Bankruptcy Flashcards
When is credit counseling required?
An individual must have a briefing within 180 days of filing for bankruptcy with an approved nonprofit budget and credit counseling agency. This can be over the phone or internet.
What is a debt relief agency?
any person who provides bankruptcy assistance in return for payment. They must comply with certain restrictions and disclosures, and since 2005 this includes attorneys.
What are an attoney’s obligations regarding a Chapter 7 filing?
The attorney certifies that he has performed a reasonable investigation into the bankruptcy and the petition is well grounded in fact and law and is not an abuse.
Under Bankruptcy law, what is a reorganization?
When the company keeps his assets/business, and renegotiates/organaizes his debt
What is a liquidation?
When a bankrupt entity does not keep his assets
Describe a Chapter 13 bankruptcy
Available to an individual to pay off creditors over time, usually in 3–5 years. It allows the debtor to retain assets that otherwise might be sold in a Chapter 7. The debts may be extended and reduced. The proposed plan is reviewed under the best interest of the creditors test, meaning that each creditor must receive in present value terms at least as much as he would under Chapter 7.
What are the limitations of Chapter 13?
IT is only available to individualsThe debtor must have unsecured debt less than 383k and secured debt less than 1.149 MM. Exceeding these limits makes the debtor have to seek Chapter 11.
Describe Chapter 11
It is used by businesses to extend, reduce, or modify the debtor’s obligations, and is allowed for businesses or individuals. It also has the Best interest of the creditors test, meaning each creditor must receive at least as much as he would under Chapter 7. It has an approval process by the creditors involving negotiations between the creditors and debtors. Then a judge confirms the plain. Generally the debtor continues to operate the business during Chapter 11 as a “debtor in possession” without having a trustee appointed, unlike Chapters 7 and 13, where a trustee is appointed.
Describe Chapter 7
The debtor’s non-exempt assets are liquidated and the debtor’s debts are discharged.
How can a Chapter 7 petition be dismissed?
For abuse, when the debtor filed in bad faith under the totality of the circumstances, ORMeans test: compares the debtor’s income in the 6 months before the bankruptcy, and if it is more than the state median then if the debtor can pay between 7,475$ and 12,475$ over five years to their creditors, then the debtors should file Chapter 13.
Which Chapters are vailable for individuals, and which for entities?
Chapter 7 for individuals and entities, Chapter 13 for individuals onlyChapter 11 for individuals and entities
Which Chapter(s) allow involuntary bankruptcy?
Chapters 7 and 11
What is involuntary bankruptcy?
When hte creditors file a petition to obtain rights only available in bankruptcy (thereby “ending the race”)
Who can file an involuntary bankruptcy?
If there are 12 or more unsecured or undersecured creditors, then at least 3 with an aggregate debt of 15,325$ must file. IF there are less than 12 creditors, then only 1 creditor with that much needs to file. Employees, insiders, and creditors who have received voidable transfers aren’t counted in the 12. The debtor must be eligible for Chapter 7 or 11 and not a farmer or nonprofit.
What are adequate grounds for filing an involuntary bankruptcy?
The debtor is generally not paying debts as they come due, not including debts in bona fide disputes, ORIf a custodian is appointed to take possession or control over substantially all the debtor’s property
What is an undersecured creditor?
When the debt is greater than the value of the collateral. The debtor only has a bankruptcy claim up to the value of the collateral.
What is required in a bankruptcy petition?
A list of creditorsA list of assets and liabilitiesA schedule of income and expenditures. And 6 other things. If the Debtor doesn’t give this within 45 days, hte case may be dismissed.
What is the automatic stay?
IMMEDIATELY upon the filing of a bankruptcy petition, the automatic stay prevents ALL collection activities. Willfull violations of the stay may result in damages, attorney’s fees, and even punitive damages. An unknowing violation will probably just be told to cease. It lasts for the duration of the bankrutcy
What are common exceptions to the automatic stay?
Prosecution of criminal actionestablishing or modifying domestic support obligationsenforcing government, police, or regulatory powersCivil actions for paternity, child custody/visitation, divorce, or domestic violenceTax assessments or auditsMaintaining security interests in property2 others
How can a creditor get the stay removed?
1). Adequate protection, meaning the secured creditor is entitled to protection against a decline in the value of the collateral. Adequate protection can be from a lien, cash, or insurance.2). Lack of equity when the debtor had not equity in the property (value of the collateral exceeds the amount of the debt.)3). A scheme to defraud creditors when there are multiple bankruptcy filings affecting the property or a transfer of all or part of the property without the court’s/creditor’s consent
When is the stay automatically terminated?
If the debtor files a bankruptcy within one year after having another bankruptcy dismissed unless a court says this filing was in good faith (2005 change)
What property is included in the bankruptcy estate?
all property acquired before the bankruptcy including exempt property. In Chapter 7, all post-petition property remains the debtor’s except inherited property, life insurance, and property received in divorce.
What choices of exemptions do debtors have?
The Bankruptcy code allows debtors to choose state or federal exemptions, but a state may only allow its citizens to choose state. Texas doesn’t do this, so we get to choose.
Describe some Texas exemptions?
Up to 60,000$ of personal property if the debtor has a family, or 30,000$ if single. Secured creditors can still obtain property with a security interest on it. We also keep wages earned after bankruptcy, proscribed health aids, alimony, payments from insurance contracts. And the Homestead (but still subject to the security interest. SINCE 2005, the debtor must be a resident of a state for 2 years to claim its exemptions, otherwise, it gets the residence from 2–2.5 years.