1. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Chapter 12: Creditor-DebtorChapter 12: Creditor-Debtor Relations and BankruptcyRelations and Bankruptcy © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

2. Laws Assisting Creditors  Liens: encumbrance (claim upon) on property to satisfy a debt, or protect a claim for the payment of debt. Mechanic’s Liens: security for labor, materials, or service on real estate. CASE 12.1 BHP L AND S ERVICES, I NC. V. S EYMOUR (2011). CASE 12.1 BHP L AND S ERVICES, I NC. V. S EYMOUR (2011). Why did the court hold that Jennifer was her mother’s agent? 2

3. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Liens (continued). Artisan’s Liens: labor and materials on personal property. Judicial Liens: arises out of a court decision. Writ of Attachment. Writ of Execution. 3

4. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Garnishment. Permits a creditor to collect a debt by seizing property of the debtor held by a third party (garnishee). Typically the garnishee is the debtor’s employer. Garnishment Proceedings governed by state law.  4

5. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Garnishment. Laws Limiting the Amount of Wages Subject to Garnishment. Both federal and state laws limit the amount that can be taken out of a debtor’s take home pay. 5

6. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Creditors Composition Agreements. Creditors take less than owed on a liquidated debt. Binding on those who agree because consideration given by each depending on one another. 6

7. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Suretyship and Guaranty. Suretyship: Promise by a third person to be primarily liable for the debtor’s obligation to the creditor. Express contract between surety and the creditor. Creditor can demand payment from surety at any time after debt is due.  7

8. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Suretyship and Guaranty. Suretyship. Creditor need not exhaust all legal remedies against the debtor before holding the surety responsible. Guaranty: third person making the guaranty is secondarily liable. Guarantor is liable only after the principal debtor defaults. 8

9. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Suretyship and Guaranty Parties 9

10. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Suretyship and Guaranty. Guaranty: third person making the guaranty is secondarily liable. Statute of Frauds requires guaranty to be in writing, unless main purpose exception applies. 10

11. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Suretyship and Guaranty. Actions Releasing Surety and Guarantor: same as those that will discharge the guarantor. Defenses: Surety can use any of the principal debtor’s defenses EXCEPT incapacity, bankruptcy, or statute of limitations.  11

12. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Suretyship and Guaranty. Defenses: Surety can use his own defenses, EXCEPT fraud between debtor and surety that is unknown by creditor. Material contract modification between debtor and creditor will release a gratuitous surety and a compensated surety to the extent he suffers a loss.  12

13. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Suretyship and Guaranty. Defenses: Surrender or impairment of the Debtor’s collateral releases surety to the extent he is damaged. Release of a co-surety releases surety to the extent he is damaged. 13

14. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Laws Assisting Creditors  Suretyship and Guaranty. Rights of Surety and Guarantor. Right of Subrogation. Right of Reimbursement. Right of Contribution. – Sureties in equal amounts. – Sureties in equal amounts, one or more co-sureties missing or insolvent. 14

15. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Protection for Debtors  Exempted Real Property. Homestead: state laws permit entirely or up to a certain dollar amount.  Exempted Personal Property. Household furniture up to certain limit. Clothing and personal possessions. Vehicle for transportation.  15

16. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Protection for Debtors  Exempted Personal Property (cont’d). Certain classified animals. Equipment debtor uses in a trade or business, up to certain dollar amount. 16

17. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Bankruptcy Law  Bankruptcy Courts.  Types of Bankruptcy Relief. Chapter 7 – liquidation. Chapter 11 – reorganizations. Chapter 12 - adjustment of debts of family farmers and fishermen with regular incomes. Chapter 13 - adjustment of debts of individuals with regular incomes. 17

18. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Bankruptcy Law  Special Requirements for Consumer- Debtors. A consumer-debtor is a debtor whose debts primarily result from the purchase of personal goods. Special notices. 18

19. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 7: ordinary or straight bankruptcy. Debtor turns all assets over to the bankruptcy trustee. Trustee sells nonexempt property and distributes the proceeds to the creditors. Remaining debts are discharged. Chapter 7 - Liquidation 19

20. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Voluntary Bankruptcy. Straight bankruptcy is commenced by the filing of a voluntary or involuntary petition in bankruptcy with the bankruptcy court. If a debtor files the petition, it is voluntary.  If creditors file a petition, it is involuntary.  Chapter 7 - Liquidation 20

21. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Voluntary Bankruptcy. Prior to filing, debtor(s) must receive credit counseling within 180 days of filing, and submit certificate. Debtor must confirm accuracy of contents; attorney must file affidavit informing debtor about other chapters. Chapter 7 - Liquidation 21

22. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 7 Schedules. 1.A list of both secured and unsecured creditors, their addresses, and the amount of debt owed to each. 2.A statement of the financial affairs of the debtor. 3.A list of all property owned by the debtor, including property claimed by the debtor to be exempt.  Chapter 7 - Liquidation 22

23. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 7 Schedules. 4.A listing of current income and expenses. 5.A certificate of credit counseling (as discussed previously). 6.Proof of payments received from employers within sixty days prior to the filing of the petition.  Chapter 7 - Liquidation 23

24. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 7 Schedules. 7.A statement of the amount of monthly income, itemized to show how the amount is calculated. 8.A copy of the debtor’s federal income tax return for the most recent year ending immediately before the filing of the petition. Chapter 7 - Liquidation 24

25. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Substantial Abuse and The ‘Means Test.’ Determines whether debtor’s petition will be dismissed under Chapter 7. Basic Formula: debtor’s average monthly income is compared to median income in area where he lives. If below median income, no presumption of abuse.  Chapter 7 - Liquidation 25

26. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Substantial Abuse and The ‘Means Test.’  Applying the Means Test to Future Disposable Income: if debtor’s income is above the median income, then further calculations are necessary, including calculations of disposable income.  Chapter 7 - Liquidation 26

27. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Logic Tree for “Means Test” 27

28. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Additional Grounds for Dismissal. Conviction of violent crime or drug- trafficking. Debtor fails to pay post-petition domestic- support obligations.  Order for Relief. If filing is proper, filing itself is an order for relief. Chapter 7 - Liquidation 28

29. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Involuntary Bankruptcy. Creditors force debtor into bankruptcy. If there are 12 or more creditors, need three or more with unsecured claims totaling at least $14,425 to join in petition. If less than 3 creditors, one or more creditors with $14,425 debt may file. Chapter 7 - Liquidation 29

30. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Involuntary Bankruptcy. Debtor can challenge involuntary bankruptcy but court will enter an order for relief if: Debtor is not paying debts as they come due, OR The debtor was in receivership for the 120 days before filing the petition. Chapter 7 - Liquidation 30

31. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Involuntary Bankruptcy. Penalties for frivolous petitions against debtors, including Punitive damages. If court dismisses involuntary petition, creditors may be required to pay fees and costs, and in some cases, punitive damages. Chapter 7 - Liquidation 31

32. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Automatic Stay. The moment a petition is properly filed, an automatic stay is granted protecting debtor from all creditors. Creditors cannot commence or continue most legal actions. Damages for knowing violation of stay.  Chapter 7 - Liquidation 32

33. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Automatic Stay. Adequate Protection Doctrine: protects secured creditors from losing their security interest due to the automatic stay.  Chapter 7 - Liquidation 33

34. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Automatic Stay. Exceptions to the Automatic Stay. Domestic Support Obligations. Proceedings against Debtor related to divorce, support, custody, and maintenance. Investigations by securities regulatory agency. Chapter 7 - Liquidation 34

35. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Automatic Stay. Limitations on the Automatic Stay. Secured party can petition bankruptcy court for relief from automatic stay. Chapter 7 - Liquidation 35

36. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Bankruptcy Estate. All Debtor’s legal and equitable interests in property presently held, including community property; Property transferred in a “voidable” transaction; and Property which Debtor becomes entitled within 180 days after filing.  Chapter 7 - Liquidation 36

37. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Bankruptcy Estate. Proceeds and profits from the property of the estate. After-acquired property such as inheritances, property settlements, and life insurance death proceeds. Chapter 7 - Liquidation 37

38. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Bankruptcy Trustee. Appointed by Court: duties include collecting assets and paying creditors in order of priority. Duties for Means Testing: to determine whether there is substantial abuse. Must file statement within 10 days after 1 st meeting with creditors.  Chapter 7 - Liquidation 38

39. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Bankruptcy Trustee. Trustee’s Powers: has right to ‘strong arm’ creditors return debtor’s property to trustee. Has “Avoidance Powers” to set aside certain transfers: – Voidable Rights.  – Preferences.  – Fraudulent Transfers.  Chapter 7 - Liquidation 39

40. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Bankruptcy Trustee. Voidable Rights: Trustee can stand in shoes of debtor and assert any lack of capacity or lack of assent.  Chapter 7 - Liquidation 40

41. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Bankruptcy Trustee. Chapter 7 - Liquidation 41

42. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Bankruptcy Trustee. Preferences. Debtor not permitted to transfer property or make a payment that favors—or gives a preference—to one creditor over another. For a Trustee to recover payment, debtor must be insolvent and transferred property for preexisting debt within previous 90 days. Chapter 7 - Liquidation 42

43. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Bankruptcy Trustee. Preferences. Preferences to Insiders: avoidance power of Trustee extends to transfers made within ONE YEAR before filing.  Chapter 7 - Liquidation 43

44. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Bankruptcy Trustee. Preferences. What Constitutes a Preference? Transfers That Do NOT Constitute Preferences: payments for services within 15 days, payments made in ordinary course of business, and generally debts that are not preexisting. Chapter 7 - Liquidation 44

45. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Bankruptcy Trustee. Fraudulent Transfers. Trustee may avoid fraudulent transfers if made: (1) within two years of filing of petition, or (2) with actual intent to hinder, delay or defraud a creditor. Chapter 7 - Liquidation 45

46. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Exemptions. 1.Up to $21,625 in equity in the debtor’s residence and burial plot (the homestead exemption). 2. Interest in a motor vehicle up to $3,450. 3.Interest, up to $550 for a particular item, in household goods and personal effects (up to $11,525).  Chapter 7 - Liquidation 46

47. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Exemptions. 4.Interest in jewelry up to $1,450. 5.Interest in any other property up to $1,150, plus any unused part of the $21,625 homestead exemption up to $10,825. 6.Interest in any tools up to $2,175. 7.A life insurance contract owned by the debtor. Chapter 7 - Liquidation 47

48. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Exemptions. 8.Certain interests in accrued dividends and interest not to exceed $11,525. 9.Professionally prescribed health aids. 10.Social Security and other benefits. 11.The right to receive certain personal-injury and other awards up to $21,625. Chapter 7 - Liquidation 48

49. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  The Homestead Exemption. 2005 Bankruptcy Reform Act: Places limits on the amounts of home equity debtors can shield from creditors. Debtor must have lived in state two years prior to filing. Maximum equity: $146,450, if within previous 3.5 years of filing. Chapter 7 - Liquidation 49

50. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Creditors’ Meetings and Claims. Creditors’ Meeting: Trustee calls meeting of creditors, to examine debtor under oath. Creditors’ Claims: to receive a portion of debtor’s estate, each creditor must file a proof of claim. Necessary if there is any dispute. Chapter 7 - Liquidation 50

51. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Distribution of Property. Debtor must file a statement of intention regarding secured collateral. Distribution to Secured Creditors. Distribution to Unsecured Creditors: paid in the order of their priority (see page 346). If any amount is left over, it is returned to debtor. Chapter 7 - Liquidation 51

52. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Distribution of Property 52

53. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Discharge. Exceptions to Discharge: discharge of a debt may be denied (see page 366). Objections to Discharge: court may deny claims based on debtor’s conduct. Effect of Discharge: voids, or sets aside any judgment and prohibits any collector action.  Chapter 7 - Liquidation 53

54. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Reaffirmation of Debt. Debtor agrees to pay a debt in bankruptcy by executing a reaffirmation agreement. Reaffirmation Process: before discharge. Reaffirmation Disclosures. Chapter 7 - Liquidation 54

55. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Chapter 11-Reorganization  Chapter 11—Corporations. Debtor and Creditors formulate a plan under which the Debtor pays a portion of its debts and is discharged of the rest. Same debtors as are eligible under Chapter 7.  55

56. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Chapter 11-Reorganization  “Fast Track” Chapter 11 for small business debtors whose liabilities do not exceed $2 million and who do not own or manage real estate.  Workouts.  Focus is on the Best Interests of the Creditors.  56

57. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Chapter 11-Reorganization  Debtor in Possession (DIP): business operates under court supervision. DIP has same powers as trustee. But court may appoint trustee (receiver) with ‘strong arm’ powers.  Creditors Committees.  57

58. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Chapter 11-Reorganization  Reorganization Plan. Plan must be fair and equitable to all parties. Filing the Plan: within 120 days after date relief order. Acceptance and Confirmation of the Plan. Discharge: binding upon confirmation. 58

59. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 12 – Family Farmers and Fishermen. “Family Farmer”: 50% of gross income comes from farming and whose debts are 80% farm related. Family Fisherman means 50% of gross income dependent on commercial fishing operations. Bankruptcy Relief under Chapter 12 and Chapter 13 59

60. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 12 – Family Farmers and Fishermen. Filing the Petition: similar to process under Chapter 13. Content and Confirmation of the Plan: Confirmed or denied within 45 days of filing, same as repayment plan. Unsecured creditors. Bankruptcy Relief under Chapter 12 and Chapter 13 60

61. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 13-Individual Repayment Plan. Not for partnerships, corporations. For individuals with regular income who owe fixed unsecured debts of <$360,475 or fixed secured debts of <1,081,400.  Bankruptcy Relief under Chapter 12 and Chapter 13 61

62. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 13-Individual Repayment Plan. Filing the Petition: within 120 days after order of relief. Good Faith Requirement. Turn over future earnings to Trustee. Full Payment of priority claims. Identical treatment of claims within a class. Bankruptcy Relief under Chapter 12 and Chapter 13 62

63. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 13-Individual Repayment Plan. The Repayment Plan, must contain: 1.Turning over to trustee such future earnings or income of debtor as necessary for execution of the plan. 2.Full payment through deferred cash payments of all claims entitled to priority, such as taxes.  Bankruptcy Relief under Chapter 12 and Chapter 13 63

64. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 13-Individual Repayment Plan. The Repayment Plan, must contain: 3.Identical treatment of all claims within a particular class. CASE 12.2 R ANSOM V. FIA C ARD S ERVICES, N.A. (2011). CASE 12.2 R ANSOM V. FIA C ARD S ERVICES, N.A. (2011). How would you have decided this case, and why? Bankruptcy Relief under Chapter 12 and Chapter 13 64

65. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 13-Individual Repayment Plan. Confirmation of the Plan: court may refuse to accept or accept with “cram down.” Bankruptcy Relief under Chapter 12 and Chapter 13 65

66. © 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.  Chapter 13-Individual Repayment Plan. Discharge: after debtor has completed all payments, court grants discharge. CASE 12.3 U NITED S TUDENT A ID F UNDS, I NC. V. E SPINOSA (2010). CASE 12.3 U NITED S TUDENT A ID F UNDS, I NC. V. E SPINOSA (2010). Why didn’t the Court hold that Espinosa’s plan was ‘void’? Bankruptcy Relief under Chapter 12 and Chapter 13 66