Source: https://www.scribd.com/document/54975839/Chapter-7-Liquidation
Timestamp: 2017-09-26 04:56:37
Document Index: 273835928

Matched Legal Cases: ['§ 707', '§ 707', '§ 109', '§ 303', '§ 362', '§ 701', '§ 522', '§ 721', '§541', '§541', '§ 727', '§726', '§725', '§507', '§101', '§524', '§532', '§ 524', '§722', '§ 524', '§ 524', 'art, 10']

Chapter 7 Liquidation | Chapter 7 | Bankruptcy In The United States
Uploaded by Joseph Ring
Chapter 7 Liquidation: I. Pre-Petition A. Who may be a Debtor: 109(a)(b): No Railroads, Insurances Companies, or Banks B.
Credit Counseling Requirement: 111 C. Chapter 7 Threshold: 707 1. Anti Abuse Provision: The court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707(b). a. Application of the Means Test: If the debtor's "current monthly income" (1) is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive. i. Current Monthly Income: ii. Means Test: Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $11,725, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $7,025. b. Rebuttable Presumption: The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor's consent) or will be dismissed. 11 U.S.C. § 707(b)(1). D. Time between Filing: 1. Previous Chapter 7 or 11: The court will deny a discharge in a later chapter 7 case if the debtor received a discharge under chapter 7 or chapter 11 in a case filed within eight years before the second petition is filed. 2. Previous Chapter 12 or 13: The court will also deny a chapter 7 discharge if the debtor previously received a discharge in a chapter 12 or chapter 13 case filed within six years before the date of the filing of the second case unless (1) the debtor paid all "allowed unsecured" claims in the earlier case in full, or (2) the debtor made payments under the plan in the earlier case totaling at least 70 percent of the allowed unsecured claims and the debtor's plan was proposed in good faith and the payments represented the debtor's best effort. 3. Dismissal of Previous Petition: An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e).
What is not Stopped: But filing the petition does not stay certain types of actions listed under 11 U. a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling. 362.II. a schedule of current income and expenditures. If more than three. If there are more than 12 creditors. 2. evidence of payment from employers. Debtor is generally not paying debts as debts come due. The Filing: The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. and . aggregate amount is used iii. 722 1. b. creditors generally may not initiate or continue lawsuits. (b) Who can file: i. wage garnishments. (c) § 303(h)—Acts of Bankruptcy i. a schedule of executory contracts and unexpired leases. Involuntary Petition: 303 (a) Can be filed against legal person (this includes corporations—any person who themselves is eligible to file 7 or 11).C. 521. family farmer.300. OR ii. and undisputed ii. or even telephone calls demanding payments. 3. Information from the Debtor 521-522. Petitioner must be owed $12. e. Types of Petitions 1. Voluntary Petition: 301 2. Exceptions to Automatic Stay: See Outline C. aggregate amount is used. a statement of monthly net income and any anticipated increase in income or expenses after filing. All debtors must also file with the court: a. b. The Automatic Stay: Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. profit or commercial corporation. 501(c). A. Individual debtors with primarily consumer debts must also file: a. business. unsecured. B. Within 120 days a custodian other than trustee. receiver or agent is appointed or took position. non-contingent. if any. c.S. a statement of financial affairs. but at least 3 creditors must join. § 362(b). except a farmer. The stay arises by operation of law and requires no judicial action. a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). received 60 days before filing. and d. schedules of assets and liabilities. What is Stopped: As long as the stay is in effect. or corporation that is not money. and the stay may be effective only for a short time in some situations. 2. 1. c.
a schedule of "exempt" property. 11 U.S. Administration: 1. trustee (or the bankruptcy court in Alabama and North Carolina) appoints an impartial case trustee to administer the case and liquidate the debtor's nonexempt assets. if the debtor is a business.S. and d. c. clothing. Representative of the Estate: ii. Appointment or Election: When a chapter 7 petition is filed. (iii) Distribute Proceeds iii. amount. Duties and Powers: i. transportation.S.S. 361-365. the bankruptcy court may authorize the trustee to operate the business for a limited period of time. a record of any interest the debtor has in federal or state qualified education or tuition accounts. Creation of the Estate A. The Trustee: 323. e. A list of all of the debtor's property. 705 This meeting is informally called a "341 meeting" because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property. medicine. Caretaker: In addition. 521 3.C. Extent of Estate Property: a. etc.C. 3. The Estate: 1. A list of all creditors and the amount and nature of their claims. 2.e. the U. food. Distributor of Assets: The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors. 721 a. 541(a) . Creditors' Meeting: 341-43. shelter. utilities. §§ 701. The source. b. i. if such operation will benefit creditors and enhance the liquidation of the estate. and frequency of the debtor's income. III. A detailed list of the debtor's monthly living expenses. 701-704. All legal and equitable property interests. 11 U. 704. § 522(b). The Claims: 501-505.d. 11 U. Additionally.C. taxes. Debtor must provide: a.. § 721. 511 See Separate Outline B. b. (i) Collect Property: (ii) Sell Property: The trustee accomplishes this by selling the debtor's property if it is free and clear of liens (as long as the property is not exempt) or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property.
Disputed areas: a. i. If the court is under no obligation to pay the bonus and/or the bonus is contingent. commissions. such as permits or licenses that are nontransferable.Employee Bonuses . Legal interests that are not enforceable at the date of bankruptcy but may be enforceable at a future time. intangible property iii. Excluded from the Estate: 541(b)(d) a. Exemptions: established by 522 or State Law if "Opted out": See Separate Outline. c. Distribution 506-10. the liquor license is property of the estate and the trustee can market the bar with the liquor license. Most courts will hold that liquor licenses are property of the estate because when a person buys a bar.A non-alienable provision is a provision in a K which says the debtor will not transfer property under any circumstances. iii. FCC license. ii. 2. In 2005 Amendments.Exceptions to unenforceability restrictions on transferability for retirement accounts. 347 . debtor argues that he didn’t have a legal interest in the bonus. Most of these types of laws that restrict the owner’s ability to transfer property ARE NOT enforceable in bankruptcy because the debtor’s property is transferred to the trustee. etc. tangible real and personal property ii. the only thing of “real value” is the liquor license. 542. Property in the hands of 3rd Parties. etc…) b. contingent property interests (ability to file a law suit iv. Look past the label on the property right. Jackoway) said most types of IRA’s are exempt from property of the estate. Property acquired after the commencement of bankruptcy (wages. iii. Examine the terms to determine whether the debtor had a legal interest/ right in the bonus as of the date of filing. Question: Whether they are sufficiently matured and certain to be included in the estate? ii.BT argues the debtor had a legal interest in the bonus. v. Examples of other licenses held to be property of the estate: brother license (In re Burgess).ERISA qualified plans are beyond the reach of creditors and outside the reach of the bankruptcy estate. “Spendthrift” Trust Provision . trucking certificates. Basically says that when you put your money into a trust which protects you from getting a lot of money and spending it (i. §541(c) . it is likely that the court will hold that the bonus is not part of the estate. Like pets. if you own a bar and file for bankruptcy.e. Property Abandoned by the Estate: Trustee may give back property that is of no value or benefit to the estate. spendthrift trust). Ex . Congress (as upheld by SC in Rousey v. taxi cab medallions. iv. c. Thus. earnings. Test: Could the debtor have filed a lawsuit over the bonus on December 21? Look past the label on the property right.This provision enables debtors to keep their retirement accounts out of bankruptcy estates. 544(c) 3. Certain entitlements. Sharp v. 724-726. Dery . i. Avoidance of Transactions: 544-51: See Separate Outline IV.i. 2.Liquor Licenses.Retirement Accounts . airport landing slots. Restrictions on transferability imposed by contract or law i. ERISA . sales tax licenses. which may or may not be property. the money does not become part of the estate. §541(c)(2) . b. if debtor files bankruptcy.
Disposition of Certain Property . Interest on any Claim f.A. Effect of Dismissal: 349-50 D. destroyed. Unsecured Claims Timely Filed c. § 727. or defraud a creditor or officer of the estate charged with custody of property under this title. records. removed. the debtor is not an individual Why? Corporations can get a discharge of their debts under CH 11. or concealed. concealed. Secured creditors must be taken care of before distribution to unsecured creditors occurs. Debtor concealed. then pro rata to the next group: a. R. ii. Grounds for Dismissal: 707 The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Ex . §726 . or destroyed property that would have become property of the estate.Farmer who sold property to feed his pigs because he couldn’t stand the sound of his pigs starving was sent to jail for 4/5 months. mutilated. then they have not fully liquidated. Grounds for Denying Discharge: 727 a. the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records.S. committed a bankruptcy crime such as perjury. Unsecured Claims Tardily Filed d. or failed to complete an approved instructional course concerning financial management. the trustee is going to just hand over collateral to secured creditors. in full until out of assets. §725 . with intent to hinder. has transferred. or property of the estate. but not under CH 7 because at the end of a CH 7 there should be no corporation. Fines. 11 U. §507 Priority Unsecured Claims b. Bankr. destroyed.Generally speaking. after the date of filign of the petition. destroyed.C. failed to obey a lawful order of the bankruptcy court. mutilated. B. documents. Debtor V. Denying General Discharge: i. or concealed property of the debtor within 1 year before the date of the filing of the petition.The estate shall be distributed in the following order. 4005. Termination A Dismissal: 1. iii. Fed. removed. 2. and papers from which the . or Forfeitures e. Among other reasons. If someone is claiming they need a discharge. The debtor. fraudulently transferred. Penalties. falsified. P. The secured creditor essentially receives the collateral or its value in cash after its distribution. delay. or failed to keep or preserve any recorded information including books. Discharge: 1.Distribution of Property . or has permitted to be transferred. failed to explain satisfactorily any loss of assets. mutilated.
Debtor has refused to obey any lawful order of the court/ revoked their privilege of self-incrimination after debtor has been granted immunity. or withholds relevant information from the bankruptcy trustee v. . Fraud while a fiduciary. bribes. embezzlement or larceny. Debts are only discharged if the constitutional requirements of proper notice are met. Any debt obtained through false pretenses. unless such act or failure to act was justified under the circumstances of the case. i. x. .e. Taxes and DSO’s are 2 debts that are both going to be non-dischargeable and priority claims b/c Congress has decided that as a social policy matter that repayment of those debts is more important than the fresh start given to debtors though the discharge. viii. penalties payable to government entity. Debtor knowingly or fraudulently. Note that anyone with a close relationship to a debtor is an insider. the term luxury goods or services does not include anything reasonably necessary for the support/maintenance of the debtor. agreement states that the credit card holder is going to be able to pay all debts. v. but there is lots of constructive notice (i. in connection with the case. vi. vii. Willful and malicious injury (intentional tort) by debtor to another entity or to their property.debtor’s financial condition or business transactions might be ascertained. on which debtor relied and debtor caused to be made or published with intent to deceive. or actual fraud. For purposes of (a). We are requiring more than creditor leant money to debtor—has to be a statement in writing concerning financial condition on which creditor relied and that there was intent to deceive. goes along with (3). Fines. This has been used in situations where someone has a credit card and goes to casino and use cc to withdraw money. newspaper). DSO (defined in §101—doesn’t include property settlement obligations that arise form a divorce decree—SEE also (a)(15)). what type of records would we expect this type of debtor to have. . consumer debts owed to single creditor . Denying Specific Discharge: i. . then the debt will not be discharged. false claims. . Any type of taxes that an individual owes are going to be non-dischargeable. b. iii. ix. application for credit card—you have to fill in income so there is a writing. iv. Or a debt that is based upon a statement in writing . ii. Notice doesn’t mean actual notice to creditors necessarily.e. Standard: Reasonableness. . make a false oath or account. false representation. . so the BR court can send notice to those creditors. Any federally guaranteed educational loan is going to be non-dischargeable unless it would impose an undue hardship. vi. Debtor failed to explain satisfactorily any loss of assets or deficiency of assets to meet the debtor’s liabilities . iv. The debtor also must list their creditors. are presumed not dischargeable and presumably cash advances are not dischargeable within 90 days of bankruptcy. If the debtor doesn’t list a debt in their BR filing.
This is the “Ride Through Option. or reaffirm debt out of gratitude. Reaffirmation of Unsecured Debt → Concerned that debtor is being preyed upon by the creditor. the atty must represent to the court saying that the reaffirmation will not constitute an undue hardship to the debtor going forward. and he will sign a promissory note protecting her from the rest of the debt. Reaffirmation must be in writing and filed with the court.For cases on student loans. There was a 4th possibility up unto the revisions in 2005. xiv. boating. the trustee does not represent the debtor. Any debts other than DSOs that arise from a divorce case will also be nondischargeable debt. Problems: Worried about consumers being preyed upon plus fraud. Payment of any federal criminal order of restitution. then file BR seeking to discharge the bill. xii. . Debt for death or personal injury caused by drunk driving. Congress is concerned that creditors are going to prey on unsophisticated debtors. Reaffirmation is not a violation of the automatic stay—courts permit this. Reaffirmation of Secured Debt—Possibilities for Debtor: Debtor can turn collateral over to the creditor. then you can probably get away with not repaying. xi. All the debtor has to pay to redeem property in BR is the value of the collateral.e. cars. There’s a cooling off period b/w time that reaffirmation agreement is filed with the court and the court enters the reaffirmation giving debtor time to change his mind. Why? With regard to some secured debts. Czar asks Aunt Alice if she will sign off the interest rates. court is more likely to find undue hardship where debtor has bills but also has dependents. Runs up debt on a guaranteed school loan. i. Remember. Reaffirmation under §524(a)(4) is an extremely complicated procedure. and Czar signs off on the promissory note. Example: Czar goes to med school. Aunt Alice pays off the student debt. xiii. c. If a debtor is represented by an atty. you might want to reaffirm a debt where you have pledged collateral that is vital to your existence. or with unsecured debt (in order to start future line of credit/maintain business r-ship). 3 weeks later the Czar files for BR. Reaffirmation Redemption (this refers to redeeming collateral) → BR law seeks to disrupt property rights as minimally as possible. Is that debt to Czar’s aunt non-dischargeable under §532(a)(8)? If you are a clever scoundrel. You might be able to use (a)(2).” This is that liens ride through BR unless there’s a provisions that avoids them. the debtor and their creditors agree debt will not be discharged but will be paid under conditions the parties agree to. Debt incurred to pay a tax to a governmental unit other than US or incurred to pay fines and penalties under federal election law—situation where people pay taxes on credit cards. or flying (basically anything with a motor)—does NOT apply to property. but a clever debtor will probably wait a while to take that out. Reaffirmation of Debts With regard to specific debt (SEE § 524).
and (6) (obligations affected by fraud or maliciousness) are not automatically excepted from discharge. No one is forced to reaffirm a debt. The types of debts described in sections 523(a)(2). (4). The most common types of nondischargeable debts are certain types of tax claims. The only thing a creditor has no choice about is redemption of collateral under §722.If no atty.C. § 524(c). Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of disclosures described in 11 U. debts for willful and malicious injuries to person or property. 2. If the balance . If the debtor decides to reaffirm a debt. such as the debtor's drunken driving). In return. the debtor must still repay those debts after bankruptcy.S. but beyond that reaffirmation is voluntary process. Therefore. the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt. then courts gives debtor equivalent of Miranda. debts owed to certain tax-advantaged retirement plans. In the absence of an affirmative request by the creditor and the granting of the request by the court. and debts for certain condominium or cooperative housing fees. even though the debt would otherwise be discharged in the bankruptcy. debts to governmental units for fines and penalties. debts for personal injury caused by the debtor's operation of a motor vehicle while intoxicated. the types of debts set out in sections 523(a)(2). the disclosures must advise the debtor of the amount of the debt being reaffirmed and how it is calculated and that reaffirmation means that the debtor's personal liability for that debt will not be discharged in the bankruptcy. (4). Depending on individual circumstances. he or she may decide to "reaffirm" the debt. debts for most government funded or guaranteed educational loans or benefit overpayments. debts for spousal or child support or alimony. Among other things. § 524(k). The debtor must sign a written reaffirmation agreement and file it with the court. he or she must do so before the discharge is entered. Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. 11 U. Creditors must ask the court to determine that these debts are excepted from discharge.C. Effects of Discharge: 523-25 Not all debts are discharged. The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the balance of income paying expenses is sufficient to pay the reaffirmed debt. The debts discharged vary under each chapter of the Bankruptcy Code. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed. Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor. if a debtor wishes to keep certain secured property (such as an automobile).S. and (6) will be discharged. debts not set forth by the debtor on the lists and schedules the debtor must file with the court.
a trustee. The court will decide whether such allegations are true and. and the court may decide not to approve the reaffirmation agreement. or failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case. failed to disclose the fact that he or she acquired or became entitled to acquire property that would constitute property of the bankruptcy estate. trustee may request that the court revoke the debtor's discharge in a chapter 7 case based on allegations that the debtor: obtained the discharge fraudulently. 3. in some cases.S. there is a presumption of undue hardship. creditor. . Revocation of Discharge: The court may revoke a discharge under certain circumstances. if so. whether to revoke the discharge. Typically. before the date that the case is closed. a request to revoke the debtor's discharge must be filed within one year of the discharge or. For example.is not enough to pay the debt to be reaffirmed. committed one of several acts of impropriety described in section 727(a)(6) of the Bankruptcy Code. or the U.
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