Bankruptcy Midterm

Topics: Bankruptcy, Bankruptcy in the United States, Income tax in the United States Pages: 9 (3520 words) Published: December 6, 2012
Bryan Boyle
Bankruptcy Mid-Term

Question 2 –

Describe and differentiate between the various “relief” Chapters (Chapters 7, 9, 11, 12,13 & 15) which can be utilized under the Bankruptcy Code for protection, reorganization and Liquidation. Pay particular attention to who can be a debtor in each of those chapters. Chapter 7 – provides for liquidation proceedings or the selling of all nonexempt assets and the distribution of the proceeds to the debtor’s creditors. Who Can Be a Debtor – Any “person” (including partnerships, corporations, and municipalities) except railroads, insurance companies, banks, savings and loan institutions, investment companies licensed by the Small Business Administration, and credit unions. Farmers and charitable institutions cannot be involuntarily petitioned. If the court finds the petition to be a substantial abuse of the use of Chapter 7, the debtor may be required to convert to a Chapter 13 repayment plan.

Chapter 9 – provides for reorganization of municipalities which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts. These are very rare although professor has dealt with one or two cases. Yonkers was not allowed to file for bankruptcy. Chapter 11 – provides generally for reorganization, usually involving a corporation or partnership. The Chapter 11 debtor usually presents a plan to pay creditors a certain amount of cents per dollar owed in order to keep its business alive. Who Can Be A Debtor – Any debtor eligible for Chapter 7 relief; railroads are also eligible. Individuals have specific rules and limitations.

Chapter 12 – provides for adjustment of debts of a “family farmer”, or a “family fisherman”. Who Can Be A Debtor – Any family farmer (one whose gross income is at least 50 percent farm dependent and whose debts are at least 50 percent farm related) or family fisherman (one whose gross income is at least 50 percent dependent on commercial fishing operations and whose debts are at least 80 percent related to commercial fishing) or any partnership or closely held corporation at least 50 percent owned by a family farmer or fisherman, when told debt does not exceed a specified amount ($3,792.650 for farmers and $1,757,475 for fishermen).

Chapter 13 – provides for the adjustment of debts of an individual with regular income. Usually when an individual compiles too much debt and is unable to pay it back. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.) Who Can Be A Debtor – Any individual (not partnership or corporations) with regular income who owes fixed (liquidated) unsecured debts of less than $360,475 or fixed secured debts of less than $1,081,400.

Chapter 15 – Deals with International Bankruptcy and usually involves jurisdictional issues. The purpose is to provide effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country. The general purpose is realized through five objectives in the statute: (1) to promote cooperation between the US courts and those of other countries involved in cross-border insolvency cases; (2) to establish greater legal certainty for trade and investment; (3) to protect the interests of all creditors and other interested entities, including the debtor; (4) to afford protection and maximization of the value of the debtor’s assets; and (5) to facilitate the rescue of financially troubled businesses.

Question 3
When an individual or entity files for reorganization under Chapter 11, he, she or they, in most cases get to operate as a Debtor-in-Possession. The Office of the United States Trustee then steps in to “oversee” the Debtor-in-Possession’s progress toward reaching a confirmed plan. The U.S. Trustee’s Office typically requires an initial debtor conference with the Debtor, its attorney and accountant. A first meeting of...
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