[REG] 7. Bankruptcy

7.1 General Definition

1. Applicable laws + court

  - Title 11 of the United States Code + Federal court

2. Purpose

  - for debtors: giving a change of new start

  - for creditors: distributing fairly

  - Stop the enforcement of a judgment lien against property in bankruptcy

3 Type

Type of Bankruptcy	Chapter	Repayment methods	Education-voluntary petition
Individual	7	Liquidation	Credit counseling + financial management course
	13	Reorganization	Credit counseling + financial management course
Business Entity	7	Liquidation(financial institution금융회사(X) ,municipality(X), railroad(x), 비영리회사(x)	X
	11	Reorganization(cha7 + railroad)	X
Municipality	9	Reorganization	X

 

7.1.1 Bankruptcy process

Step 1: Filing  bankruptcy petition/ involuntary petition

step 2: court's order for relief

step 3: automatic stop of legal actions

step 4: Creation of bankruptcy estate

           - creditors confirm the amount of the loan within 6M after the meeting

           * exemption: domestic disputes(alimony, child support), social security benefits, federal or state exemption list

step 5: Appointment of trustee

step 6: assumption or rejection of the after-order contract

step 7: liquidation/ reorganization

 

Bankruptcy limitation

6yrs > general bankruptcy,  8yrs > consumer 

 

7.2 Chap7 Liquidation (Individual + biz entity)

1. Voluntary vs Involuntary

Voluntary petition - Debtor files the petition

Involuntary petition - Creditors file the petition - Debtor needs to be insolvent - Unsecured debts are more than or equal to $16,750

2. Bankruptcy process

3. Trustee's duty

  -Fiduciary duty = duty of loyalty(Secret profit+Usurfing+self dealing) + duty to care

                         * BJR: reasonable mgt 나와 동일한 판단했을것

  - Interim report +other documents > court

 

7.2.1 Bankruptcy Estate

Property transfer 거래인정X(Debtor가 3자에게 재산을 준다면 Trustee가 뺏어올 수 있다)

1. within 1year prior to the petition filing

   - Fraudulent transfer: set aside

   - Less than reasonable value: 서비스/물건 판 대가를 시장가 보다 낮게 받음

   - preferential transfer to insiders

 

2. within 90days prior to the petition filing

  - Preferential transfer to a creditor 채건자에게 돈을 미리 갚거나, Security int, collateral을 제공한것

  * Exception

     1) contemporaneous transaction 물건 매매하고/서비스를 제공하고 전체 가격을 다 받는 것.

     2) Transaction of the ordinary course of business

         기존에 하고 있는 사업에 대한 계약 이행. 과거 계약을 체결하여 매당 일정 금액을 납부하는 계약

     3) Domestic obligations: alimony, child support

     4) Financial support to charitable organizations

 

3. Within 180days after the petition filing

   - property goes to the debtor

 

Bankruptcy process, Property transfer 거래인정X(debtor가 3자에게 재산을 준다면 trustee가 뺏어올수 있다.

 

	1yr before	90 days before	180 days after
Preferential transfer to 3rd party	Only to insider	To creditors	NA
Exception for preferential transfer	NA	- Contemporaneous - Ordinary course - Charity - Domestic support - Debt payment - Retention bonus	NA
Fraudulent transfer	Insolvent(0), Solvent(0)		NA
Less than reasonable value	Insolvent(0), Solvent(x)		NA

 

 

7.2.2 Priority of Claims

Priority

1) Secured interest (with collateral)

    - collateral 가치만큼, 가치가 떨어져 다 못받은 금액은 general creditor 순위로 밀려남

2) Domestic support

    - 가사소송과 관련된 obligation

    - Child support, alimony

    - individual의 경우 Garnishment(원천징수)를 통해 강제이행됨

3)  Administrative expenses

    - Bankruptcy estate 운영과정에서 발생하는 변호사, 회계사, 수수료 등등

4) Claim in the ordinary course of business after the petition before the order for relief

    - involuntary bankruptcy petition이후, Order for relief 전, debtor가 영업활동을 하면서 발생하는 채권 채무 계약

5) Wage(for 180 days) 종업원임금

    180일간 임금중 13,650만큼, 나머지는 general creditor

9) Tax and penalty

12) General creditor who filed in a timely manner(within 6Ms after the time of 1st creditor meeting) 

13) General creditor who filed in an untimely manner

 

 

7.3 Discharge of Bankruptcy

- Bankruptcy진행과정중 갚지 않아도 되는 Debts

- Individual Debts Discharge 인정/ Business entity(corp, pship, company) Dissolution 0, Discharge X

 

1. Conducts which bar the discharge of debt(반드시 갚아야함)

   - before 6yr limitation period

   - fraud in keeping records, books(12M)

   - Destruction of property to undermine the creditor's right(12M)

   - Noncompliance with court order

   - Failure to explain the asset loss

     * breach of contract, negligence > Discharge of debt 혜택 받을 수 없음

2. Nondischargeable debts of bankruptcy

   - unpaid tax for 3yrs

   - Loans for federal tax payment

   - Unfiled or unscheduled debts( bankruptcy 진행시, Debtor가 숨기면 알수가 없다)

   - domestic support(child support, alimony)

   - Criminal liabilities - larceny, false pretense, embezzlement

   - Debts caused by fraudulent bookkeeping

   - Civil liabilities - intentional tors(0), reckless disregards(0), negligence(x), breach of contract(x)

   - Education al loan for 5yrs - FAFSA

   - Fine or penalty to federal, and state government

     Violation of securities laws, Sarbanes-Oxley act

* filing a petition 12개월 전 사건에 대해 dischargeable, nondischargeable 여부를 결정함

 

 

7.4 Reaffirmation

discharge 가능한데 돈을 갚겠다고 함

1) Creditor - Debtor 약속

2) Debtor Bankruptcy 신청

3) Court's order > Dischanrge of debts 빛만 갚아도 된다

4) Debtor court 찾아감, reaffirmation 할래요. 돈갚을래요

5) court order, reaffirmation 확인

6) 60일이내 Debtor's objection/ Rejeciton 없다면 > Reaffirmation 인정

 

7.5 Chap11 Business Reorganization

1. Basic concept

- 회사의 청산가치보다 잔존가치가 더 높은 경우, 회사를 운영하되 1) 부채조정하거나 2) 경영 직접 개입 함

- Chap 7 (corp, pship, company) + railroad company

- Creditors file petition, Debtor insolvent(*debt less than $16,750, farmer, charitable org), Unsecured debts more than/ equal to $16,750

2. Critical process

 Step1. Creditors and SHs create committees

 Step2. The debtor builds a reorganization plan

          - Within 120 days after the order for relief > Debtor's reorganization plan(exclusive right)

          - Debtor's mgt vs trustee's mgt

 Step3. Review and approval of the plan

         - Majority creditors in each committee (2/3 total debts)

         - Acceptance of SHs(2/3 shares)

         - Submission to court + court's approval

         - confirmation of the plan + final decree

Step4. Rehabilitation plan

         - court's supervision over the company

         1) Debts, PS > CS

         2) Forfeiture of CS

       

 

7.6 Chapter13, individual reorganization

1. Basic concept

- reorganization plan > creditor confirm > cour approval

   1) Composition 채무금액을 합의하여 낮춤

   2) Extension 채무변제 기간을 합의하여 연장

- voluntary petition

- court trustee 선정 채무상환