R6 Module 1 Flashcards
six types of bankruptcy
1) Chapter 7 liquidation
2) Chapter 9 municipal debt adjustment
3) Chapter 11 reorganization
4) Chapter 12 family farmers with regular income
5) Chapter 13 adjustment of debts of individuals with regular income
6) Chapter 15 ancillary and other cross-border cases
chapter 7 liquidation
-a trustee is appointed and required
-trustee collects debtor’s assets and sells them off to use proceeds to pay off creditors as much as possible
-if debtor is an individual or married couple, debtor’s debts are discharged with certain exceptions
-if debtor an entity, it is dissolved. No discharge is given but effect is the same-the debts are wiped out
chapter 13 adjustment of debts of individuals with regular income
-debtor repays all or portion of his debts over 3 yr period to max of five yr period
-no liquidation
-trustee oversees handling of Chapter 13 proceeding
-after proceeding, remaining debts of debtor discharged
-trustee is required
chapter 11 reorganization: no liquidation, trustee not required
-usually used by businesses but can be used by individuals
-trustee not usually appointed
-debtor remains in possession of his or her assets and a plan of reorganization is adopted
-creditors are paid to extent possible and business continues
-commencement of bankruptcy case may be voluntary or involuntary
chapter 15 ancillary and cross-border cases
-the U.S. adoption of the Model Law on Cross-Border Insolvency implemented by United Nations
-adopted to promote a uniform and coordinated legal regime for cross-border insolvency cases
dismissal or conversion of chapter 7 case
-for an individual consumer debtor may be dismissed if granting relief under Chapter 7 would constitute abuse or debtor has sufficient income to pay debts
-if individual or married couple have monthly income > state median income for family of same size, state, or interested creditor, or court file motion to dismiss case
-test is done through the means test or for general abuse because debtor has enough income to pay debts
means test
-used to determine whether creditors would be better off under Chapter 13, five yr reorganization
-60 times debtor’s average monthly income - allowable expenses is compared with high and low threshold ($9,075 and $15,150)
-if 60 times debtor’s average monthly income - allowable expenses > $15,150; presumption of abuse by debtor and covert to Chapter 13
eligible debtors for chapter 7 bankruptcy
-person who resides in U.S.
-has place of business in U.S.
-includes individuals, partnerships, corporations etc.
Entities who cannot file for Chapter 7 bankruptcy
1) Railroads
2) savings institutions
3) insurance companies
4) banks
5) small business investment companies
entities who can be debtors under chapter 11 reorganization
1) anyone under Chapter 7 EXCEPT stockbroker or commodity broker
2) railroad can be a debtor
Note: an individual eligible for relief under Chapter 11
automatic stay
-goes into effect against creditors when a bankruptcy petition is filed in either a voluntary case or involuntary case
-stay stops almost all collection efforts (filing lawsuit or demanding payment)
-does not apply to criminal prosecutions, paternity suits, and cases brought to establish or collect spousal or child support obligations
duties of debtors after petition is filed, debtor should file:
1) a list of creditors and their addresses
2) a schedule of assets and liabilities
3) a schedule of current income and expenditures
4) a statement of debtor’s financial affairs
5) copies of pay stubs received within 60 days before filing
6) copies of federal tax returns from last tax yr
Note: if debtor has not paid taxes for previous tax yr, debtor must do so before bankruptcy can proceed
if debtor fails to file any items for Chapter 7 case
if debtor fails to file any items specified above within 45 days after filing petition, the case automatically dismissed on the 46th day
chapter 7 and 11 voluntary cases
-debtor must file voluntary case by filing a petition for relief
-debtor may not be insolvent to file and meet income tests
-spouses can file jointly to avoid duplicate fees
-voluntary petition constitutes “an order for relief”, meaning a case may proceed unless a court orders otherwise
chapter 7 and 11 involuntary cases
-unsecured creditors may petition debtor involuntarily into bankruptcy proceedings
-creditors must show debtor is not paying debts as they become due
-only creditors who are owed, individually or together at least $18,600 in unsecured, undisputed debt can file petition
-number of creditors who must file depends on debtor’s total number of creditors
-if < 12 creditors, any one or more creditors owed at least $18,600 in unsecured debt may file
-if > 12 creditors or more, at least three creditors owed $18,600 in total in unsecured, undisputed debt must join in involuntary petition
-farmers and nonprofit charities cannot be petitioned involuntarily into bankruptcy