Chapter 20
Order of Unsecured Priority:
1. Legal Fees to Administrators - people doing the bankruptcy 2. Liabilities from the ordinary course of business 3. Wages to employees 4. Employee Benefits 5. Customer Deposits 6. Taxes due
In order to us fresh start accounting there are two requirements?
1. They have to have a negative equity 2. Previous shareholders must collectively hold less than 50%, meaning they have to lose control.
How much of wages are entitiled to creditors with priority?
10,000 PER employee within 180 day period leading to the
According to ASC _______ what must be the case in order to qualify for fresh start accounting?
852, Shareholders lose control, Company has a negative equity.
Chapter 11 Bankruptcy
A reorganization form of bankruptcy for businesses that allows them to continue operating under court supervision as they repay their restructured debts.
Your client is insolvent under the federal bankruptcy law. Under the circumstances
A transfer of assets to a creditor less than 90 days before filing a petition may be voidable
The highest priority for payment of unsecured claims in a bankruptcy proceeding is
Administrative expenses of the bankruptcy.
The plan of reorganization must be approved by
At least half of all creditors who hold at least two-thirds of the total debt.
Chapter 7 Bankruptcy the accounting statement of affairs is prepared...
At the BEGINNING of the liquidation process.
Statement of Affairs..
Breaks out who gets what by the different categories of Secured Creditors, Unsecured Priority, and Unsecured.
In a chapter 7 liquidation the ____________ value of the assets doesn't matter.
Carrying
Proceeds from a sale due to a chapter 11 proceeding?
Cash flows from investing activities
Current interest expense on post-petition debt is paid during the year.
Cash flows from operating activities
Company borrowed $10,000 in short-term debt as part of a financial plan administered by the court.
Cash flows provided by financing activities
Chapter 7 Bankruptcy
Chapter of the Bankruptcy Code providing for liquidation of the debtor's assets in order to repay the creditors; certain assets or aggregate value of assets of the debtor may be exempt based on state law.
Wages fall under
Creditors with priority
What happens to the exceeding wages?
Fall under the third category, Unsecured Creditors
A client has joined other creditors of Jet Company in a composition agreement seeking to avoid a bankruptcy proceeding against Jet. Which statement describes the composition agreement?
It provides that the creditors will receive less than the full amount of their claims
An example of a supplementary credit?
Net Loss
Interest received on cash because of chapter 11 proceedings.
Operating cash flows from reorganization activities
Preference Payments:
Payments made from the debtor to the creditor within 90 days before filing that was out of the order, can be taken back and added to the cash available for all investors.
Among other provisions, a Chapter 11 plan of reorganization must
Provide adequate means for the plan's execution.
Dividend Percentage:
Remaining Assets/ Remaining Debts - Remaining assets are everything that's left after you have paid off secured creditors and preferred creditors.
Order of who gets paid...
Secured Creditors Unsecured Priority Unsecured Creditors
Statement of Realization and Liquidation:
Shows everything that's going to be realized and liquidated.
Accounts payable are only priority if
Specified.
The following statements describe the possible status of such claims in a bankruptcy proceeding
They are entitled to priority. Such claims include wages earned within 180 days before the filing of the bankruptcy petition but not to exceed $10,000 in amount per wage earner. The amounts of excess wages not entitled to a priority are mere unsecured claims.
Secured Loans usually include..
Things backed up by assets
An example of a supplementary charge?
Trustee fees
What things are below the line?
Unrealized gain in value of investments, transfer for equipment that we haven't spent used yet.