Bankruptcy 2 Flashcards
Six basic types of bankruptcy cases exist under federal law:
- Chapter 7 Liquidation
- Chapter 9 Municipal Debt Adjustment
- Chapter 11 Reorganization
- Chapter 12 Family Farmers with Regular Income
- Chapter 13 Adjustments of Debts of Individuals with Regular Income
- Chapter 15 Ancillary and Other Cross-Border Cases
Chapter 7
For Liquidation.
Trustee is appointed and if the debtor is a business, it ceases to operate.
a. Married couples may file jointly.
b. Individual consumer debtor must pass means or abuse test; if debtor’s income is too high, case will be converted to a Chapter 13.
Chapter 13
For Debt Adjustment.
A trustee is appointed and debtor or creditors come up with a 3 - 5 year repayment plan.
Chapter 11
For Reorganization.
Trustee is not required. Debtor remains in possession of his assets and a plan of reorganization is adopted. Business continues; assets are not liquidated. Creditors are paid to the extent possible.
Chapter 15
For Cross-Border Case.
Commenced by a “foreign representative” filing a petition for recognition
Chapter 7
Chapter 7 case by an individual consumer debtor may be dismissed (or with the debtor’s consent converted to a case under Chapter 13) upon finding that granting relief under Chapter 7 would constitute abuse as determined by a specific means test or by a more general abuse test.
Common Features of Chapters 7 and 11
- Automatic Stay
- Duties of Debtor
- Section 341 Meeting—Gives creditors an opportunity to examine debtor. All interested parties, including creditors, the bankruptcy trustee and the debtor must be given notice of the meeting.
- Property of the Bankruptcy Estate
- Excluded Property
- Exempt Property
- Preferential Payment
- Fraudulent Transfers
Features of Chapter 7 Liquidation
- Gives an honest debtor a “fresh start.”
- Objections to Discharge
- Exceptions to Discharge
- Reaffirmation of Discharged Debts
- Revocation of Discharge
- Distribution of debtor’s estate. Three basic categories:
a. Secured claimants
b. Priority claimants
c. General creditors - Priority claimants: SAG-WEG-CTI
Chapter 7: SAG-WEG-CTI
a. S upport obligations to spouse and children
b. A dministrative expenses
c. I nvoluntary case gap claims
d. W age claims of each employee up to $12,475 earned within 180 days prior to bankruptcy
e. E mployee benefit plans contributions for each employee arising within 180 days prior to bankruptcy, up to $12,475 reduced by wage claims
f. G rain farmers’ and fishermen’s claims against storage/processing facilities up to $6,150
g. C onsumer deposits up to $2,775
h. T ax claims
i. P ersonal injury claims arising from intoxicated drivers
Features of Chapter 11 Reorganization
- Create a creditor’s committee or a stockholder’s committee.
- Trustee generally is not appointed but can be appointed when there is fraud, dishonesty, incompetence, or gross mismanagement by the debtor. 3. Reorganization Plan—Unless a trustee is appointed, the debtor has an exclusive right to file a plan during the first 120 days after the order for relief is effective. Creditors may file a plan if a trustee has been appointed; the debtor has not filed a plan within 120 days; or the debtor has filed a plan but has not obtained acceptance of the plan by every impaired class within 180 days of the entry of the order of relief
Features of Chapter 15 Cross-Border Case
- U.S. court can recognize as a “foreign main proceeding” (i.e., a country where the debtor’s main interests are located) or a “foreign non-main proceeding” (i.e., a country other than one where the debtor’s main interests are located).
- Automatic stay takes effect upon recognition of a foreign main proceeding.
- Chapter 15 prohibits discrimination against foreign creditors and requires cooperation with foreign courts and representative
