5 THINGS EVERY LAWYER SHOULD KNOW ABOUT BANKRUPTCY
5 THINGS EVERY LAWYER SHOULD KNOW ABOUT BANKRUPTCY Laura A. Deeter, Esq.
5 Things Every Lawyer Should Know About Bankruptcy Five Things 1. What do the different BK chapters mean? 2. Do I need to file a Proof of Claim? 3. What does the BK Trustee do? 4. What is the Automatic Stay? 5. What is a 341 Meeting – and should I go?
5 Things Every Lawyer Should Know About Bankruptcy 1. BK Chapters Three main types: Chapter 7 Chapter 13 Chapter 11 (“Chapter” => particular chapter under Title 11 of the U. S. Code)
5 Things Every Lawyer Should Know About Bankruptcy Chapter 7 Governing rules are set forth at 11 U. S. C. §§ 701 -784. • Liquidation • Individuals or Businesses • Liquidate all non-exempt assets
5 Things Every Lawyer Should Know About Bankruptcy Chapter 13 Governing rules are set forth at 11 U. S. C. §§ 1301 -1330. • Reorganization • Individuals only (income-based) • Reorganize via structured payment Plan
5 Things Every Lawyer Should Know About Bankruptcy Chapter 11 Governing rules are set forth at 11 U. S. C. §§ 1101 -1174. • Reorganization (or Liquidation) • Individuals or Businesses • Reorganize via a Confirmed Plan; stringent requirements
5 Things Every Lawyer Should Know About Bankruptcy 2. File Proof of Claim? • POC can be filed in the BK case by a Creditor of the Debtor • Timing important; deadlines provided in Notice • POC Forms online; can attach supporting documentation
5 Things Every Lawyer Should Know About Bankruptcy 2. File Proof of Claim? Chapter 7: “No Asset” vs. “Non-exempt Assets” No Asset Case: • No Proof of Claims filed • No recovery against Debtor
5 Things Every Lawyer Should Know About Bankruptcy 2. File Proof of Claim? Chapter 7: Non-exempt Assets Case: • File POC • Recovery only against assets Debtor did not claim under an exemption
5 Things Every Lawyer Should Know About Bankruptcy Ch. 7 Exemptions • Some equity in house • Household goods, clothing • Some unpaid earned wages • Pension • Autos, jewelry, tools of trade (to max) • Public benefits • PI Damages • “Wildcard”
5 Things Every Lawyer Should Know About Bankruptcy Ch. 7 Exemptions • • How to elect Exemptions? Federal vs. State Exemptions States have residency requirements Some states opt out of the Federal Exemptions
5 Things Every Lawyer Should Know About Bankruptcy 3. Bankruptcy Trustee • Administers the BK estate on behalf of creditors • Appointed by Court • Preserve and/or liquidate assets of estate • Ensure Debtor complies with BK law
5 Things Every Lawyer Should Know About Bankruptcy 3. Bankruptcy Trustee Chapter 7, Chapter 13: • appointed Trustee Chapter 11: • Debtor-in-Possession acts as Trustee, unless a Trustee is appointed
5 Things Every Lawyer Should Know About Bankruptcy 3. Bankruptcy Trustee • • Authority of Trustee: Account for property Object to claims Employ professionals Use, sell, lease estate property Obtain credit Assume/reject contracts/leases Move to dismiss, object to discharge
5 Things Every Lawyer Should Know About Bankruptcy 3. Bankruptcy Trustee’s “Avoidance Powers”: § 547: Preferences • Can avoid certain payments to creditors made within certain time before filing • 90 days vs. One year for Insiders • Exceptions: New Value Ordinary Course of Business
5 Things Every Lawyer Should Know About Bankruptcy 3. Bankruptcy Trustee’s “Avoidance Powers”: § 548: Fraudulent Transfers • Can avoid transfers made with intent to hinder, delay, or defraud, or for less than reasonably equivalent value • 2 years before filing • Self-settled trust: 10 years
5 Things Every Lawyer Should Know About Bankruptcy 3. Bankruptcy Trustee’s “Avoidance Powers”: § 549: Post-petition Transfers • Can avoid these transfers if not authorized by Court or by Title 11 • Cut off: 2 years after transfer or upon closing/dismissal, whichever is earlier
5 Things Every Lawyer Should Know About Bankruptcy 4. Automatic Stay? 11 U. S. C. § 362 • Effective as soon as petition filed • Prohibits debt collection efforts against Debtor • Attempts to collect are sanctionable
5 Things Every Lawyer Should Know About Bankruptcy 4. Automatic Stay? Exceptions: • 11 U. S. C. § 362(b) has 28 subsections of exceptions. • Does not stop criminal proceedings • Does not stop proceedings for child support, alimony, custody, domestic violence
5 Things Every Lawyer Should Know About Bankruptcy 4. Automatic Stay? Exceptions: • Taxing authorities can maintain some actions, such as audits, notice of deficiency • Stay affected if prior BK case(s) dismissed within certain time(s)
5 Things Every Lawyer Should Know About Bankruptcy 4. Automatic Stay? Relief from Stay / Lifting the Stay: • Creditor can ask court to “lift the stay, ” so that it can proceed with collection efforts against the Debtor • By Motion and Hearing • 11 U. S. C. § 362(d)
5 Things Every Lawyer Should Know About Bankruptcy 4. Automatic Stay? Relief from Stay / Lifting the Stay: Secured Creditor: • Debtor not making payments • Lack of adequate protection • No equity & not necessary to reorganization
5 Things Every Lawyer Should Know About Bankruptcy 4. Automatic Stay? Relief from Stay / Lifting the Stay: Unsecured Creditor: • Debt non-dischargeable • Eviction, if post-petition rent not paid
5 Things Every Lawyer Should Know About Bankruptcy 5. 341 Meeting? 11 U. S. C. § 341 Chapter 7 • Mandatory meeting of Creditors • Trustee questions the Debtor to ensure compliance with bankruptcy requirements • Creditors can question the Debtor
5 Things Every Lawyer Should Know About Bankruptcy 5. 341 Meeting? • Attend if you are a Creditor with questions about the assets, the petition, whether filed in good faith, whether Debtor intends to repay your debt • Typical case:
5 Things Every Lawyer Should Know About Bankruptcy Attorneys’ Fees Typical Payment: • Chapter 7: Pay up front • Chapter 13: Pay through Plan, over several years • Chapter 11: Retainer up front; Fee Application to Court; paid as Administrative (high priority) claim
Thank You Laura Deeter – laura@ghandilaw. com -- (702) 878 -1115
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