[REG] Bankruptcy

- only a person(individual, partnership, corporation) who resides or has a place of business in the United States is eligible to be a debtor under the Bankruptcy code

- not all debts of the debtor are discharged, exceptions to discharge(WAFTED)

 

Chapter 7 Liquidation, trustee required

- Process

  1)Trustee Appointed

  2) collects the debtor's assets

  3) liquidates them

  4) uses the proceeds to pay off creditors to the extent possible

Individual, debts are discharged with certain exceptions    * certain debts will never go away

Entity, it is dissolved

 

- if an individual filing for Chap 7 liquidation + Monthly income is greater than the state median income

  > state, any interested creditor, court may file a motion to dismiss the case(abusing the bankruptcy system)

 

* not file for bankruptcy under Chapter 7

   Railroads, insurance or small biz investment co, Banks, Saving institutions

 

* prevent debtors from receiving chapter7 discharge

   - Creditors raise objections against discharge

   - non-dischargeable debts(WAFTED)

      1) Willful and malicious injury

      2) Alimony

      3) Fraud

      4) Taxes

      5) Educational loans

      6) Debts undisclosed in bankruptcy petition

   - the debtor is not an individual

   - fraudulent transfer

   - unjustifiably failed to keep books and records

   - prior discharge within 8yrs

 

Chapter 11 Reorganization, No liquidation, Trustee not required

- Debtor remains in possess of his assets and a plan of reorganization is adopted

  Creditors are paid to the extent possible and the business continues

 

* not file for reorganizations

Broker, insurance or small biz investment co, Banks, Savings institutions

 

 

 

Chapter 13 adjustment of debts of individuals with regular income, trustee required

- debtor repays all or a portion of his debts over a 3yrs~5yrs

 - trustee required  

 

 

Chapter 15 Ancillary and Cross-Border Cases

US adoption of the model law on Cross-Border insolvency promulgated by the United Nations

 

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Chapter 7 Liquidation

 

1. Bankruptcy petition filed(voluntary/ involuntary)

  voluntary: individual need not be insolvent to file

  involuntary:

   - creditors must show that the debtor is not paying debts as they become due(in default),

                                                             regardless of the debtor's ability to pay

   - unsecured creditors of fewer than 12, at least $18,600 in aggregate

    more than 12, more than three owe at least $18,600 in aggregate

 

2. Automatic Stay

- Stops almost all collection efforts

- does not apply to criminal prosecutions, paternity suits, spousal or child support obligations

 

3. Debtor must file

- creditors and their addresses

- schedule of assets and liabilities(FMV or liquidation value)

- schedule of current income and expenditures

- statement of the debtor's financial affairs

- copes of pay stubs received within 60 days before filings

- copies of federal tax returns from the last tax year. If the debtor has not paid taxes for the previous tax year must pay

> individual debtor in voluntary cha7, file above items within 45 days, or the case is automatically dismissed on 46th days

 

4. Sec 341 meeting: creditor's meeting

- all interested parties, creditors, bankruptcy trustees, debtor must be given notice of the meeting

- within 20 to 40 days

 

 

property Included

- all of the debtor's real and personal property at the time of filing

  + income generated from estate property received within 180days after the filing of the petition for relief

    Rent, dividends, Interest income

  + Property receives from divorce

  + Inheritance

  + Insurance within 180days after the filing of the petition

    

 

Trustee

- hypothetical lien creditor as of filing date

- set aside fraudulent transfers made within two years of the filing date

- Trustee can disaffirm preferences: preferential payment, made within 90 days prior to the filing

   > payment for a Antecedent(preexisting) debt = preference payment

   * Contemporaneous exchange for new value is not a preference(영업을할수있게해줘야지)

   > insolvent during the 90 days

   * transfer made to repay a debt that the debtor incurred in the ordinary course of biz is not a voidable preference

 

 

Claim

unsecured creditors must file a proof of claim'

SHs must file a proof of interest with the bankruptcy court

perfected security interest passes through and survives bankruptcy even if the creditor does not file a proof of claim

 

Priority

admin expense > perfected secured interest > domestic support(alimony, child support) > Wage > tax & penalty > general creditor

 

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Reorganization chapter 11(trustee not required)

 

1) filing petition(vol +invol) + sch of asset  liability

2) Creditor's Committees( stakeholder: creditor, SH), trustee generally not appointed

   - 7 largest holders of the equity securities

   - consult with the debtor, investigate the debtor's finances, participate in preparing the reorganization plan

3) Debtor, reorganization plan, first 120 days after the order for relief is effective

   - classify all claims

   - describe the treatment to be accorded each impaired class

   - treat each claimant within a particular class identically

   - Establish ways to implement the plan

4) Committee's review (Acceptance of the plan by creditors)

  - vote on the plan

  - accepted by equity security holders having 2/3  in amount, 1/2 in number of the allowed claims

5) Court's Approval  

 - a plan can be confirmed by the court even if all impaired classes do not accept it

   (at least one impaired class has accepted)

- confirmation also terminates the automatic stay