Black Letter Outline on Bankruptcy and Related Law

, by Nickles, Steve H.; Epstein, David G.

Note: Supplemental materials are not guaranteed with Rental or Used book purchases.

ISBN: 9780314065797 | 0314065792
Cover: Paperback
Copyright: 8/14/2006

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Presents an analysis of the debtor/creditor relationship before bankruptcy, state-created alternatives to bankruptcy, bankruptcy procedure, as well as the aspects of collecting and distributing property once the bankruptcy process has begun. Discover how the debtor is protected once the matter is filed with the bankruptcy courts. Reveals alternatives to liquidation bankruptcy. A must-have for the student wishing to have a comprehensive and insightful analysis of bankruptcy and creditor rights.

Capsule Summary

(56)

Perspective

(5)

Extra Judicial Collection Devices

Common Law Theories and Limitations

(1)

Defamation

(1)

Invasion of Privacy

(1)

Public Disclosure of Private Facts

(1)

Wrongful Intrusion on Solitude

(1)

Emotional Distress

(1)

Federal Fair Debt Collection Practices Act (FDCPA)

(2)

Scope

(1)

Meaning of Consumer Debt

(1)

Meaning of ``Debt Collector''

(1)

Limits on Debt Collectors

(1)

Contacting Third Parties

(1)

Contacting the Debtor

(1)

Verifying the Debt

(1)

Unfair Conduct

(1)

Remedies

(1)

Review Questions

(3)

Judicial Debt Collection

Exempt Property

(3)

Personal Property

(1)

Real Property

(1)

Procedure

(1)

Limits on Exemptions

(1)

Federal Court

(1)

Federal Law

(1)

Federal Exemptions

(1)

Restrictions on Garnishment

(1)

Amount

(1)

Loss of Employment

(1)

Relation to State Law

(1)

Prejudgment Remedies

(13)

Attachment

(1)

Origin and Purpose

(1)

Limits on Attachment

(1)

Kind of Action

(1)

Grounds Necessary

(1)

Bond Required

(1)

Due Process

(1)

Procedure for Attachment

(1)

Levy

(1)

Advantages of Attachment

(1)

Security

(1)

Priority

(1)

Jurisdiction

(1)

Leverage

(1)

Hazards of Attachment

(1)

Fees

(1)

Liability for Wrongful Attachment

(1)

Bankruptcy of the Debtor

(1)

Terminating an Attachment

(1)

Prejudgment Garnishment

(1)

How It Works

(1)

Relation to Attachment

(1)

Replevin

(1)

Nature of the Remedy

(1)

Limited Availability

(1)

Receivership

(1)

Nature of the Remedy

(1)

When Receiver Appointed

(1)

Powers of Receiver

(1)

Effect on Other Creditors

(1)

No New Lien

(1)

Other Creditors Stayed

(1)

Constitutional Due Process Limitations on Prejudgment Remedies

(1)

The Cases

(1)

Sniadach

(1)

Fuentes

(1)

Mitchell

(1)

North Georgia

(1)

Doehr

(1)

A Synthesis of the Cases

(1)

Obtaining a Judgment

(1)

Postjudgment Collection Concerns

(15)

Judgment Liens

(1)

Source of Law

(1)

Mechanics of Obtaining a Judgment Lien

(1)

Same State

(1)

Federal Court

(1)

Different States

(1)

Scope of the Judgment Lien

(1)

Real Property

(1)

After-Acquired Property

(1)

Enforcement of Judgment Lien

(1)

Duration of Judgment Lien

(1)

Execution

(1)

Nature of the Remedy

(1)

Lien

(1)

Procedure

(1)

Issuance

(1)

Levy

(1)

Sale

(1)

Chart Comparing of Postjudgment Liens on the Debtor's Real Property With Postjudgment Liens on the Debtor's Personal Property

(1)

Creditor's Bill

(1)

Nature of the Remedy

(1)

Reach of the Remedy and Lien

(1)

Possible Uses

(1)

Limitations

(1)

Supplementary Proceedings

(1)

History

(1)

How Used

(1)

Not Used Where Property Transferred

(1)

Execution Sales

(1)

Role of Execution Sales

(1)

Type of Sale

(1)

Insuring Fair Sale

(1)

Appraisal Statutes

(1)

Redemption

(1)

Judicial Review

(1)

Priority of Purchasers at Sale

(1)

General Rule: Caveat Emptor

(1)

Exceptions for Void Sale

(1)

Garnishment

(1)

Role of the Remedy

(1)

Parties to the Proceeding

(1)

Procedure

(1)

Lien

(1)

Review Questions

(5)

Fraudulent Transfers

What Is Fraudulent Transfer Law?

104

(2)

Statute of 13 Elizabeth

104

(1)

``Badges of Fraud''

104

(1)

Early Common Law: Twyne's Case

104

(1)

Acceptance by the States

105

(1)

Preference Is Not a Badge of Fraud

105

(1)

Modern Uniform Laws

106

(1)

UFCA

106

(1)

UFTA

106

(1)

Which Transfers Are Fraudulent Transfers?

106

(2)

Actual Fraud

106

(1)

Constructive Fraud

107

(1)

Insolvency

107

(1)

Reasonable Equivalent Value

107

(1)

Liens

107

(1)

Preferring an Insider

108

(1)

Fraudulent Obligations Are Also Covered

108

(1)

What Are the Consequences of Determining That a Transaction Is a Fraudulent Transfer?

108

(3)

Who Has a Remedy?

109

(1)

Not the Debtor

109

(1)

Only Some Creditors

109

(1)

What Are the Remedies?

110

(1)

Getting the Property That was Transferred by Voiding the Transfer

110

(1)

Getting Money Instead

110

(1)

Against Whom Can a Recovery Be Had?

111

(1)

Looking Back: Fraudulent Transfer and Garnishment

111

(1)

Looking Ahead: Fraudulent Transfer Law and Bankruptcy

111

(1)

Review Questions

112

(3)

Creditors with Special Rights

Consensual Liens

115

(8)

Article 9 Security Interests

116

(1)

Terminology of Article 9

116

(1)

Creation and Attachment

117

(1)

Perfection

117

(1)

Filing

117

(1)

Organization of Article 9

117

(1)

Section 9-317

117

(1)

Part 6 of Article 9

118

(1)

Meaning of Default

118

(1)

Rights Upon Default

118

(1)

Ignore the Security Interest

119

(1)

Notify Account Debtors

119

(1)

Repossess and Sell the Collateral

119

(3)

Mortgages

122

(1)

Redemption

122

(1)

Strict Foreclosure

122

(1)

Sale

122

(1)

Judicial Sale

122

(1)

Private Sale

123

(1)

Liens by Operation of Law

123

(2)

Common Law Liens

123

(1)

Specific Versus General

124

(1)

Enforcement by Possession

124

(1)

Effect of Loss of Possession

124

(1)

Equitable Liens

125

(1)

State Statutory Liens

125

(1)

Federal Claims

126

(11)

Federal Priority Provision

126

(1)

When It Applies

127

(1)

How It Applies

127

(1)

Affect on Liens

127

(1)

Choatenes

128

(1)

Federal Tax Lien

128

(1)

When Does the Federal Tax Lien Arise?

128

(1)

Time of Assessment

129

(1)

Notice

129

(1)

Relation Back

129

(1)

No Filing Required as Against the Debtor

130

(1)

What Property is Covered by a Federal Tax Lien?

130

(1)

After-Acquired Property

130

(1)

Exempt Property

130

(1)

How Can the Tax Lien be Enforced?

130

(1)

Levy and Sale

130

(1)

Notice and Right to Hearing

130

(1)

What Are the Rights of a Third Party Who Buys Property From the Taxpayer After the Tax Lien Arises?

131

(1)

Sale Before Assessment

131

(1)

Sale Before Filing

131

(1)

Sale After Filing

132

(1)

What Are the Rights of the Taxpayer's Other Creditors?

132

(1)

Choate Liens Win

132

(1)

Unfiled Tax Liens Lose

133

(1)

Security Interest

133

(1)

Lien Creditor

134

(1)

Relation to Choateness

134

(1)

Examples

135

(1)

Circuity of Priority Problems

136

(1)

Other Federal Claims

136

(1)

Setoff

137

(1)

Recoupment

138

(1)

Review Questions

138

(4)

Debtor's State Law Remedies A/K/A Collective Creditor Action

Assignments for the Benefit of Creditors

142

(4)

Nature of the Remedy

142

(1)

Assignee's Role

142

(1)

Assignee's Duties

142

(1)

Relation to Fraudulent Conveyance Law

143

(1)

Assignment for Creditors Not Fraudulent Per Se

143

(1)

Effect of Reserving Some Interest

143

(1)

Partial Assignment

143

(1)

No Discharge

144

(1)

Preferential Payments

144

(1)

Statutory Regulation

144

(1)

Recording

144

(1)

Prohibiting Preferences

145

(1)

Avoiding Powers

145

(1)

Relation to Bankruptcy

145

(1)

Workouts A/K/A Composition and Extension

146

(3)

Nature of the Remedy

146

(1)

Governed by Contract Law

146

(1)

Why Creditors Reluctant to Participate

146

(1)

Effect on Non-Participating Creditors

147

(1)

Preferring Some Creditors

147

(1)

Compared to Bankruptcy

148

(1)

Why Workout Rather Than Chapter 11

148

(1)

Why Chapter 11 Rather Than Workout

148

(1)

Compared to Assignment for Benefit of Creditors

148

(1)

Review Questions

149

(3)

Bankruptcy: An Overview

Differences Between Bankruptcy and State Law

152

(1)

The Law of Bankruptcy

153

(2)

The Bankruptcy Code

153

(1)

Bankruptcy Rules of Procedure and Forms

154

(1)

Role of State Law

154

(1)

Forms of Bankruptcy Relief

155

(1)

Liquidation

155

(1)

Reorganization

156

(1)

Bankruptcy Courts and Bankruptcy Judges

156

(2)

Under the Bankruptcy Act of 1898

156

(1)

Under the Present Law

157

(1)

Bankruptcy Court Part of District Court

157

(1)

Grant of Jurisdiction Under § 1334

157

(1)

Role of Bankruptcy Judge Under § 157

158

(1)

Trustees

158

(2)

Chapter 7 Cases

158

(1)

Chapter 13 Cases

159

(1)

Chapter 11 Cases

159

(1)

United States Trustees

160

(1)

Review Questions

160

(4)

Commencement, Conversion, and Dismissal of a Bankruptcy Case

Voluntary Cases

164

(3)

Who Can File

164

(1)

By Chapter

164

(1)

Chapter 7

164

(1)

Chapter 11

164

(1)

Chapter 13

165

(1)

Debts Excluded from the Debt Limit

165

(1)

Partly Secured Debts

165

(1)

Global Limitation on Individuals in Any Chapter

166

(1)

Other Filing Issues

166

(1)

Insolvency Not Required

166

(1)

Joint Filing

166

(1)

Frequent Filing

166

(1)

Filing Fee

166

(1)

Commencement

167

(1)

Involuntary Cases

167

(2)

Limitations on Involuntary Petitions

167

(1)

Effect of Filing an Involuntary Petition

167

(1)

Grounds for Relief

167

(1)

Debtor Not Paying Debts

167

(1)

Receiver or the Like Having Taken Possession of Debtor's Property

168

(1)

What Happens During the Gap Period Between Filing and Order of Relief

168

(1)

Court May Appoint Interim Trustee

168

(1)

If No Interim Trustee Appointed

168

(1)

Debtor's Remedies if Petition Dismissed

168

(1)

Foreign Debtors

169

(1)

Commence a Regular Case

169

(1)

Commence an Ancillary Case

169

(1)

Conversion of Cases

169

(1)

Dismissal

169

(5)

Chapter 7 Cases

170

(1)

Section 707(a)---``For Cause''

170

(1)

Section 707(b)---``Abuse''

170

(1)

Three Alternative Tests

170

(1)

When the Means Test Does Not Apply

170

(1)

When the Means Test Does Apply

171

(1)

If the debtor fails the test

172

(1)

If the debtor passes the test

172

(1)

Section 707(c)(3)---Crime Victim

173

(1)

Chapter 11 Cases

173

(1)

Chapter 13 Cases

173

(1)

Foreign Bankruptcy Cases

173

(1)

Review Questions

174

(2)

Stay of Collection Actions and Acts

Time Stay Arises

176

(1)

Scope of the Stay

177

(2)

Section 362

177

(1)

Litigation

177

(1)

Informal Collection Efforts

177

(1)

Secured Creditors

177

(1)

Exceptions

177

(1)

Third Parties Not Protected

178

(1)

Section 1301

178

(1)

Section 105

178

(1)

Not Automatic

178

(1)

Not Limited by Other Restrictions

179

(1)

Termination of the Stay

179

(1)

With Respect to Particular Property

179

(1)

Otherwise and Generally

179

(1)

Frequent Filings

180

(1)

Relief From the Stay

180

(6)

Section 362(d)(1)

180

(1)

``Cause'' In General

180

(1)

``Lack of Adequate Protection'' in Particular

180

(1)

Party in Interest

181

(1)

What Is Protected

181

(1)

Loss in Value Through Depreciation

181

(1)

Not Lost Opportunity

181

(1)

How Is It Protected

182

(1)

Payments

182

(1)

Liens

182

(1)

``Indubitable Equivalent''

183

(1)

When Adequate Protection Is Inadequate

183

(1)

Section 362(d)(2)

184

(1)

No Equity

184

(1)

Property Not Necessary to Effective Reorganization

184

(1)

Not Necessary

184

(1)

Effective Reorganization

185

(1)

Section 362(d)(3)

185

(1)

Meaning of Debt Limit ``Single Asset Real Estate''

185

(1)

Basis for Relief

185

(1)

Relationship of Section 362(d) Subsections

186

(1)

Burden of Proof in Section 362(d) Litigation

186

(1)

Consequences of Violating the Stay

186

(3)

Legal Effect of Conduct in Violation of the Stay: Void Ab Initio

186

(1)

Damages for Violating the Stay

187

(1)

Section 362(k)

187

(1)

Who is the Plaintiff?

187

(1)

Who is the Defendant?

187

(1)

What is the Wrong?

187

(1)

What are the Damages?

187

(1)

Immunity from Liability for Damages

188

(1)

Creditors Without Proper Notice

188

(1)

Sovereign Immunity

188

(1)

Review Questions

189

(2)

Property of the Estate

Why Is Property of the Estate an Important Concept?

191

(2)

Chapter 7 Cases

191

(1)

Reorganization Cases

192

(1)

Supervision of Property in Chapter 11 and 12 Cases

192

(1)

Supervision of Property in Chapter 13 Cases

192

(1)

Basis for Determining Dividends in Chapters 11, 12, and 13

193

(1)

Other Importance of the Concept

193

(1)

What Does Property of the Estate Include?

193

(4)

What Is Included in the Phrase ``Interests of the Debtor in Property as of the Commencement of the Case''?

193

(1)

Section 541(a)(1)

193

(1)

What ``All. . .Interests'' Includes

194

(1)

Limited Interests

194

(1)

Generally, Not Pre-Petition Interests

194

(1)

What Else Is Included in Property of the Estate?

195

(1)

``Any interest in property that the trustee recovers,'' Section 541(a)(3)

195

(1)

``Proceeds, product, offspring, rents or profits of or from property of the estate,'' Section 541(a)(6)

195

(1)

``Earnings from services'' and Other Property That the Debtor Acquires After the Filing of a Chapter 11 or Chapter 13 Petition, Sections 1115 and 1306

196

(1)

Certain Other After-Acquired Property

196

(1)

What Is Excluded From Property of the Estate?

196

(1)

Inalienable Trusts

196

(1)

Education Accounts

196

(1)

Exempt Property

197

(1)

Review Questions

197

(3)

Exemptions

What Property Is Exempt?

200

(3)

Debtor's Choice

200

(1)

Section 522(b)(3)---Property Exempt Under State Law and Federal Law

200

(1)

State-law exemptions

200

(1)

Tenancy-by-the-Entirety Property

200

(1)

Non-Bankruptcy Federal Exemptions

200

(1)

Retirement Funds

201

(1)

Section 522(b)(2)---Property Exempt under Section 522(d)

201

(1)

Choice of Law

201

(1)

Waivers of Exemptions

202

(1)

Timely Objecting to Exemptions

202

(1)

Pre-Petition Conversions of Property---Bankruptcy Estate ``Planning''

202

(1)

What Is the Significance in Bankruptcy of Exempt Property?

203

(4)

General

203

(1)

Section 522(f)

203

(1)

Judicial Liens

204

(1)

Consensual Liens

205

(1)

When 522(f)(1)(B) Applies to Such Liens

205

(1)

When 522(f)(1)(B) Does Not Apply

205

(1)

Does Not Apply to Purchase Money Liens

205

(1)

Does Not Apply to Possessory Liens

205

(1)

Does Not Apply to Usually Important Stuff

205

(1)

Further Limit---Section 522(f)(3)

206

(1)

Section 722

206

(1)

Review Questions

207

(3)

Avoidance of Prebankruptcy Transfers

Basic Issues

210

(2)

Transfer Means Voluntary and Involuntary

210

(1)

When Avoidance Is an Issue

211

(1)

Procedure

211

(1)

What Are the Consequences of Avoiding a Transfer?

212

(2)

Recovering Transferred Interest for the Estate

212

(1)

Affects Ammount of Claim

212

(1)

Affect on Transfer of Interest for Security

213

(1)

Recovering Value

213

(1)

From Initial Transferee

213

(1)

From Later Transferees

214

(1)

Preferences

214

(16)

Elements of a Preference

214

(1)

``Transfer of an Interest of the Debtor in Property''

215

(1)

Transfers by Other People Not Preferences

215

(1)

Earmarking Doctrine

215

(1)

``Transfer ... Made Within 90 Days Before ...''

216

(1)

And Perfection

216

(1)

And Insiders

216

(1)

Preferential Effect

217

(1)

Applying Section 547(b)

217

(2)

Indirect Preferences

219

(1)

Important When Transferee Insolvent

220

(1)

Important When Actual Transfer Not Avoidable

220

(1)

Levit Case

220

(1)

Amendment to Section 550 Overrules Deprizio

221

(1)

Newer Amendment Finishes the Job

221

(1)

Exceptions (Section 547(c))

222

(1)

Contemporaneous New Value

222

(1)

Ordinary Course Payments

222

(1)

Enabling Loans

223

(1)

Subsequent Credit

224

(1)

Floating Liens

224

(1)

How After-Acquired Interest Is a Preference

225

(1)

How 547(c)(5) Protects the After-Acquired Interest

226

(1)

Two-Step Test

226

(1)

Applications of 547(c)(5)

226

(2)

Statutory Liens

228

(1)

Payment of Domestic Obligations

229

(1)

Payment of Consumer Debts

229

(1)

Payment of Debts by Non-Consumer

229

(1)

Setoffs

230

(5)

General Rules

230

(1)

Under State Law

230

(1)

Right of Setoff Generally Preserved in Bankruptcy

230

(1)

Exceptions

231

(1)

``Mutual Debt''

231

(1)

``Arose Before the Commencement of the Case''

231

(1)

``Disallowed,'' Section 553(a)(1)

231

(1)

``Acquired'' Claims, Section 553(a)(2)

231

(1)

Build-ups, Section 553(a)(3)

232

(1)

Improvement in Position, Section 553(b)

232

(1)

Applications

233

(1)

Postpetition Setoffs

234

(1)

Automatic Stay Applies to Setoffs

234

(1)

``Recoupment' Treated Differently

234

(1)

Fraudulent Transfers and Obligations

235

(7)

Section 548

235

(1)

Similar to State Law

235

(1)

Actual Fraud

235

(1)

Constructive Fraud

236

(1)

Applied to Common Business Transactions

236

(1)

Foreclosure Sales

236

(1)

Intercorporate Guarantees

237

(1)

Leveraged Buyouts

238

(1)

Remember Insolvency

238

(1)

Comparison of Fraudulent Transfers and Preferential Transfers

238

(1)

Comparison of Section 548 and State Law

239

(1)

No Requirement of Actual Unpaid Creditors

239

(1)

One--Year Reach-Back Period

239

(1)

Exempt Property

239

(1)

No ``Good Faith'' Requirement

240

(1)

Section 544(b)

240

(1)

Incorporates State Law

240

(1)

Effect of Avoidance Enhanced in Bankruptcy

241

(1)

Chart Comparing of Sections 548 and 544(b)

241

(1)

Transfers Not Recorded or Otherwise Perfected

242

(5)

Section 544(a) [a/k/a ``Strong Arm Clause'']

243

(1)

Requirements

243

(1)

Examples

243

(3)

General Rules for Using 544(a)

246

(1)

Section 545(2)

246

(1)

Transfers Not Timely Recorded or Otherwise Perfected

247

(6)

Section 547(e)

247

(1)

``Deeming'' Time of Perfection as Time of Transfer-Section 547(e)

247

(2)

Grace Period

249

(1)

Examples

249

(2)

Section 548(d)

251

(1)

Section 544(b) [Not]

252

(1)

Landlords' Liens

253

(1)

Disguised Priorities

253

(1)

Seller's Reclamation and Return Rights

254

(3)

Rights Granted by State Law

254

(1)

Effect of Bankruptcy Law on State--Law Rights

254

(1)

Effect of Debtor's Transfer of Rights in Goods

255

(1)

Priority Claim

256

(1)

Bankruptcy Right of Return

256

(1)

Review Questions

257

(2)

Postpetition Transfers

When Do Postbankruptcy Transfers Happen?

259

(1)

How Does a Postbankruptcy Transfer Happen?

260

(1)

How Does Section 549 Affect Postbankruptcy Transfers of Property of the Estate by the Debtor?

261

(2)

Authorized Transfers

261

(1)

Gap Transfers

261

(1)

Recorded Real Estate Transfers

262

(1)

How Does Section 542 Affect Postbankruptcy Transfers of Property of the Estate by Third Parties?

263

(1)

Review Questions

263

(3)

Effect of Bankruptcy on Secured Claims

What Is a Secured Claim?

266

(2)

Meaning

266

(1)

Valuation

267

(1)

The Rash Case---Replacement Value

267

(1)

Foreclosure Value Sometimes Used

267

(1)

Invalidation of Liens

268

(1)

What Can Happen to Secured Claims During Bankruptcy?

268

(5)

Delay in Realizing on Collateral

269

(1)

Debtor's Use, Lease or Sale of Collateral

269

(1)

Nonaccrual of Interest

269

(1)

Loss of Priority

270

(1)

Limitations on Floating Liens

270

(1)

Section 552(a) Sinks Floating Liens

270

(1)

Except for Proceeds

271

(1)

Return of Repossessed Property

272

(1)

Return What?

272

(1)

Whiting Pools Case

272

(1)

Effect of Discharge on Secured Claims

272

(1)

Satisfaction of Secured Claims

273

(7)

Recovery of Collateral

273

(1)

Payment of Amount Equal to the Value of the Collateral in Chapter 7 and Chapter 11 Cases

274

(1)

Chapter 7

274

(1)

Payment from Trustee's Sale

274

(1)

Payment from Postpetition Money

274

(1)

Reaffirmation

275

(1)

Redemption

275

(1)

Comparison of Sections 524 and 722

276

(1)

Chapters 11 and 13

276

(1)

Cram Down Explained

276

(1)

Limitations on Cram Down

277

(1)

Value of the Collateral

277

(1)

Present Value of Plan Distributions

278

(1)

Distinguish Paying Interest on Over-Secured Claims

278

(1)

Comparison of Paying Interest on Over-Secured Claims and Calculating Cram Down Interest

279

(1)

Payment of the Debt in Full in Chapter 13 Cases and Chapter 11 Cases With Individual Debtors

279

(1)

Chapter 13 Differences

279

(1)

Chapter 11 Comparison

280

(1)

Postponement of Tax Liens in Chapter 7 Cases

280

(1)

If No Valid Tax Lien, Then Section 507

280

(1)

If Valid Lien in Chapter 7, Then Section 724

281

(1)

Review Questions

281

(3)

Claims

Why Is ``Claim'' an Important Bankruptcy Concept?

284

(1)

What Is a Claim? (and, Who Cares?)

284

(1)

What Is an Unsecured Claim?

285

(1)

Collection of Unsecured Claims From the Debtor

286

(1)

What Property Is Distributed to Holders of Unsecured Claims?

287

(1)

What Property Is Distributed to Holders of Unsecured Claims in Chapter 7 Cases?

287

(1)

What Property Is Distributed to Holders of Unsecured Claims in Chapter 12, Chapter 13, and Individual Chapter 11 Cases?

287

(1)

What Property Is Distributed to Holders of Unsecured Claims in Other Chapter 11 Cases?

288

(1)

Which Holders of Unsecured Claims Are Eligible to Participate in the Bankruptcy Distribution?

288

(6)

Proof of Claim

288

(1)

Bankruptcy Rules Govern Form

289

(1)

Debtor Filing for Creditors

289

(1)

Allowance

289

(1)

Grounds for Disallowance in 502(b) and 502(d)

290

(2)

Contingent Claims and 502(c) and 502(e)

292

(1)

Time of Claim

293

(1)

What Is the Order of Distribution?

294

(6)

Treatment of Priority Claims in 7

294

(2)

Treatment of Priority Claims in 11, 12, 13

296

(1)

Section 507 Treatment of Priorities

296

(1)

Domestic Support Obligations

296

(1)

Administrative Expenses

296

(1)

Ordinary--Course Claims in Involuntary Cases

297

(1)

Wage Claims

297

(1)

Employee Benefit Plans

297

(1)

Farmers and Fishermen

298

(1)

Consumer Deposits

298

(1)

Tax Claims

298

(1)

Depository Institutions

299

(1)

DUI or FUI

299

(1)

Section 510 Treatment of Subordination

299

(1)

Classification of Claims

300

(1)

Review Questions

300

(4)

Leases and Executory Contracts

Overview

304

(3)

Hybrid Nature of Lease and Executory Contract

304

(1)

Bankruptcy Provisions

304

(1)

Different Ways of Treating Lease or Executory Contract

305

(1)

Debtor Limited in Changing Lease or Executory Contract

305

(1)

No Choice to Modify as of Right

306

(1)

Power to Persuade

306

(1)

Summary

306

(1)

Effect of Rejection, Assumption, Assignment

307

(1)

If Lease Rejected

307

(1)

If Lease Assumed

307

(1)

If Lease Assigned

308

(1)

Procedure for Rejection or Assumption

308

(2)

Chapter 7 Cases (Other Than Nonresidential Real Property Leases)

308

(1)

Chapters 11 and 13 (Other Than Nonresidential Real Property Leases)

309

(1)

Nonresidential Real Property Leases in Chapter 7, 11, and 13 Cases

309

(1)

The Gap Period

310

(1)

Nondebtor's Performance

310

(1)

Debtor's Performance

310

(1)

Limitations on the Effect of Rejection of a Lease or Executory Contract

311

(1)

Collective Bargaining Contracts

312

(1)

Employee Benefit Contracts

312

(1)

Limitations on Assumption and Assignment

312

(4)

Contract Limitations

312

(1)

Proceeds of Assignment of Lease

313

(1)

Leases and Executory Contracts That Cannot Be Assumed or Assumed and Assigned

314

(1)

Lease Terminated Before Bankruptcy

314

(1)

Loan Commitment

314

(1)

Contracts Not Assignable Under Applicable Law

314

(1)

Requirements for Assumption and Assignment

315

(1)

Section 365(b) Applies if Default

315

(1)

Requirements

315

(1)

``Adequate Assurance''

315

(1)

Definition of Executory Contract

316

(1)

Review Questions

316

(4)

Discharge:

Which Debtors Receive a Discharge?

320

(7)

Chapter 7

320

(1)

Substantive Grounds for Withholding a Chapter 7 Discharge

320

(1)

Not an Individual

320

(1)

Dishonesty

321

(1)

Fraudulent Transfers

321

(1)

Failing to Keep Records

321

(1)

Withholding Information

321

(1)

Failing to Explain Loss of Assets

322

(1)

Refusing to Testify

322

(1)

Conduct Relating to Another Bankruptcy Case

322

(1)

Earlier Discharge

322

(1)

Measuring the Time Periods

323

(1)

Limits on the Limit

323

(1)

Waiver of Discharge

323

(1)

New Grounds Added in 2005

323

(1)

Procedure for Objecting to a Chapter 7 Discharge

324

(1)

Complaint

324

(1)

Trial

324

(1)

Post-Discharge Hearing

324

(1)

Chapter 11 Cases: Business Entity Debtors

324

(1)

Confirmation Operates as Discharge

324

(1)

Grounds for Denying

325

(1)

Applying Section 1141(d)(3)

325

(1)

Chapter 13

325

(1)

Discharge Depends

325

(1)

Completing Plan

326

(1)

Experiencing Hardship

326

(1)

Reasons for Denying Discharge

326

(1)

Which Obligations Are Affected by a Bankruptcy Discharge?

327

(7)

Chapter 7

327

(1)

Taxes

328

(1)

Fraudulent Obligations

328

(1)

False Statements and False Pretences---523(a)(2)(A) and (B)

329

(1)

Comparison of Section 523(a)(2)(A) and (B)

329

(1)

Proof under 523(a)(2)(B)

329

(1)

Reliance under 523(a)(2)(A)

329

(1)

Luxuries---Section 523(a)(2)(C)

329

(1)

Risk of Asserting Section 523(a)(2) Objection

330

(1)

Unscheduled Debts

330

(1)

Fraud as Fiduciary

331

(1)

Domestic Obligations

331

(1)

Willful and Malicious Injury---Section 523(a)(6)

331

(1)

The Kawaauhau Case

331

(1)

Relation to Other Provisions

332

(1)

Fines Owed Government

332

(1)

Student Loans

332

(1)

Test for Hardship

332

(1)

Partial Discharge

332

(1)

Other Exceptions to Discharge

333

(1)

Chapter 11

333

(1)

Chapter 13

333

(1)

Discharge Under 1328(b)

333

(1)

Discharge Under 1328(a)

334

(1)

Procedure for Asserting an Exception to Discharge

334

(1)

Effect of a Discharge

334

(1)

What a Discharge Does

334

(1)

What a Discharge Does Not Do

335

(1)

No Protection of Co-Debtors

335

(1)

No Effect on Liens

335

(1)

Reaffirmation

335

(2)

What Is a Reaffirmation Agreement?

335

(1)

Why Make Such an Agreement?

336

(1)

Keep Encumbered Property

336

(1)

Protect Co--Debtors

336

(1)

Avoid Litigation About Discharge

336

(1)

Preserve Relationship

336

(1)

Bankruptcy Law Issues

337

(1)

Effect of Stay

337

(1)

Limits on Enforceability

337

(1)

Protection From Discriminatory Treatment

337

(1)

Review Questions

338

(4)

Chapter 13 Cases

Commencement of the Case

342

(2)

Eligibility

342

(1)

Effects of 2005 Amendments to Code

343

(1)

Chapter 7 Means Testing

343

(1)

Changes Approach to Chapter 13

343

(1)

Filing Begins the Case

343

(1)

Automatic Stay

344

(1)

Co-Debtor Stay

344

(1)

Requirements of the Stay

344

(1)

Termination of the Stay

344

(1)

Relief From the Stay

344

(1)

Co-Debtor Received the Consideration

344

(1)

Plan Will Not Pay Claim

345

(1)

Irreparable Harm

345

(1)

Trustees

345

(2)

Who Works as Trustee

345

(1)

Duties

345

(1)

Avoidance---Maybe, Maybe Not

346

(1)

Operating Business---Not

346

(1)

Exact Role Varies

346

(1)

Standard Roles With Respect to the Plan

347

(1)

Preparation of the Chapter 13 Plan

347

(2)

Contents of the Plan---Section 1322

347

(1)

What the Plan Must Provide (Section 1322(a))

347

(1)

What the Plan May Provide (Section 1322(b))

348

(1)

Home Mortgages

348

(1)

Funding the Plan

349

(1)

Length of Plan

349

(1)

Confirmation of the Chapter 13 Plan

349

(4)

Filing Fee

349

(1)

``Good Faith''

349

(2)

Adequacy of Plan Payments

351

(1)

``Best Interests of Creditors'' Test

351

(1)

``Best Efforts''

351

(1)

Secured Claims

352

(1)

Ability to Perform

352

(1)

Effects of Confirmation

352

(1)

Performance of the Plan

352

(1)

Modification

352

(1)

Cramdown (or Cram Down) of Secured Claims in Chapter 13

353

(2)

Alternatives to Cram Down

353

(1)

Agreed Upon Modifications

353

(1)

Surrender

353

(1)

Explaining Cram Down

353

(1)

Requirements of Cram Down

353

(1)

Before 2005 Amendments

354

(1)

After the 2005 Amendments

355

(1)

Treatment of Home Mortgages in Chapter 13 Plans

355

(3)

Strip Down Versus Strip Off

356

(1)

Allowed Modifications

356

(1)

Cure Default

357

(1)

Short-Term Mortgages

357

(1)

Preferring Some Claims

358

(1)

By Classifying Claims

358

(1)

Using Claim Classification to Pay Some Debts in Full

358

(1)

Cannot ``Discriminate Unfairly''

358

(1)

By Paying Long--Debt Terms Beyond the Plan

359

(1)

Discharge

359

(1)

Requirements of Discharge

359

(1)

Limits on Discharge

359

(1)

Debts Exceptions

359

(1)

Objection Based on Prior Bankruptcy

359

(1)

Hardship Discharge

360

(1)

Dismissal and Conversion

360

(1)

Dismissing or Converting to Chapter 7 Upon Debtor's Request

360

(1)

Dismissing or Converting to Chapter 7 Upon Creditor's Request

360

(1)

Converting to Chapter 11

360

(1)

Treatment of Postpetition Claims and Property When Converting to Chapter 7

361

(1)

Comparison of Chapters 7 and 13

361

(1)

Comparison of Chapters 11 and 13

362

(1)

Review Questions

363

(4)

Chapter Cases

Commencement of the Case

367

(3)

Filing the Petition

367

(1)

Consequences of Commencing a Chapter 11 Case

368

(1)

Notifying and Organizing the Creditors

368

(1)

Notice

368

(1)

Proof of Claim

368

(1)

Unsecured Creditors Committee

369

(1)

Trustee Appoints

369

(1)

Membership

369

(1)

Functions

369

(1)

First Day Orders

370

(1)

Operation of the Business

370

(12)

Who Operates the Business?

370

(1)

Debtor in Possession (DIP)

370

(1)

Trustee

371

(1)

Statutory Grounds for Appointment

371

(1)

Statutory Procedures for Appointment of Trustee

371

(1)

Statutory Duties

371

(1)

Business Considerations

371

(1)

Examiner

372

(1)

Requirements for Appointment

372

(1)

Purpose

372

(1)

Use of Encumbered Property Including Cash Collateral

372

(1)

In Bankruptcy Most Property is Subject to Liens

372

(1)

Postpetition, After-Acquired Property

373

(1)

Proceeds

373

(1)

But 362 Stay Stops Creditor From Repossessing

373

(1)

And 363 Allows DIP to Use Collateral---With Conditions

373

(1)

Adequate Protection

374

(1)

Inadequate Adequate Protection

374

(1)

Raising the Issue

375

(1)

Encumbered Property that is NOT ``Cash Collateral'

375

(1)

``Cash Collateral'' is Different

376

(1)

What Is It?

376

(1)

Use of Cash Collateral Only Upon Consent or Adequate Protection

376

(2)

Basics of Funding a Debtor in Chapter 11 Bankruptcy Cases

378

(1)

Possible Sources of Funding

378

(1)

Comparison of Use of Cash Collateral with Debtor-In-Possession Financing (a/k/a DIP Financing)

379

(1)

Obtaining Additional Unsecured Credit From Vendors in the Ordinary Course of Business

379

(1)

Obtaining Unsecured Credit Not in the Ordinary Course of Business

380

(1)

Obtaining Priority or Secured Credit

380

(1)

Obtaining Priming Secured Credit

380

(1)

Procedure for Obtaining Credit

381

(1)

Safe Harbor

381

(1)

Cross--Collateralization

381

(1)

Meaning

381

(1)

Forms

382

(1)

Case Law on the Second Form of Cross Collateralization

382

(1)

Preparation of the Chapter 11 Plan

382

(5)

Who Prepares and Files

382

(1)

Debtor's Exclusivity

382

(1)

Trustee

383

(1)

Creditors' Committee

383

(1)

Contents of the Plan

383

(1)

Funding for the Plan

384

(1)

Possible Sources of Funding

384

(1)

Using Securities

384

(1)

Selling Assets

384

(1)

Classification of Claims

385

(1)

Administrative Expense Class---Small Claims---1122(b)

385

(1)

Other Classes---``Substantially Similar'---1122(a)

385

(1)

Grouping

385

(1)

Excluding

386

(1)

Why Create Classes

386

(1)

Business Reason

386

(1)

Legal Reason

386

(1)

Single--Asset Real Estate

387

(1)

Acceptance of the Plan

387

(3)

Disclosure

387

(1)

Who Votes?

388

(1)

Double Deeming

388

(1)

Impairment of Claims

389

(1)

1111(b) Elections

389

(1)

Advantage of Section 1111(b) Election

389

(1)

Disadvantages of Section 1111(b) Election

390

(1)

Needed Majorities

390

(1)

Confirmation of the Plan

390

(8)

Standards for Confirmation

391

(1)

Plans Accepted by Every Class

391

(1)

Best Interests of Creditors

391

(1)

Priority Claims

391

(1)

Feasibility

392

(1)

Consenting Impaired Class

392

(1)

Plans Accepted by Less Than Every Class

392

(1)

Fair and Equitable

393

(1)

Secured Claims

393

(1)

Unsecured Claims

394

(2)

Equity

396

(1)

Effect of Confirmation

397

(1)

Discharge

397

(1)

Limitations

397

(1)

Comparison of Discharge in Chapter 7 and 11 Cases

398

(1)

Special Forms of Chapter 11 Cases

398

(4)

Prepackaged

398

(1)

Good News

398

(1)

Bad News

399

(1)

Small Business Cases

399

(1)

What Is a Small Business Case?

399

(1)

How Is a Small Business Case Different?

400

(1)

Single Asset Real Estate Cases

400

(1)

Meaning of Single Asset Real Estate Case

401

(1)

Automatic Stay Works Differently

401

(1)

Different Case Law

401

(1)

Individual Chapter 11 Cases

401

(1)

Review Questions

402

(4)

Allocation of Judicial Power Over Bankruptcy Matters

History

406

(3)

1898 Act

406

(1)

1978 Code

407

(1)

Marathon Pipeline Decision

408

(1)

Operation of Present Law

409

(5)

Bankruptcy Court as Part of the District Court, Section 151

409

(1)

Grants of Jurisdiction to the District Court, Section 1334(A) and 1334(B)

410

(1)

Cases

410

(1)

Proceedings

410

(1)

``Arising Under'' Title 11

410

(1)

``Arising in'' a Case Under Title 11

410

(1)

``Related to'' a Case Under Title 11

410

(1)

Role of the Bankruptcy Court, Section 157

411

(1)

Procedural Role

411

(1)

Core Versus ``Noncore''

411

(1)

District Court Right of Withdrawal

412

(1)

Abstention Under Section 1334(C)

413

(1)

Jury Trials

414

(1)

When Is There a Right?

414

(1)

When Can a Bankruptcy Judge Hold a Jury Trial?

415

(1)

Review Questions

415

(2)

APPENDICES

A. Answers to Review Questions

417

(18)

B. Practice Examination

435

(6)

C. Glossary

441

(10)

D.Table of Cases

451

(2)

E. Table of Statutes

453

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Black Letter Outline on Bankruptcy and Related Law

Summary

Table of Contents

Supplemental Materials