Chpater 38 Bankruptcy

Commencement of the case

Commencement of the casefiling of a voluntary or involuntary petition begins jurisdiction of the bankruptcy court

voluntary petition

available to any eligible debtor even if solvent

involuntary petition

may be filed only under Chapter 7 or 11 if the debtor is generally not paying his debts as they become due

Dismissal

the court may dismiss a case for cause after notice and a hearing; under Chapter 13, the debtor has an absolute right to have his case dismissed

Automatic stays

prevent attempts by creditors to recover claims against the debtor

trustee

responsible for collecting, liquidating, and distributing the debtor’s estate

Meeting of creditors

debtor must appear and submit to an examination of her financial situation

creditor

any entity that has a claim against the debtor

insider

relative or general partner of debtor, partnership in which debtor is a partner, or corporation in which debtor is an officer, director, or controlling person

lien

charge or interest in property to secure payment of a debt or performance of an obligation

secured claim

claim with a lien on the property of the debtor

unsecured claim

portion of a claim that exceeds the value of any property securing that claim

judicial lien

property interest obtained by judgment, a levy, or some other legal or equitable process

Priority of claims

the right of certain claims to be paid before claims of lesser rank

Debtor’s duties

the debtor must file specified information, cooperate with the trustee, and surrender all property of the estate

Debtor’s exemptions

determined by state or federal law, depending upon the state

Discharge

relief from liability for all debts except those the Bankruptcy Code specifies as not dischargeable

estate

all legal and equitable interests of a debtor in nonexempt property

Trustee as lien creditor

trustee gains the rights and powers of a creditor with a judicial lien

Voidable preferences

Bankruptcy Code invalidates certain preferential transfers made before the date of bankruptcy from the debtor to favored creditors

Insolvency

financial condition in which debts exceed fair value of assets

fraudulent transfers

trustee may avoid fraudulent transfers made on or within two years before the date of bankruptcy

statutory lien

trustee may avoid statutory liens that first become effective on insolvency, are not perfected at commencement of the case, or are for rent

Purpose of Chapter 7

to distribute equitably the debtor’s nonexempt assets and usually to discharge all dischargeable debts of the debtor

Distribution of the estate

in the following order: (1) secured creditors, (2) creditors entitled to a priority, (3) unsecured creditors, and (4) the debtor

purpose of reorganization

to preserve a distressed enterprise and its value as a going concern and to pay creditors over time

Acceptance of plan

requires a specified proportion of creditors to approve the plan

Confirmation of plan

requires (1) good faith, (2) feasibility, (3) cash payments to certain priority creditors, and (4) usually acceptance by creditors

Effect of confirmation

binds the debtor and creditors and discharges the debtor

purpose of Chapter 13

to permit an individual debtor with regular income to file a repayment plan that will discharge her from most debts

Confirmation of plan

requires that (1) it be made in good faith; (2) the present value of property distributed to unsecured creditors not be less than the amount that would be paid them under Chapter 7; (3) secured creditors accept the plan, keep their collateral, or retain their security interest and the present value of the property to be distributed to them be not less than the allowed amount of their claim; and (4) the debtor be able to make all payments and comply with the plan

attachment

seizure of property to bring it under the custody of the court

garnishment

proceeding by a creditor against a third person who owes money to debtor

writ of execution

order served by sheriff upon debtor demanding payment of a court judgment against debtor

composition

agreement between debtor and two or more of her creditors that each will take a portion of his claim as full payment

assignment for the benefit of creditors

voluntary transfer by the debtor of his property to a trustee, who applies the property to the payment of all the debtor’s debts

Equity receivership

receiver is a disinterested person appointed by the court to collect and preserve the debtor’s assets and income and to dispose of them at the direction of the court