CH 31 Bankruptcy

Family Farmers and Fishermen (Ch 12)

Family farmer is one whose gross income is at least 50 percent farm dependent and whose debts are at least 50 percent farm related.

Consumer-debtor

A debtor whose debts result primarily from the purchase of goods for personal, family, or household use.

Bankruptcy trustee

A person appointed by the court to manage the debtor's funds. Basic duty to collect the debtors available estate and reduce it to cash for distribution. Has strong-arm power to require persons holding the debtor's property at the time the petition is filed to deliver the property to the trustee.

Liquidation Proceedings (Chapter 7)

AKA straight or ordinary bankruptcy. Debtor turns all assets over a bankruptcy trustee and the trustee sells the nonexempt assets and distributes the proceeds to creditors. Can be filed by either voluntary or involuntary petition.

Individuals Repayment Plan (chapter 13)

Adjustment of debts of an individual with regular income. Repayment plan must be confirmed by secured creditors

Reaffirmation of Debt

An agreement to pay a debt dischargeable in bankruptcy. Must be made before debtor is granted a discharge and must be signed and field with court. Debtor cannot retain secured property while continuing to pay without entering into reaffirmation.

voluntary bankruptcy

Debtor has to actually file petition and receive credit counseling

Cram-down Provision

Even if only one class of creditors has accepted, the court may still confirm a reorganization plan over the objections of a class of creditors.

Reorganizations (Chapter 11)

Most commonly used by corporate debtors. Creditor and debtor formulate a plan under which the debtor pays a portion of the debts and is discharged of the remainder Done in the best interest of the creditors

Debtor in Possession

On entry of the order for relief, debtor generally continues to operate the business as DIP. is an individual or corporation that has filed for Chapter 11 bankruptcy protection and remains in control of property that a creditor has a lien against, or retains the power to operate a business.

Workout

Private, negotiated adjustments of creditor-debtor relations and these often lead to a speedier settlement.

Adequate Protection Doctrine

Protects secured creditors from losing their security interest as a result of automatic stay, courts require the debtor to make periodic cash payments or a onetime cash payment.

Automatic Stay

The moment any petition is filed, automatic stay or suspension of all actions by creditors against the debtor goes into effect.

Creditors Claims

To be entitled to a portion of the debtor's estate, each creditor files a proof of claim with court clerk.

Involuntary Bankruptcy

When a debtor has multiple creditors the creditors can file for involuntary.

Reorganization Plan

designates classes of claims, specifies treatment to classes, provides means for plan's execution, and provides payment of tax claims. Plan must be filed, accepted and confirmed. Each class of creditors must accept the plan with majority before it can be adopted. Plan is binding on confirmation but confirmation does not discharge an individual debtor.

Order for Relief

if the voluntary petition for bankruptcy is found to be proper, the the filing will itself constitute an order for relief (acceptance of petition)

Discharge

releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. Exception apply.

Creditors' Meeting

trustee must call a meeting of the creditors and debtor is require to attend and submit to examination. Trustee ensures that the debtor is aware of the consequences of bankruptcy and their ability to file for a different chapte

means test

used to determine a debtor's eligibility for Chapter 7. If debtor's income is below median income, the debtor is usually allowed to file for chapter 7. This is applied to future disposable income.