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レグ 1 Ethics and Business Law > II-3 Debtor-Creditor Relationships 2 > Flashcards

II-3 Debtor-Creditor Relationships 2 Flashcards

1
Q

Creditors’ remedy before bankruptcy: What is composition?

A

Discharge debts if debtor preforms as to all creditors who agreed - binding contract.

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2
Q

Creditors’ remedy before bankruptcy:What is assignment?

A

Debtor steps up and offer to assign any pmt to creditors directly - no binding contract. Creditors can petition debtor into bankruptcy.

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3
Q

What is the last remedy for creditors before bankruptcy besides composition and assignment?

A

Judgment / Judgment lien.

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4
Q

When judgment/judgment lien is selected, what can creditors take. Exceptions?

A

Attachment and garnishment (wage).

  • Social security is exempt.
  • can’t garnish more than 25% of take-home-pay.
  • can’t be fired because of the garnishment order against them.
  • Homestead exemption - Protection for equity in home but still subject to mortgage and IRS.
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5
Q

What is Chapter 7 bankruptcy? Voluntary or involuntary? Exception? Who is eligible? Who is not eligible?

A

Liquidation.
Can be either.
No involuntary for farmers and nonprofits.

E: Individuals, partnerships, corporations.
Not: S and Ls (savings and loans), credit unions, SBA(small business administrations), RRs (rail roads), municipalities, insurers.

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6
Q

What is a characteristic of Chapter 7?

A

Trustee.

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7
Q

What is Chapter 11 bankruptcy? Voluntary or involuntary? Exception? Who is eligible? Who is not eligible?

A

Reorganization.
Can be either.
No involuntary for farmers and nonprofits.

E: Individuals, partnerships, corporations.
Not: S and Ls (savings and loans), credit unions, SBA(small business administrations), municipalities, insurers, stockbrokers.

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8
Q

What is 3 characteristics of Chapter 11?

A

Automatic stay (EVERYHTING stops) - no one can sue etc.
Trustee not required.
Approval of reorganization plan: 1/2 creditors with 2/3 claims.

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9
Q

What is Chapter 12? Voluntary or involuntary? 2 characteristics?

A
  • Family farmer chapter.
  • Only voluntary petitions.
  • 50/50 requirement: 50% of income from farm and 50% of debts due to farm.
  • Total maximum debt: $4,031,575.
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10
Q

What is Chapter 13? Voluntary or involuntary? Eligibility? Characteristic?

A

Consumer Debt Adjustment Plan.
Voluntary.

E: Only for individuals.
Income

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11
Q

What are requirements for voluntary petition? Result?

A

Petitioner has debts.

Automatic relief.

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12
Q

What are requirements for involuntary petition? Result?

A

Liability for wrongful filing if any.
<12 creditors = 1 creditor must be owed unsecured $15,775.
>12 creditors = 3 creditors together are owed unsecured $15,775

Entry of stay (for debtor to dispute).

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13
Q

What are damages for wrongful involuntary filing?

A

Court costs, attorney fees, compensatory damages, punitive damages.

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14
Q

Chapter 13: what is the process? When would court discharge after the plan is place?

A

Hearing for approval of plan.

After 3 or 5 year period, if debt plan met, discharge is granted with exceptions.

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15
Q

What chapter is required before going in for Chapter 7?

A

Chapter 13 is requirement for Chapter 7.

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16
Q

What is test for dismissal?

A

The court uses Means Test to determine whether bankruptcy can proceed or whether the debtor is using it for substantial abuse.

17
Q

How is Means Test calculated?

A

Calculate debtor’s monthly income averaged over the last 6 months less allowed expenses.

Monthly income x 12: if this exceeds state’s median income by more than $6,325, then substantial abuse is presumed.

18
Q

What can debtor do if the court presumes abuse?

A

He can rebut by showing “special circumstances” or adjustments” with no alternatives.

19
Q

What are duties of debtor?

A

File (under oath):

  1. Schedule of all assets.
  2. List of all creditors.
  3. Schedule of current income and expenses.
  4. Certificate from approved credit counseling agency
  5. Copy of most recent federal income tax return.
20
Q

What happens after the debtor file all the requirements? Any exceptions?

A

Everything stops: Lien, enforcement actions, judgment.

Yes, trustee can’t avoid certain liens.

21
Q

How is the trustee appointed?

A

Appointed by government.

22
Q

What are trustee’s duties?

A
  1. Collect debtor’s assets.
  2. Investigate debtors financial affairs.
  3. Furnish reports to interested parties.
  4. Review debtor’s materials.
  5. Be the representative for the debtor’s estate.
23
Q

Is intangible property included in debtor’s estate?

A

Yes.

24
Q

Are all tangible and intangible property at the date of bankruptcy only ones that go into the debtor’s estate? Examples?

A

No, all property acquired within 180 days following bankruptcy will go in.
Property by inheritance or gift, property by divorce, separation, property settlement, beneficiary proceeds from a life ins.

25
Q

What are exceptions to the debtor’s estate?

A

Child support, social security pmts, wages.

26
Q

How is it decided to take either state law or federal law for exemptions? What are their characteristics?

A

Debtor’s choice.
State: can limit choice to state.
Federal: control on homestead exemptions.

27
Q

What is homestead exemption?

A

If homestead is acquired within 3.5 yrs of bankruptcy filing, homestead equity exempted is limited to $160,475.
Also, must have lived in the state for 2 years.

28
Q

What are federal exemptions and dollar amount?

A
  • Motor vehicle: $3,775.
  • Household furnishing: $12,625.
  • Other property (wildcard): $1,250 and up to $11,850 of unused homestead exemption.
  • Tools for profession: $2,375.
  • Life insurance: $12,625.
  • Jewelry: $1,600.
  • IRA and ROTHs: $1,283,025.
  • Personal injury claim up to $23,675.
29
Q

What are total exemptions?

A
  • Personal and retirement savings
  • Wrongful death recovery for person upon whom you were dependent.
  • Alimony and child support
  • Disability and unemployment income.
30
Q

What kind of transfer of assets can trustee set aside for debtor’s estate? What are they called? What kind is ok?

A
  • Fraudulently transferred assets to hide assets.
  • Unfair transfer within 1 year presumed insolvent (Liabilities > Assets)
  • Transfer to insiders within 1 year
  • Transfer that is not ordinary course of business within 90 days.

Voidable preferential transfers.

Security for antecedent debt is ok.
Consumer debt up to $6,425 ok.
Pmt for perfected secured party - their rights do not change.

31
Q

What are distribution priorities?

A
  1. Secured creditors (to the extend of repossession - if a creditor has $10,000 owed and repossessed land is $5,000 value, his remaining $5,000 will be unsecured claim).
  2. Claims for child support and alimony.
  3. Administration costs (attorneys, accountants, trustees, appraisers).
  4. Claims arising in ordinary course of business after bankruptcy petition is filed but before order of relief (involuntary) - company is till fighting, but business still goes on.
  5. Employee wages (not officers): $12,475 maximum per employee. 6 months preceding petition (180 days).
  6. Contribution to Benefits Plans - $12,475 maximum (reduced by wages received) 180 days preceding bankruptcy.
  7. Claims on raising or storage of grain $6,325.
  8. Consumer deposit: $2,850 maximum.
  9. Taxes (federal, state, local) - won’t get discharged.
  10. Unsecured creditors (pro rata - those filed first before those not filed).
32
Q

What are non dischargeable debts?

A
  1. Taxes within 3 yrs of filing bankruptcy petition.
  2. Liability for obtaining money or property by false pretenses.
  3. Willful and malicious injuries.
  4. Debts incurred by driving DWI
  5. Alimony, maintenance or child support.
  6. Unscheduled debts (didn’t disclose).
  7. Debts resulting from fraud as a fiduciary (embezzlement).
  8. Government fines or penalties imposed within 3 yrs prior.
  9. Educational loans due within 5 prior yrs (unless hardship).
  10. Prior bankruptcy debts in which debtor waived discharge.
  11. Mortgage issues.
  12. Sarbanes-Oxley - bonuses, fraud.
  13. Consumer debt incurred within 90 days of filing: $650 permitted (luxury goods), cash withdrawals on credit cards within 70 days ($950).
  14. Reaffirmation agreements if its’ (1) in writing, (2) filed with court, (3) not rescinded prior to discharge.
  15. Home owner association fees.
33
Q

Is general discharge under Chapter 7 applicable to individuals, partnership, and corporations?

A

No, just individuals.

34
Q

How frequently can debtor obtain Chapter 7?

A

Eight years.

レグ 1 Ethics and Business Law (11 decks)

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