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chapter 31: Bankruptcy
blaw test 3
Terms in this set (36)
Bankruptcy relief is provided under which type of law?
-some state laws play a role in proceedings, particulary state propery laws, but the governing law is based on federal legislation
Federal bankruptcy laws are called
the Bankruptcy Code, or the Code
Two Main Goals of Bankruptcy Law
1. to protect a debtor by giving them a fresh start with creditors claims
2. to ensure equitable treatment of creditors who are competing for a debtors assets
Why did the balance in the twin goals of bankruptcy law shift after the 2005 reform legislation?
because of the the growing concern that the law allowed to many debtors to avoid paying their debts
what was the goal of the 2005 reform legislation?
to require more consumers to pay as many of their debts as possible instead of having thoughts debts fully turn into bankruptcy
Where are bankruptcy proceedings held?
in federal bankruptcy courts, which are under authority of the U.S. district courts
How many years are bankruptcy court judges appointed for?
4 most important types of relief a debtor can seek
chapter 7: liquidation
chapter 11: governs reorganizations
chapter 12: for family farmers and family fisherman
chapter 13: adjust of debts by persons with regular income
does a debtor need to be insolvent to file for bankruptcy?
no, anyone obligated to a creditor can declare bankruptcy
debtor whose debts results from purchase of goods for personal, family or household use
According to the Bankruptcy code, what is the clerk of court required to give all consumer-debtors?
-written notice of the general purpose, benefits, and cost of each chapter under which they might proceed
-provide information on the types of services available from credit counseling agenies
example of consumer debts
-credit card debt
Under Chapter 7 (liquidation) proceedings, who does the debtor turn its assets over to?
a bankruptcy trustee - a person appointed by the court to manage the debtors funds
How does the bankruptcy trustee manage the debtors funds?
by selling the debtors nonexempt assets and distributing the proceeds to creditors
Generally, under chapter 7 bankruptcy what happens after the debtor has turned over their nonexempt assets to the trustee?
the debtor is granted a discharge of the remaining debts and is no longer obligated to pay
Who can be a debtor in a liquidation proceeding?
any "person" including individuals, partnerships and corporations
How can a liquidation bankruptcy begin?
by filing a voluntary or involuntary petition in bankruptcy
petition in bankruptcy
the document that is filed with a bankruptcy court to initiate bankruptcy proceedings
What must a debtor do before filing a petition for bankruptcy?
receive credit counseling from an approved nonprofit agency within the 180-day period before the date of filing
Debtors filing a chapter 7 petition (liquidation), must include what in their application?
certificate proving they have received individual or group counseling from an approved agency within the last 180 days
Attorneys representing consumer debtors must file
an affidavit stating that they have informed the debtors of the relief available under each chapter of the bankruptcy code
the voluntary petition must contain the following schedules
1. a list of both secured and unsecured creditors, their addresses and the amount of debt owed to each
2. a statement of the financial affairs of the debtor
3. list of all property owned by debtor, including property debtor claims is exempt
4. a list of current income and expenses
5. a certificate of credit counseling
6. proof of payments received from employers within 60 days prior to the filing of the petition
7. a statement of the amount of monthly income, itemized to show how the amount is calculated
8. a copy of the debtors federal income tax return for the most recent year ending immediately before the filing of the petition
with exception to tax returns, failure to file the required schedules within 45 days after filing the petition will result in
automatic dismissal of the petition, an extension may be granted though
a debtor has up to ____ before the date of the first creditors meeting to provide a copy of the most recent tax returns to the trustee
-a government official who performs administrative tasks that a bankruptcy judge would otherwise have to perform
Who may require a debtor to file a tax return at the end of each year while the case is pending and provide copy to the court?
-Any party in interest (a party, such as a creditor, who has a valid interest in the outcome of the proceedings)
A bankruptcy court can dismiss a chapter 7 petition if...
the use of Chapter 7 constitutes a "substantial abuse" bankruptcy law
What is the Point of a Substantial Abuse - Means Test?
-to keep upper-income people from abusing the bankruptcy process by filing for chapter 7
-forces more people to file for chapter 13 bankruptcy rather than have their debts discharged under chapter 7
what is the basic formula for a debtor wishing to file for chapter 7 bankruptcy
The debtors average monthly income in recent months is compared w the median income in the geographic area in which the person lives, if the debtors income is below the median income, the debtor usually is allowed to file for Chapter 7 bankruptcy, as there is no presumption of bankruptcy abuse
In addition a court may dismiss chapter 7 in two others situation...
1. If the debtor has been convicted of a violent crime or drug-trafficking offense, the victim can file a motion to dismiss the voluntary petition
-The court may not dismiss a case on the ground if the debtors bankruptcy is necessary to satisfy a claim for a domestic-support obligation
2. If the debtor fails to pay postpetiton domestic-support obligations (which include child and spousal support), the court may dismiss the debtors petition
if the voluntary petition for bankruptcy is found to be proper, the filing of the petition constitutes?
an order for relief-courts grant of assistance to petitioner
Once a consumer-debtors voluntary petition has been filed, the trustee and creditors must give notice of the order for relief by mail not more than ___ days after entry of the order
when does involuntary bankruptcy occur?
when the debtors creditors force the debtor into bankruptcy proceedings
what happens if the court dismisses an involuntary petition?
-the petitioning creditors may be required to pay the costs and attorney fees incurred by the debtor in defending against the petition
-If the petition was filed in bad faith, damages can be awarded for injury to the debtors reputation
for involuntary action to be filed, the following requirements must be met
1. If the debtor has 12 or more creditors, 3 or more of these creditors having unsecured claims totaling at least 16,750 must join in the petition
2. if a debtor has fewer than 12 creditors, one or more creditor having a claim totaling for $16,750 or more may file
The moment a petition, either voluntary or involuntary, is filed, an automatic stay, or suspension, of all actions by creditors against the debtor or the debtors property normally goes into effect
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