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Flashcards in Bankruptcy Deck (18):
1

Chapter 7 bankruptcy

debtor liquidates assets, except exempt assets, to pay creditors

Debtor must show they have debts and have income below the state's median income

Not available to corporations or partnereships

2

Chapter 11 bankruptcy

debtor reorganizes debts to pay creditors - primarily used by businesses

3

Chapter 13 bankruptcy

debtor reorganizes debts to pay creditors - primarily used by individuals

debtor must show they have regular income

4

Creditors committee

group of unsecured creditors who essentially function as the bankruptcy trustee in Chapter 11 cases

5

Discharge

after debtor completes bankruptcy, debtor is relieved of all previous debt except debts that are nondischargeable.

6

Estate

debtor's assets that are used to pay the creditors

7

Insider

party who has a close relationship with the debtor (insider transactions for 1 year prior to petition are examined by bankruptcy trustee

8

Involuntary petition

debtor is sued by creditors and forced in bankruptcy. measures insovlency in the equitiy sense (vs bankruptcy sense) where debtor is not paying debts as they become due.

-if less than 12 creditors, any creditor(s) owed more than $15,325 (in aggregate) may file

-if 12 or more creditors, at least 3 creditors (with over $15,325 owed in aggreate) must sign petition

damages (including punitive) may be assesed to creditors filing in bad faith (frivolous petitions)

9

Liquidation

process of turning assets into cash to pay creditors

10

Order for relief

granted to debtor upon filing bankruptcy petition - allows debtor to stop paying creditors until the bankruptcy can be finalized

11

Preferential transfer

when the debtor provides payment or security to a creditor, which would allow creditor to collect more than they would have under Chapter 7 bankruptcy (trustee may set aside if transfer took place 90 days prior to the petition)

12

Reaffirmation

when a debtor voluntarily chooses to repay a debt that otherwise would be fully discharged under the Bankruptcy Code

13

Reorganization (rehabilitation)

debtor retains assets (vs liquidating) and agrees to pay creditors out of future earnings under Chapters 11 or 13 of the Bankruptcy Code

14

Set aside

trustee may set aside transfers made within one year prior to filing bankruptcy petition if

(1) transfer was made with intent to hinder, delay, or defraud any creditor (debtor need not be insolvent at time of transfer)

(2) debtor reeived less than reasonably equivalent value in exchange for transfer and the debtor was inslovent at the time, or became insovlent as a result

(3) preferential transfer was made to an insider

trustee may set aside preferential transfers to non-insiders of nonexempt property made within ninety days prior to filing bankruptcy

trustee returns consideration and reclaims an asset improperly taken from the estate, returning the parties back to their original position before the transfer

transfers cannot be set aside if (1) debtor received new value (2) transfer made in ordinary course of business (3) secured interest given to aquire property if perfected w/in 10 days (4) consumer debts less than $650 (5) business debts less than $6,225

15

Stay

court order that prevents further collection actions by creditors. issued upon the filing of the bankruptcy petition (does not apply to family law issues)

16

Trustee

bankruptcy trustee presides over the bankruptcy estate and organizes the estate for the court. trustee determines what the assets and liabilities of the estate are.

17

Voluntary petition

when a debtor chooses to file bankruptcy (as opposed to being forced by creditors)

18

Claim Priority

(1) Secured Debt: to the extent the asset pays off the debt

(2) Domestic Support

(3) Administration Costs

(4) Claims arrising from ordinary business

(5) Wages, salaries etc

(6) contributions to employee benefit plans

(7) Claims of storage of grain or fish

(8) Consumer deposits for undelivered goods

(9) Taxes

(10) obligations to an insured bank

(11) Debts arising from auto accidents

(12) General