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Bankruptcy Principles

updated: 5-19-09 (1-26 below)

1. A debtor, an attorney on behalf of the debtor, and a bankruptcy petition preparer may all prepare Chp. 7 petitions and schedules.

 

2.  Obligations for the Bankruptcy Petition Preparer are set for in the United States Bankruptcy code.

 

3. An individual with secured debts of less than $1,010,650 and unsecured debts of less than $336,900 is eligible for a Chapter 13 Bankruptcy.

To file Chapter 13, you must be 

• an individual (no corporations or partnerships); 
• have a regular income greater than your reasonable  living expenses; and
• have liquidated, unsecured debts not exceeding $336,900  and secured debts not exceeding $1,010,650

 

4. A Husband and Wife may file a joint case under 7,11,13 if otherwise appropriate.

 

5. A Debt Relief Agency is any person who provides bankruptcy assistance to an assisted person" - see bankruptcy code.

 

6. In a Chapter 7 Bankruptcy the trusteee is always appointed.

 

7. In a Chapter 7 a debtor's non-exempt assets may be liquidated by the trustee to pay off debts.

 

8. An Adversary Proceeding is governed by Part VII of the Federal Rules of Bankruptcy Procedure.

 

9. An Adversary Proceeding is commenced by filing a Complaint (not a petition or a motion.

 

10. The form B22 Means Test only applies to individuals who have primarily consumber debts.

 

11. An Automatic Stay under USC Section 362 precludes all creditors from proceeding again the debtor, except those permitted under Section 362(b).

 

12. The automatic stay does not prevent the commencement or a continuation of a criminal action>

13. The automatic stay prevents a creditor from collecting a pre-petition debt.

15. The automatic stay terminates after 30 days of a 2nd bankruptcy filing if a prior bankruptcy filing was dismissed within the prior year.

 

16. An executory contract is one in which neither side has fully performed, such that the failure to perform a material term by one of the parties would result in a breach of that agreement.

 

17. a 341 A First meeting of creditors is always held after the filing of the bankruptcy, must be attended by the debtor, and allows the debtor to be examined by the trustee and the creditors.

 

18. A proof of claim is a document filed by a creditor of the amount claimed by the creditor.

 

18. A claim for wages incurred within 180 days prior to the filing of the petition up to $10,000 is entitled to priority. (see curent Schedule E Form - $10,950)

 

19. A bankruptcy exemption  is based on the law of the state of the debtor's residence for the prior 730 days, and allows certain assets to remain free of the claims of the Trustee and creditors.

 

20. Exemptions for bankruptcies filed in California are only allowed under California Law ( CCP 703 - and 704)

21. Exemtpions allowable are a homestead exemption of $75,000 (CCP 704) and 100 % of employer provided retirement plans - what about $5000 for household furnishings?

 

22. A secured creditor is secured up to the extent of the value of the property securing the claim.

23. The purpose of a discharge in bankruptcy is to give the honest, but unfortunate debtor a fresh start.

24. A dischargeable debt in Chapter 7 does not include alimony, maintenace, or support or a debt for fraud.

 

25. To be eligible for a discharge you must have completed a credit counseling course, you must have completed an instructional course about personal financial management, and you must have completed your bankruptcy schedules truthfully.

 

26. Once a Chp. 11 is filed a debtor can continue to manage the business as a "Debtor in Possession" unless the business is grossly mismanaged.

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1. individuals, partnerships and corporations may be debtors in a bankruptcy, however railroads, insurance companies, banks, savings and loan associations, investment companies licensed by the Small Business Administration, and credit unions cannot be debtors in a liquidation or chp. 7 bankruptcy

 

2. the order for relief starts upon the filing of the pettion

 

3. If the debtor cannot provide its creditors with adequate protection during the automatic stay. The bankruptcy court is most likely to remove the stay and permit the affected assets to be repossessed.

 

4. If debtor is forced into an involuntary bankruptcy proceeding by several creditors who wish to have the debtor pay off its debts more quickly, even though it has not defaulted on any of its financial obligations, and if the bankruptcy court rules that the creditors acted in bad faith, then it can award to debtor, the costs and attorneys' fees incurred by debtor in defending against the involuntary petition, damages for injury for injury to debtor's reputation, and punitive damages.

 

5. Proof of Claim must be filed within 90 days of the creditors meeting - i.e 341 A meeting - Day #20-#40 - A Meeting of Creditors is held at the Court ("The 341 meeting").

 

6. The Trustee's responsibility is to collect the debtor's property. The order of priority for payment of unsecured debtors is not established by the Trustee but by law.

 

7. Transfers of property and making payments that favor one creditor over another are "preferences".

 

8. If a debtor receives an inheritance within 180 day of the filing of the bankruptcy, the property becomes part of the bankruptcy estate.

 

9.  If a creditor takes a security interest in equipment prior to debtor filing a bankruptcy, and if the creditor fails to perfect the security interest before the filing of the bankruptcy, the trustee may invalidate the security interest.

 

10. If a creditor takes a security interest in equipment prior to debtor filing a bankruptcy, and if the creditor perfects the security interest before the filing of the bankruptcy, the trustee may not invalidate the security interest.

 

11. If a company owes current wages, receives a deposit for services, and pays a supplier half of its past due bill, and then files bankruptcy, the trustee can recover the payment to the supplier as a voidable preference.

 

12. Order of priority in paying unsecured debts is

a. administrative debts

b. wages and salaries

c. employee benefit plans

d. consumer deposits

e. taxes and fines

f. general creditors

see Order of priority - order-priority - http://lawdog.com/bkrcy/bkcp7g.htm

 

13. A bankruptcy stops actions and void judgments regarding overdue debts.

 

14. If a debtor agrees to pay a debt, which is otherwise dischargeable in bankruptcy, this is a reaffirmation.

 

15. A chapter 11 bankruptcy may be filed by an individual, a partnership or a corporation.

 

16. If the creditors of a corporation agree to workout its debts with the corporation, this is called a privately negotiated adjustment of creditor-debtor relations.

17. If a debtor corporation files for a bankruptcy under Chapter 11 and assumes the role of a debtor in possession, this is similar to a trustee in a liquidation.

18. A chapter 13 plan does not require the completion of payment of all creditors, nor the turnover of future income, nor the payment of 100 percent of all obligations in full. It does require the surrender of all collateral to the creditors.

 

19. A chapter 13 bankruptcy can only be filed by a debtor and not by a creditor. 

20. A chapter 13 bankruptcy can only be filed by an individual and not by a partnerhship, or a corporation.

21. A chapter 13 will be granted if the debtor completes all the payments under the plan or also if the debtor fails to make all payments due to circumstances beyond the debtor's control.

 

22. Claims of alimony or support are not discharged by a chapter 13 bankruptcy.

 

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Additional principles

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1. When a business reorganizes under Chapter 11, it can reject a recently negotiated collectively bargained labor contract, if the court finds on the record that such an interest will be furthered, the agreement may be rejected under NLRB v. Bildisco and Bildisco - http://bklaw.pbwiki.com/nlrb

 

2. A child or spouse can block a chp. 11 plan if the chapter 11 debtor does not provide for back alimony and back child support in cash.

 

3. Bankruptcy proceedings start in special bankruptcy courts and appealed to District Courts - the Federal System. Not to state courts, nor Circuit Courts.

 

4. After all secured creditors have been paid, a trustee has $10,000 to satisfy all other debts. The remaining debts are as follows: $4,000 for contributions made to the debtor's employee benefit plan, $4,000 in child support payments, and $4,000 to the Mastercard. How much will Mastercard receive? General creditors have the least rights among unsecured creditors. They split leftovers among themselves. Here, there is only one general creditor

 

5. An individual may file either a chp. 7 or a chp. 11 bankruptcy.

 

6. A person does not need to be insolvent to file a bankruptcy, and may file so long as there is not substantial abuse of the system.

 

7. When there are fewer than 12 total creditors, any of them who is owed at least $10,000 can bring action on his own.

 

8. Fraudulently incurred debts may be dischargeable under Chapter 13, and is not dischargeable under Chapter 7.

 

9. If a debtor intentionally fails to report all assets to the court, this is concealment, and is a criminal offense which can carry both a fine and a jail sentence.

 

10. Once a debtor files a petition in a Chapter 11, he or she may continue to operate the business, unless the court appoints a trustee to run the case.