1. Chapter 36 Bankruptcy Twomey, Business Law and the Regulatory Environment (14th Ed.)

2. (c) 2000 West Legal Studies Chapter 362 PROCEEDINGS Chapter 13: Extended Time Payment Chapter 7: Liquidation Chapter 11: Reorganization CASES Involuntary: Commenced by Creditors Voluntary: Commenced by Debtor(s) vs. Types of Bankruptcy Proceedings and Cases [36-1]

3. (c) 2000 West Legal Studies Chapter 363 Declaration of Bankruptcy [36-2]

4. (c) 2000 West Legal Studies Chapter 364 Steps in a Bankruptcy Case [36-3] Priority of Creditors PetitionDismissal Order of Relief Appt. of Trustee Collection of Assets Evaluation of Claims Discharge Sale and Payment Exemptions Valid Voidable Preference List of Creditors Creditors 1 Meeting Executory Contracts (60 days) Property Rights (180 days) Social Security Disability Alimony VOIDABLE PREFERENCES 1. 1yr. fraud 2. 1yr. insolvent 2 and unfair 3. 1yr. insider 4. 90 days—insolvent—not ordinary course of business. 5. Security for antecedent debt OK (not avoidable) $600 consumer debt contemporaneous exchange; regular payments 1 Automatic with Involuntary Petition 2 Insolvent = “bankruptcy” sense (liabilities > assets) Voluntary Involuntary

5. (c) 2000 West Legal Studies Chapter 365 Priority of Claims in Bankruptcy [36-4] 1.Secured creditors (to the extent of value in the collateral) 2.Administration costs Attorneys, Accountants, Trustees, Appraisers 3.Claims arising in ordinary course of business after bankruptcy petition is filed but before order of relief (involuntary) 4.Employee wages (not officers), salaries, commission up to $4,300/person for 90 days preceding petition 5.Contributions to benefit plans $4,300 maximum (reduced by wages received) 180 days preceding bankruptcy 6.Farmers and Fishermen 7.Claims by consumer creditors up to $1,950 8.Child support and spousal maintenance 9.Taxes and Penalties 10. All other unsecured debts

6. (c) 2000 West Legal Studies Chapter 366 1.Fraudulent transfers within 1 year 2.Failure to keep financial records 3.False testimony 4.Depletion of assets 5.Refusal to obey court order 6.Taxes 7.Student loans 8.Fraudulent agreements 9.Drunk driving 10.Alimony 11.Child support 12.Unscheduled debts 13. Willful injury Non-Dischargeable Debts and Grounds in Bankruptcy [36-5]

7. (c) 2000 West Legal Studies Chapter 367 Reorganization under Chapter 11 [36-6] debtor or party in interest or committee of creditors File plan for reorganization of the debtor Identifies ownership interests and debts not affected by adoption of the plan Identifies ownership interests and debts affected by adoption of the plan Specifies what will be done to interests and claims affected Confirmation of plan—Approval by court Owners and creditors have only such rights as are specified in the plan

8. (c) 2000 West Legal Studies Chapter 368 Chapter 36 Summary Jurisdiction over bankruptcy cases is in U.S. district courts, which may refer all cases and related proceedings to adjunct bankruptcy courts. Three bankruptcy proceedings are available: liquidation, reorganization, and extended-time payment.

9. (c) 2000 West Legal Studies Chapter 369 A liquidation proceeding under Chapter 7 may be either voluntary or involuntary. A voluntary case is commenced by the debtor’s filing a petition with the bankruptcy court. An involuntary case is commenced by the creditors’ filing a petition with the bankruptcy court. If there are 12 or more creditors, at least 3 whose unsecured claims total $10,775 or more must sign the involuntary petition. Chapter 36 Summary [2]

10. (c) 2000 West Legal Studies Chapter 3610 If there are fewer than 12 creditors, any creditor whose unsecured claim is at least $10,775 may sign the petition. If the debtor contests the bankruptcy petition, it must be shown that the debtor is not paying debts as they become due or that within 120 days before the date of the filing of the petition a custodian had been appointed for the debtor’s property. Chapter 36 Summary [3]

11. (c) 2000 West Legal Studies Chapter 3611 An automatic stay prevents creditors from taking legal action against the debtor after a bankruptcy petition is filed. The trustee in bankruptcy is elected by the creditors and is the successor to, and acquires the rights of, the debtor. In certain cases, the trustee can avoid transfers of property to prevent creditors from satisfying their claims. Preferential transfers may be set aside. A transfer for a present consideration, such as a cash sale, is not a preference. Chapter 36 Summary [4]

12. (c) 2000 West Legal Studies Chapter 3612 Bankruptcy law regulates the way creditors present their claims and how the assets of the debtor are to be distributed in payment of the claims. Chapter 36 Summary [5]

13. (c) 2000 West Legal Studies Chapter 3613 Secured claims are not affected by the bankruptcy of the debtor. Unsecured claims are paid in the following order of priority: (1) administrative expenses; (2) claims arising in the ordinary course of the debtor’s business; (3) wage claims, limited to $4,300 for each claimant and to wages earned within 90 days before the filing of the petition; (4) claims for contributions to employee benefit plans; (5) claims by consumer creditors; (6) certain taxes; and (7) general creditors. Certain property of the debtor is exempt from the claims of creditors. Chapter 36 Summary [6]

14. (c) 2000 West Legal Studies Chapter 3614 The decree terminating bankruptcy proceedings is generally a discharge that releases the debtor from most debts. Certain debts, such as income taxes, student loans, loans obtained by use of a false financial statement, alimony, and debts not duly scheduled, are not discharged. Chapter 36 Summary [7]

15. (c) 2000 West Legal Studies Chapter 3615 Chapter 36 Summary [8] Individuals, partnerships, and corporations in business may be reorganized so that the business may continue to operate. A plan for reorganization must be approved by the court. Individual debtors with a regular income may adopt extended-time payment plans for the payment of debts. A plan for extended-time payment must also be confirmed by the court.

16. (c) 2000 West Legal Studies Chapter 3616 Federal, state, or local law may not discriminate against anyone on the basis of a discharge in bankruptcy. Chapter 36 Summary [9]