometimes to avoid bankruptcy proceedings creditors may prefer this

Question 44

Debtor in possession (DIP)

Answer 44

In chapter 11 bankruptcy proceedings, a debtor who is allowed to continue in possession of the estate in property (the business) and to continue business operations - similar to a trustee

Question 45

Cram-down provision

Answer 45

A provision of the bankruptcy code that allows a court to confirm the debtors ch 11 reorganization plan even though only one class of creditors has accepted it. To exercise this the court must demonstrate that the plan does not discriminate unfairly against any creditors and is fair and equitable

Question 46

Chapter 12 and 13

Answer 46

12- family farmer and family fishermen debt adjustments 13- individual repayment plans

Question 47

Ch 13 repayment plan

Answer 47

1. Turning over to the trustee of future earnings of income 2. Full payment through deferred cash payments of claims entitled to priority such as taxes 3. Indentical treatment of all claims within a particular class - can be 3-5 years