1. No Assignments this week!! Just the Discussion board!! Yay – no Homework!!!!

2. There is a quiz – so make sure you take your quiz! Please remember to….

3. Welcome to week #7! :-) This week is a normal week….meaning no papers are due… so just stay on top of the Discussion Board and do your postings….and make sure to take your Week #7 quiz!! Last week we focused on the Chapter 7 Bankruptcy….this week we will cover Chapter 11 Bankruptcy….

4. Chapter 7 bankruptcy is initiated to immediately discharge the debtor from all of his debts by selling off most of his assets. In contrast, a Chapter 11 bankruptcy is initiated to rehabilitate the debtor.

5. A Chapter 11 proceeding does not require the debtor to sell most assets. Rather, it permits the debtor to reorganize his or her financial affairs and to pay creditors over an extended period of time.

6. By using the Chapter 11 proceeding, the debtor may continue operating a business without serious interruption. As a result, most Chapter 11 filings are by corporations that wish to stay in business.

7. Chapter 11 is a reorganization proceeding available to any debtor qualified to be a Chapter 7 debtor.

8. New Requirements under BAPCPA The chapter 11 debtor does not have to be subjected to the means test in order to be eligible for filing. He also does not have to attend pre-discharge debtor education sessions.

9. But, to file under chapter 11, the individual debtor must attend pre-filing credit counseling as is required of chapter 7 debtors. Furthermore, the chapter 11 debtor must make the same financial disclosures as the chapter 7 debtor.

10. Chapter 11 Bankruptcy Petition In an initial interview with a client, the attorney or you will gather the following information to complete the Chapter 11 bankruptcy petition: Name Address Social Security Number Complete list of debtors Credit reports—if the clients are unsure of their creditor information List of real and personal property Wage information Dependents Budget of monthly expenses

11. Filing a Chapter 11 Bankruptcy Petition Creditors can file a plan within the first four months of the debtor filing for bankruptcy. The plan is also filed with a disclosure statement, which includes: Prior History and Cause of the Filing — States whether your debtor-client has filed for bankruptcy in the past and what caused them to file for bankruptcy. Assets and Liabilities — Provides information about your client's assets and liabilities. Income and Expenses — Provides information about your client's income and expenses. Treatment of Creditors — States whether the creditors will be paid in full or in part. Liquidation Analysis — States whether your client will have to liquidate or sell assets. Projections of Earnings — Provides information about your client's projected future income. Tax Consequences — States how filing for bankruptcy and the Chapter 11 plan will affect the business with reference to taxes. Discussion of Options — Provides information about your client's plans to pay off debts.

12. Voluntary Chapter 11 Bankruptcy The Chapter 11 plan places the creditors with similar types of claims— unsecured, priority, and so on—into similar groups. Such a group of creditors with similar types of claims is called a class. The court allows the creditors with impaired claims to vote on the plan. A class is impaired if the plan alters its legal rights. So if a debtor owes $10,000 to XYZ Credit Card Company and a plan allows for payment of $1,000, the legal rights of XYZ are impaired because it receives partial payment of the debt owed to it. For the court to confirm the plan, the creditors actually voting must approve the plan by a numeric majority and by a two-thirds majority in dollar amount of claims. At least one impaired class must approve the plan. If a class votes against the plan, the court might still approve the plan if it finds that the plan is fair and equitable and does not discriminate.

13. A Chapter 11 plan often calls for the debtor to remain in business and to repay the creditors from future earnings, borrowings, or sale of assets. In Chapter 11 priority claims, which include recent tax claims, secured claims need to be paid in full with interest. Unsecured non-priority claims need to be paid a dividend at least equal to what they would receive if it were a Chapter 7 case. So if ABC Corporation is filing for Chapter 11 bankruptcy with priority, secured, and unsecured claims, the priority and secured claims will be paid in full along with the interest owed. The unsecured creditor will only be paid a portion of the balance owed. If ABC Corporation owed its credit card company $1,000, the credit card company will receive only $100.

14. The court will appoint a Committee of Unsecured Creditors and a Committee of Equity Security Holders to monitor the debtor's progress on the plan and payments.

15. Unlike the other bankruptcy chapters a debtor will act as the Trustee in Chapter 11 bankruptcy. The court can appoint a Trustee only if cause is shown such as mismanagement of funds by the debtor. Instead of appointing a Trustee as in previous bankruptcy chapters, the court will appoint a Committee of Unsecured Creditors and a Committee of Equity Security Holders in Chapter 11 bankruptcy.

16. Committee of Unsecured Creditors A Committee of Unsecured Creditors is a group of the seven largest unsecured creditors. Unsecured creditors are creditors who do not have an interest in or a claim to a debtor's property. The committee may consult with the debtor on the administration of the case, investigate the conduct of the debtor, investigate the operation of the business, and participate in the formulation of a plan. With the court's approval the Committee of Unsecured Creditors can hire an attorney or other professionals to assist in performing the committee's duties. The Committee of Unsecured Creditors ensures the proper management of the debtor's business.

17. Committee of Equity Security Holders A Committee of Equity Security Holders is a group of the seven largest secured creditors. Secured creditors such as a mortgage company have an interest in the debtor's property. These committees are established to ensure that a Chapter 11 plan is filed correctly and to monitor the debtor's progress in paying off creditors. As a paralegal you might file motions on behalf of clients. As a result it is necessary to learn about the motions filed under Chapter 11 bankruptcy. The next lecture discusses motions filed under Chapter 11 bankruptcy.

18. Motions…. Unlike motions for previous bankruptcy chapters, motions in Chapter 11 bankruptcy are specific to the issues that a debtor deals with. Similar to previous bankruptcy chapters, the debtor can file a motion to dismiss the case, to convert the case to another chapter, or to ask permission to use cash collateral. As a paralegal you'll be responsible for preparing a motion for the attorney on behalf of a client. After you prepare these documents the attorney will review them and make the necessary corrections or changes. After making the changes the attorney will sign the original documents for mailing, or you'll prepare the documents for electronic filing. You need to be familiar with the bankruptcy software that your office uses to file documents electronically.

19. Confirming Plans The Chapter 11 plan includes a confirmation hearing. The hearing will either confirm or modify the plan. The court will confirm the plan as long as the plan meets the requirements of creditors. If the creditors object to the plan, the court can approve the plan as long as it meets standards of fairness. However, if the court finds the appeal of the creditors convincing, it might ask the debtor to modify the plan. The next section of this lecture discusses how to modify plans.

20. Modifying Plans…. As a paralegal, you'll be responsible for modifying the plan under the supervision of your attorney. You can modify the plan any time before the confirmation hearing. The plan can be modified after the confirmatory hearing if the debtor has not made some of the payments in the plan. However, this modified plan will not automatically become the final plan. The modified plan can become the final plan only after another confirmation hearing for the modified plan.

21. Discharging Debts In a Chapter 11 case, the court does not issue a discharge order although some courts follow the practice of issuing a discharge order in cases involving an individual. The debtor needs to make the payments in the plan and is bound by the provisions of the plan of reorganization after the plan is confirmed by the court. The confirmed plan creates new contractual rights that replace or supersede pre-bankruptcy contracts.

22. There are of course exceptions to the general rule that an order confirming a plan operates as a discharge order. Confirmation of a plan of reorganization will discharge any type of debtor — corporation, partnership, or individual — from most types of debts. However, it does not discharge an individual debtor from a debt that is non-dischargeable such as back taxes. These taxes are unpaid taxes owed to the Internal Revenue Service of a state. Confirmation does not discharge the debtor if the plan is a liquidation plan, as opposed to a reorganization plan, and the debtor is not an individual. As a paralegal you'll have the exciting job of notifying your client about the discharge of debts. This will close the bankruptcy case!!

23. Chapter 11 Summary: You learned that Chapter 11 bankruptcy allows liquidation or reorganization of assets. You discussed how to prepare and file a Chapter 11 bankruptcy petition. You also learned how to file a Chapter 11 plan. You learned that under Chapter 11 bankruptcy, a debtor acts as the Trustee unless the court appoints a Trustee because of the inappropriate behavior of the debtor. Instead of appointing a Trustee the court appoints a Committee of Unsecured Creditors and a Committee of Equity Security Holders. You also learned about the various motions filed under Chapter 11 bankruptcy.