09 fa johnson bankruptcy

8/3/2019 09 FA Johnson Bankruptcy

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BANKRUPTCY // FALL 2009 // JOHNSON

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PLEASE NOTE:

1. [???] indicates incomplete/unfinished sections.

DEBT COLLECTION

I. Judicial Enforcement of Debts State Law

A. Writs of Execution for property held by debtor 1. Court order for sheriff to seize property, sell it at public sale, and pay proceeds to judgment creditor

a. NOTE judgment creditors unsecured debt becomes secured AFTER execution obtained

B. Writs of Garnishment for property held by third party1. Court order for sheriff to seize wages and earnings (surrendered by third party, and funds remitted to

judgment creditor

C. Receivers1. Third party appointed by court to take control of property

II. Liens security interest in property held by third-party

A. TYPES

1. Consensuala. Purchase Money Security Interests (PMSI)

i. Lien to furnish credit necessary for purchase of new collateral(I) Ex. home mortgage, car loans, purchase of equipment or home appliances

b. Non-PMSIi. Lien on property that debtor already owns to secure promise to repay new loan

(I) Ex. second mortgage, home equity line of credit, pledge of stock

2. Non-Consensual WITHOUT acquiescence OR cooperation from debtor

a. Judgment Lieni. Lien imposed by court after judgment rendered AND debtor has not paid

3. Statutorya. Mechanics Lien

i. Mechanic keeps car until repair bill is paid OR sells car if necessary to satisfy lienb. Landlords Lien

i. Landlord seizes personal property to satisfy unpaid rentc. Charging Lien

i. Attorney keeps documents until attorney fees are paid

III. Other Concepts

A. Priority1. First in time, first in right first recorded has priority over later liens

a. Measured by perfectionB. Perfection

1. Taking necessary steps to make lien valida. Ex. recording lien to provide notice

C. Deficiency Claim1. Payment from sale of collateral does NOT cover entire debt


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FRAUDULENT CONVEYANCES

I. Uniform Fraudulent Transfer Act (UFTA)

A. Fraudulent Transfer [ 4 of UFTA ]1. Transfer made OR obligation incurred by debtor to creditor

a. ELEMENTS 3xi. With actual intent to hinder, defraud , or delay other creditorsi. Without receiving reasonably equivalent value if debtor was engaged in business

with unreasonably small assets in relation to businesss operationsii. Intended OR reasonably believed that debtor would incur debts beyond ability to pay

B. Definitions [ 1 of UFTA ]1. Insiders

a. Debtor as Individuali. Relatives, Business Partners

b. Debtor as Corporationi. Directors, Officers, Persons in Control

c. Debtor as Partnershipi. General Partners, Relatives of General Partners

2. Propertya. Anything that can be subject of ownership

3. Transfera. Every mode, direct OR indirect, of parting with asset

C. Insolvency [ 2 of UFTA ]

1. STANDARDS 2x

a. Balance Sheet Testi. Liabilities exceed fair value of total assets

b. Equity Testi. Debtor is not paying debts as they become due

D. Actual Fraud subjective (debtors state of mind)

1. CONSIDER Badges of Fraud [ 4(b) ] creates presumption of fraudulent transfer a. Transfer to insider

b. Debtor retains possession or use of propertyc. Transfer was concealedd. Debtor transferred AFTER being threatened with suite. Transfer was of substantially all of debtors assetsf. Debtor abscondedg. Value was NOT reasonably equivalent to property transferredh. Debtor became insolvent because of transfer i. Transfer was close in time to incurrence of debt

j. Debtor transferred essential assets of business to lien holder who THEN transferred toinsider of debtor

E. Constructive Fraud objective ( NO intent required)

F. Transferees Defenses [ 8 ]1. Transfer taken in good faith AND for reasonably equivalent value


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BASIC CONCEPTS OF BANKRUPTCY

I. Reasons for Filing BankruptcyA. Individuals

1. Adverse Judgment Against Individual2. Debt Collection Efforts

a. Foreclosure b. Garnishment

3. Facing EvictionB. Businesses

1. Failure in Sale of Company2. Failure in Refinancing3. Adverse Economic Conditions4. Substantial Judgment Against Company5. Unmanageable Debt Burden

II. Bankruptcy Code Title 11 of U.S. CodeA. Chapter 1, 3, 5 applicable to ALL bankruptcy cases

1. Chapter 1 structure (definitions, rules of construction, general powers of court, eligibility)2. Chapter 3 case administration (trustee, operations of estate)3. Chapter 5 regulations (claims, distribution, discharges, and avoiding powers)

B. Chapter 7 liquidation for individuals and businessesC. Chapter 9 bankruptcy for municipality or other governmental unitsD. Chapter 11 reorganization for businessesE. Chapter 12 reorganization for farmersF. Chapter 13 payment plans for consumers and small businessesG. Chapter 15 bankruptcy for foreign debtor

III. Principles Underlying BankruptcyA. Fresh Start

1. Individual submits to jurisdiction of bankruptcy court, turns over all assets to be distributed, and isentitled to begin again with clean slate (no financial obligations)

B. Absolute Priority1. Senior creditors are paid before junior creditors are paid2. Junior creditors are paid before equity holders retain any interest in company

C. Ratable Distribution1. Assets are distributed according to priority scheme established by Congress2. Parity within classes of claims

IV. Bankruptcy and State LawA. State Law Controls

1. For when no bankruptcy law exists2. For creation of property rights and interests

a. BUT bankruptcy law determine how rights will be treated in bankruptcy case

I. Power of the Court [ 105(a) ]A. Court may issue any order, process, or judgment that is necessary OR appropriate to carry out provisions of

Bankruptcy Code


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VI. Duties of Debtor

A. Schedules and Statements [ 521(a) ]1. Debtor must file

a. List of Creditors b. Schedule of Assets and Liabilitiesc. Schedule of Current Income and Current Expendituresd. Statement of Financial Affairse. Statement of Intention for Secured Property

2. Failure to File [ 521(i) ]a. If debtor fails to file necessary information automatic dismissal

B. Credit Counseling Certificate [ 521(b) ]1. Debtor must file certificate from approve nonprofit budget and credit counseling agency

a. Within 180 days BEFORE date of filing [ 109(h) ]

C. Tax Returns [ 521(f) ]1. Debtor must file federal income tax returns from last three years

D. Meeting of the Creditors [ 341(a) ]1. Debtor must attend meeting 20 to 40 days AFTER order for relief

a. Trustee questions debtor abouti. Reason for filing petitionii. Existence of non-exempt assetsiii. Unusual circumstancesiv. Reaffirming debts

b. Trustee ensures that debtor understandsi. Potential consequences of filing petition under different chaptersii. Debtors ability to file petition under different chaptersiii. Effect of receiving discharge of debtsiv. Effect of reaffirming debt


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PROPERTY OF THE ESTATE

I. Property of the Estate

A. Creation of Estate1. Created by operation of law once petition is filed

B. Included Property [ 541(a) ]

1. ALL Interests in Propertya. All legal OR equitable interests in property (as of date of filing)

i. Ex. contractual rights, licenses, leases

2. Community Propertya. All community property

3. Recovered Propertya. Any property recovered by trustee

4. Avoided Transfersa. Any avoided transfers

i. Ex. preferences, fraudulent conveyances

5. Inherited Propertya. Any property inherited within 180 days of date of filing

6. Property from Divorce Settlementa. Any property received in divorce settlement within 180 days of date of filing

7. Property from Life Insurance Plana. Any property received as beneficiary of life insurance plan within 180 days of date of filing

8. Proceeds and Rents from Propertya. All proceeds AND rents from property of the estate

i. Ex. assets that produce value, dividends, interest b. NOT earnings from services performed by debtor AFTER date of filing Ch. 7 ONLY

9. Post-Petition Acquired Propertya. Any property acquired by estate AFTER date of filing

C. Excluded Property [ 541(b) ]

1. Certain Expired Leases [ 541(b)(2) ]a. Lease for non-residential property lease

b. Lease expired BEFORE date of filing

2. Education Accountsa. 529 Tuition Plans

3. Earnings Withheld From Paycheck

4. Post-Petition Earnings Chapter 7 ONLY a. CONSIDER whether post-petition earnings dependent upon continued services


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II. Included Property vs. Excluded Property

A. Unmatured Legal Interests1. Legal interests NOT enforceable at date of filing BUT may be enforceable at future date

a. CONSIDER whether interests have matured at date of filing

2. Ex. [ Sharp v. Dery ] (p. 117)a. Post-petition bonus NOT enforceable interest at date of filing

i. Requirements for Bonus(I) Continued employment (II) Satisfactory performance(III) Employers discretion

B. Non-Transferable Entitlements1. CONSIDER whether entitlement has value to anyone but debtor

a. Ex. drivers license vs. liquor license

C. Restrictions on Transfers [ 541(c) ]1. Property enters into estate REGARDLESS of contractual restrictions on transfer of property

a. INCLUDES state law restrictionsi. Ex. liquor licenses disallowing transferability enters

2. EXCEPTION Spendthrift Trust / Pension Plan [ 541(c)(2) ] retirement accounts? a. Restriction on transfer of trust for benefit of debtor if contractual provision is

i. Enforceable under federal law(I) Ex. - ERISA-qualified

ORii. Enforceable under applicable state law

(I) Ex. [ In re Orkin ] (p. 122)(A) Trust gave debtor power to amend or terminate trust (B) Trust entered estate since debtor had absolute authority over trust


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EXEMPTIONS

I. Classification of PropertyA. Homestead

1. Ex. - Mobile HomeB. Motor Vehicle

1. Ex. - BusC. Household Goods [ 522(f)(4)(A) ] for avoidance of security interests

1. Includeda. Clothing, furniture, appliances, ONE radio, ONE television, ONE VCR, linens, china,

crockery, kitchenware, educational materials and equipment for use of minor dependents,medical equipment and supplies, personal effects (toys and hobbies), computer (ONE)

2. NOT Includeda. Artwork (unless created by debtor)

b. Electronic entertainment equipment with FMV > $550 in aggregatec. Antiques with FMV > $550 in aggregated. Jewelry with FMV > $550 in aggregate

i. EXCEPTION wedding ringse. Computer (if own more than one)f. Motor vehicle, boat, motorized recreational vehicle

D. Ex. [ In re Pizzi ] (p. 181)1. Lottery winnings NOT annuities

II. Valuation of Exempt Property

A. DEFINE Value [ 522(a)(2) ]1. Fair market value on

a. Date of filingOR

b. Date that property becomes property of the estate IF transferred after date of filing

B. DEFINE Fair Market Value

1. [ In re Walsh ] (p. 184)a. Property subject to liquidation by trustee because it is in excess of specified monetary

amounts of exemptioni. STANDARD liquidation value

2. [ In re Mitchell ] (p. 186)a. STANDARD exposure of property to appropriate market for reasonable period of time

III. Change in Form of Property PRIOR to bankruptcyA. From Exempt Property to Non-Exempt Property

1. RESULT non-exempt property stays in the estatea. Ex. - [ In re Dasher ] (p. 193)

i. Debtor used retirement funds to purchase car B. From Non-Exempt Property to Exempt Property

1. Debtor may convert non-exempt property into exempt property BEFORE date of filinga. EXCEPTION

i. Fraudulent Conveyance NO discharge

IV. Non-Exempt PropertyA. RESULT

1. Trustee sells non-exempt property of the estate2. Trustee distributes proceeds from sale to unsecured creditors


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V. Exempt Property

A. NOT Subject to Lien1. Fully Exempt Property if value of property exemption amount

a. RESULT debtor keeps property2. Partially Exempt Property value of property > exemption amount

a. RESULT judicial sale of propertyi. Sheriff levies and sells propertyii. Sheriff distributes proceeds to

(I) 1st expenses of sale (entire amount)(II) 2nd debtor (up to full amount of exemption)(III) 3rd unsecured creditors (remainder)

B. Subject to (Consensual) Lien1. Undersecured Exempt Property value of property < amount of secured claim

a. RESULTi. Secured creditor takes propertyii. Deficiency becomes unsecured claim

2. Oversecured Exempt Property value of property > amount of secured claima. RESULT judicial sale of property

i. Sheriff levies and sells propertyii. Sheriff distributes proceeds to

(I) 1st expenses of sale (entire amount)(II) 2nd secured creditor (up to full amount of secured claim)(III) 3rd debtor (up to full amount of exemption)

VI. EXCEPTION Avoiding Liens on Exempt Property [ 522(f) ] if impairs exemption

A. Judgment Liens [ 522(f)(1)(A) ] non-consensual liens ONLY

1. Trustee may avoid judgment liens in ALL exempt property to extent that lien impairs exemptiona. EXCEPTION

i. Judgment lien securing debt for domestic support obligation

B. Non-Possessory, Non-Purchase Money Consensual Security Interests [ 522(f)(1)(B) ]

1. Trustee may avoid certain consensual security interests in certain property to extent that lien impairsexemption

a. TYPES 3xi. Household Goods and Jewelry [ 522(d)(3) + (4) ]

(I) Held for personal, family, or household useii. Tools of the Trade [ 522(d)(6) ]

(I) Implements, professional books, or tools of the tradeiii. Health Aids [ 522(d)(9) ]

(I) Professionally prescribed health aids ex. - medicine

2. DEFINE Non-Possessory, Non-Purchase Money Consensual Security Interesta. Creditors security interest in property that debtor already owns

C. RESULT creditor becomes general unsecured creditor


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VII. Exemption Planning (CA)

A. Availability of Exemptions [ 522(b) ] individuals ONLY 1. Debtor may choose state OR federal exemptions

B. Plan Two (California Federal) Exemptions [ 522(b)(2) C.C.P. 703 ]1. Advantages

a. Wildcard Exemptioni. Unused portion of homestead exemption may be applied to ANY property

C. Plan One (State) Exemptions [ 522(b)(3) C.C.P. 704 ]1. Advantages

a. Homestead Exemptioni. Higher amount than federal homestead exemption

b. Retirement Funds Exemptioni. 100% exempted

2. LIMITATION Applicable State Exemptions [ 522(b)(3) ]a. Residence in One State

i. Debtors residence during 730-day period (2 years) BEFORE date of filing b. Residence in Multiple States

i. Debtors residence during 180-day period BEFORE 730-day period

VIII. Homestead Exemption property used as residence ONLY

A. Fraudulent Conveyance of Non-Exempt Property [ 522(o) ] within 10 years1. Value of homestead exemption will be reduced by value of non-exempt property that debtor disposed

of with intent to hinder, delay, or defraud creditors within 10 year period BEFORE date of filinga. Ex. - [ In re Reed ] (p. 203)

i. Debtor sold guns for below market value and applied proceeds to mortgage

B. Enron Rule [ 522(q) ]1. Value of homestead exemption limited to $125,000 if debtor convicted of SEC securities fraud OR

fiduciary fraud

C. Limitation on Big or Unlimited Homestead Exemptions [ 522(p) ]1. Homestead exemption is NOT available for property acquired within 1,215-day period (< 3.5 years)

BEFORE date of filing that exceeds $136,875

IX. Tenancy by Entirety [ 522(b)(3)(B) ] non-communal property statesA. [???]


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AUTOMATIC STAY

I. Automatic Stay [ 362 ]A. Once petition filed automatic stay by operation of law

II. Prohibited Activities [ 362(a) ] what creditors/others may NOT do

A. Debt Collection1. Commencement or continuation of collection efforts (judicial OR non-judicial ) against debtor

a. Ex. writ of garnishment B. Enforcement of Pre-Petition Judgment

1. Enforcement of pre-petition judgment against debtor OR against property of the estateC. Foreclosure or Repossession of Property

1. Efforts to obtain possession of OR exercise control over property of the estateD. Perfection and Enforcement of Lien

1. Efforts to perfect or enforce liens against property of the estate OR property of debtor E. Claims

1. Efforts to collect, assess, or recover claim against debtor a. Ex. [ Andrews University v. Merchant ] (p. 132)

i. University must wait for stay to terminate even if non-dischargeable student loanii. Violation of stay withholding debtors transcript

F. Setoffs

III. EXCEPTIONS Permitted Activities [ 362(b) ] what creditors/others may do

A. Criminal Actions1. Commencement of continuation of ANY criminal action against debtor

B. Family-Related Civil Actions1. Commencement or continuation of civil action

a. To establish paternity, domestic support obligations, child custody, dissolution of marriage b. To collect domestic support obligation from property NOT from property of the estatec. To continue withholding income for payment of domestic support obligation by court order d. To report overdue support owed by parent

C. Perfection of Liens1. Act to perfect, continue, or maintain lien on property if

a. Applicable state law allows perfection to relate back in time b. Act to perfect takes place within 30 days AFTER property transferred

D. Government Police Power1. Commencement or continuation of government actions against debtor to enforce its police and

regulatory power a. INCLUDES enforcing judgment other than money judgment obtained in action

E. Government Tax Powers1. Government audit to determine tax liability2. Government issuance to debtor of notice of tax deficiency3. Government demand for tax returns4. Government tax assessment

F. Non-Residential, Expired Leases1. Acts by lessor to obtain possession of non-residential real property if lease expired BEFORE date of

filing OR DURING caseG. Residential Leases

1. Continuation of eviction against debtor who resides as tenant under lease or rental agreement if lessor obtained unlawful detainer order BEFORE date of filing


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IV. Violation of the Automatic Stay

A. Act in violation of stay is void 9th Circuit / Majority1. Act is ineffective EVEN IF no motion for avoidance made

a. Ex. foreclosure sale is unwound b. Ex. setoffs are replaced

B. Act in violation of stay is voidable Minority1. Act is effective UNTIL motion for avoidance made

C. Willful Violation of Stay [ 362(k) ] specific intent to violate stay1. Individual injured recovers

a. Actual Damages b. Costs and Attorneys Feesc. Punitive Damages ONLY if act NOT taken in good faith

V. Termination of the Automatic Stay

A. Operation of Law [ 362(c) ]1. Property Is No Longer Property of the Estate

a. Exemptions b. Abandonment

2. Closing of Case3. Dismissal of Case4. Grant OR Denial of Discharge

B. Relief from Stay [ 362(d) ]1. For Cause

a. Lack of Adequate Protection2. No Equity in Property and Not Necessary for Effective Reorganization

II. Relief from Stay Government Claims

A. Power of the Court [ 105 ]1. Court may stay proceedings NOT covered by automatic stay provisions

a. Ex. Non-Debtor Stayi. CONSIDER Irreparable Harm

(I) Whether action against non-debtor is so inextricably interwoven with affairsof debtor that action would substantially hinder debtors reorganization effort

B. Pecuniary Purpose Test (p. 411)

1. CONSIDER whether governments proceeding relates primarily to matters of public safety OR protection of governments pecuniary interest in debtors property

C. Public Policy Test (p. 412)

1. CONSIDER whether proceeding adjudicate private rights OR effectuate public policya. Whether it affects immediate parties to action

OR b. Whether it concerns wider group subject to authority of governmental unit


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RELIEF FROM STAY AND ADEQUATE PROTECTION

I. Grounds for Relief from Stay [ 362(d) ]

A. For Cause [ 362(d)(1) ] ex. debtors abusive behavior 1. INCLUDES Lack of Adequate Protection

2. CONSIDERa. Harm suffered by creditor if stay continued

VERSUS b. Interests of estate or debtor if stay continued

B. No Equity in Property AND Property Not Necessary for Effective Reorganization [ 362(d)(2) ]

II. Lack of Adequate Protection [ 362(d)(1) ]

A. TYPES 2x1. Loss of Collateral

a. Ex. fire, theft, neglect 2. Decline in Value depreciation over time

a. Property declining in value AND debtor NOT making payments as they become due

B. CONSIDER1. Multiple Liens whether second lien adequately protected

a. NOTE adequate protection for first lien disregards second lien value2. Declining Value of Property

a. COMPARE initial value AND current value3. Increasing Amount of Debt

a. Debtor NOT making payments when they become due4. Declining Equity Cushion

C. SITUATIONS 3x

1. Automatic Stay [ 362 ]a. Property is declining in value as it remains in the estate

2. Use of Cash Collateral [ 363 ]a. Debtors monthly expenses are greater than debtors cash flow

3. Post-Petition Borrowing [ 364 ]a. Debtor gives post-petition lender a priming lien

D. Adequate Protection [ 361 ] how debtor OR trustee provides adequate protection

1. OPTIONS 3x

a. Cash Payments [ 361(1) ]i. Single cash payment OR periodic cash payments to extent that action results in

decrease in value of property

b. Extra Liens [ 361(2) ]i. Additional OR replacement lien to extent that action results in decrease in value of

property

c. Indubitable Equivalent [ 361(3) ]i. Indubitable equivalent of creditors interest in property


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III. No Equity AND Not Necessary for Effective Reorganization [ 362(d)(2) ]

A. ELEMENTS 2x

1. Debtor has NO equity in property

a. DEFINE Equityi. Value in collateral in excess of ALL encumbrances

(I) INCLUDES debtors AND trustees interest in property(A) Ex. - exemption value (if any at all)

AND2. Property is NOT necessary for effective reorganization

a. DEFINE Necessaryi. Depriving debtor of ability of use property will damage chances of overcoming

financial difficulties

b. DEFINE Effectivei. Feasibility Test

c. DEFINE Reorganizationi. Chapter 13 Plan OR Chapter 11 Plan ONLY

(I) Element satisfied automatically in Chapter 7 case


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CLAIMS AND PRIORITIES

I. Claims Procedure

A. Proofs of Claims [ 501 ]1. Creditor must file proof of claim2. Equity holder must file proof of interest

B. Allowance of Claims [ 502(a) ]1. Claim filed will be presumed allowed

a. UNLESS debtor OR trustee objectsi. Ex. no valid debt under state law servicing procedures not organized to assure

accuracy and accountabilityii. Ex. amount of debt was lower than claimed iii. Ex. NOT liquidated or contingent

2. Claim is prima facie valid [ Rule 3001(f) ]

II. Secured Claims [ 506 ]

A. Undersecured Creditor / Partially Secured Claim [ 506(a) ] IF value of collateral < outstanding balance

1. Bifurcation [ 506(a)(1) ]a. Allowed Secured Claim

i. Claim secured by lien on property of the estateii. Claim secured ONLY to extent of value of collateral

b. Deficiency General Unsecured Claimi. Remaining portion of claim that exceeds value of collateral

2. Valuation of Personal Property [ 506(a)(2) ] Chapter 7 OR Chapter 13

a. Valuation of Personal Secured Property replacement value ON date of filing

i. DEFINE Replacement Value(I) Price charged by retail merchant for such property considering age and

condition of property at time value is determined

ii. DEFINE Personal Property(I) Property acquired for personal, family, or household purposes

B. Oversecured Creditor / Fully Secured Claim [ 506(b) ] IF value of collateral > outstanding balance

1. Allowed Secured Claima. INCLUDES 3x

i. Amount of Original Claimii. Post-Petition Interest at contract rate

(I) Allowed until value of collateral exhaustediii. Post-Petition Attorneys Fees

(I) Allowed until value of collateral exhausted

2. Lien Stripping Underwater Secured Creditor a. If first lien is undersecured

i. Second lien is stripped becomes unsecured claim


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III. Administrative Claims [ 503 ] Post-Petition, Unsecured Claims

A. Costs and Expenses to Preserve the Estate [ 503(b)(1) ]1. Actual AND necessary costs and expenses of preserving the estate

a. INCLUDES i. Post-Petition Income

(I) Wages, salaries, commissions for services rendered AFTER date of filingii. Post-Petition Backpayiii. Post-Petition Taxesiv. Fines and Penalties Related to Taxes

B. Compensation and Reimbursements [ 503(b)(2) 330(a) ]1. For trustee OR debtors attorney OR other professionals

a. Reasonable compensationi. For actual AND necessary services rendered

AND b. Reimbursement

i. For actual AND necessary expenses

C. Other Administrative Expenses1. Expenses of Certain Creditors [ 503(b)(3) ]2. Compensation of Professionals of Certain Creditors [ 503(b)(4) ]3. Reclaimed Pre-Petition Goods [ 503(b)(9) ]

IV. General Unsecured Claims [ 502 ] Pre-Petition, Unsecured Claims

A. General Unsecured Claims1. Acceleration of Claims mature on date of filing2. Amount of Claim fixed on date of filing court determination

B. LIMITATIONS [ 502(b) ]

1. NO Unmatured Interest [ 502(b)(2) ]a. Ex. - post-petition interest for unsecured claims

2. LIMITATION Lease Damages [ 502(b)(6) ]a. Landlords damages from early termination of real property lease

b. Landlords damages are limited to the greater of i. One years rent

ORii. 15% of remaining rent limited to three years rent

3. LIMITATION Golden Parachute Claims [ 502(b)(7) ]a. Employees damages from termination of employment contract

b. Employees damages are limited toi. Compensation for one year

C. Special Pre-Petition Claims1. Claim for Rejected Contracts and Leases [ 502(g) ]

a. Claim arises from trustees rejection of executory contract or unexpired lease2. Claim for Recovered Property [ 502(h) ]

a. Claim arises from recovery of certain propertyi. Exempt Property [ 522 ]ii. Voidable Preference Property [ 550 ]iii. Setoff Property [ 553 ]


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D. Reduction of Unsecured Consumer Debt [ 502(k) ]1. 20% reduction of unsecured claim on unsecured consumer debt if

a. Creditor unreasonably failed to negotiate reasonable alternative payment plan proposed bynon-profit budget and credit-counseling agency

V. Priority Claims [ 507 ] Priority of Distribution

A. 1st Domestic Support Obligations [ 507(a)(1) ]1. Alimony AND child support owed as of date of filing

B. 2nd Administrative Claims under 503(b) [ 507(a)(2) ]1. Actual AND necessary costs and expenses of preserving the estate2. Reasonable compensation for actual AND necessary services rendered trustee and attorney3. Reimbursement for actual AND necessary expenses trustee and attorney

C. 3rd Post-Petition Unsecured Claims under 502(f) [ 507(a)(3) ]1. Claim is in involuntary bankruptcy case

D. 4th Compensation Claims Up to $10,950 [ 507(a)(4) ]1. Wages, salaries, or commissions earned within 180 days of the earlier of

a. Date of filingOR

b. Date of cessation of debtors business

E. 5th Contributions to Employee Benefit Plans Up to $10,950 [ 507(a)(5) ]1. Benefits arose from services rendered within 180 days of the earlier of

a. Date of filingOR

b. Date of cessation of debtors business

F. 6th Fishermens and Grain Farmers Claims [ 507(a)(6) ]

G. 7th Deposits by Consumers Up to $2,425 [ 507(a)(7) ]1. Deposit of money for purchase of consumer goods or services that were not delivered or provided

H. 8th Certain Taxes [ 507(a)(8) ]1. Income tax, property tax, withholdings, employment taxes, excise taxes, customs duties, tax penalties

I. 9th Insurance Claims [ 507(a)(9) ]1. Debtors promise to maintain capital of insured depository institution

J. 10 th DUI Claims [ 507(a)(10) ]1. Claim for death or personal injury resulting from operation of motor vehicle while debtor was

intoxicated


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DISCHARGE

I. Effect of Discharge 3x [ 524(a) ]

A. Voided Judgment Liens1. Discharge voids any judgment at ANY time obtained

a. To extent that judgment is for debtors personal liability

B. Injunction Against Creditors Enforcement Efforts Personal Liability1. Discharge operates as injunction against enforcement to collect OR recover OR offset any discharged

debts as debtors personal liability

2. EXCEPTION Secured Property Ride-Through [ 524(j) ]a. Secured creditor may act if

i. Creditor has security interest in real property that is debtors principal residenceii. Creditors act is in ordinary course of business between debtor and creditor iii. Creditors act is limited to seeking or obtaining periodic payments

(I) NOT enforcing lien against debtor

C. Injunction Against Creditors Enforcement Efforts Community Property1. Discharge operates as injunction against enforcement to collect OR recover OR offset any claim

acquired post-petition against debtors community property

2. EXCEPTIONS 2x Debtors Spouse in Bankruptcy [ 524(b) ]a. Court did NOT grant discharge in prior bankruptcy case of debtors spouse

b. Court would NOT grant discharge in current bankruptcy case of debtors spouse

II. Protection Against Discrimination After Discharge [ 525 ]

A. Government Employer [ 525(a) ]1. Governmental may NOT deny employment OR license to OR discriminate against debtor SOLELY

based on debtors discharge OR debtors filing of bankruptcy

B. Private Employer [ 525(b) ]1. Governmental may NOT terminate employment OR discriminate against debtor SOLELY based on

debtors discharge OR debtors filing of bankruptcy


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III. Denial of Discharge

A. Rifle Shot Denial [ 523(a) ] no discharge of particular debts

1. Priority Taxes [ 523(a)(1) ]

2. Money, Property, Services, or Credit Obtained by False Statement [ 523(a)(2) ]a. False Statement OTHER THAN Statement Regarding Financial Condition

i. NOT in writing allowedOR

b. False Statement Regarding Financial Conditioni. ELEMENTS 4x

(I) False statement made in writing(II) False statement regarding financial condition(III) False statement on which creditor reasonably relied(IV) False statement made with intent to deceive

3. Luxury Goods or Services Consumer Debt [ 523(a)(2)(C) ]a. ELEMENTS 5x

i. Debt incurred within 90 days BEFORE date of filingii. Debt owed to single creditor iii. Debt is more than $5000iv. Debt used to purchase luxury goods or services

(I) NOT goods or services reasonably necessary for support and maintenance

4. Cash Advances - Consumer Debt [ 523(a)(2)(C) ]a. ELEMENTS 3x

i. Cash advance is more than $750ii. Cash advance is extension of credit under open-end credit planiii. Cash advance obtained within 70 days before date of filing

5. Unscheduled Debts [ 523(a)(3) ]a. Debts NOT listed in schedules with name of creditor (if debtor knows) if creditor could not

timely file proof of claim

6. Fraud and Embezzlement [ 523(a)(4) ]a. Debts arising from debtors fraud (while acting debtor acted in fiduciary capacity) OR

embezzlement OR larceny

7. Domestic Support Obligation [ 523(a)(5) ]

8. Willful and Malicious Injury [ 523(a)(6) ]a. Willful and malicious injury to another entity OR property of entity

9. Government Fine, Penalty, or Forfeiture [ 523(a)(7) ]a. Debt is for fine, penalty, or forfeiture payable to governmental unit

i. Ex. traffic ticket

10. Student Loans [ 523(a)(8) ]a. UNLESS imposes undue hardship on debtor OR dependents

11. DUI [ 523(a)(3) ]a. Death or personal injury caused by debtors operation of motor vehicle or vessel AND debtor

was intoxicated from using drugs or alcohol


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EXECUTORY CONTRACTS AND UNEXPIRED LEASES

I. Executory Contracts

A. DEFINE Executory Contract1. Obligations of both parties are so far unperformed at time of filing that failure of either party to

perform would be a material breacha. Ex. unexpired lease is an executory contract b. Ex. contract to produce goods or provide services

B. GOALS Executory Contracts1. Keep valuable executory contracts2. Reject contracts with no value going forward

C. OPTIONS 3x1. Trustee may assume AND THEN perform2. Trustee may assume AND THEN assign for valuable consideration

a. Valuable consideration IF value of contract > cost of performance3. Trustee may reject

II. Rejection of Executory Contracts [ 365(g)(1) ]

A. Trustee may reject executory contract or unexpired lease1. CONSIDER Debtors Business Judgment

a. Whether contract has NO value going forward b. Whether contract is below market value

2. RESULT pre-petition breacha. Other party has pre-petition claim for breach by debtor

b. Other party becomes general unsecured creditor

3. AMOUNT LIMITATIONS 2x

a. Termination of Lease of Real Property [ 502(b)(6) ]i. Claim limited to greater of one years lease OR 15% of remaining due up to three

years

b. Termination of Employment Contracts [ 502(b)(7) ]i. Claim is limited to compensation for one year


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III. Assumption of Executory Contracts in Default [ 365(b)(1) ]

A. Trustee may assume executory contract or unexpired lease in default

1. ELEMENTS 3x

a. Curing of Defaulti. Trustee cures OR provides adequate assurance that trustee will promptly cure default

(I) DEFINE Cure(A) Contract brought into compliance with its terms

(1) Ex. payment OR performance

b. Compensation for Pecuniary Lossi. Trustee compensates OR provides adequate assurance that trustee will promptly

compensate other party for any pecuniary loss to party resulting from default

c. Adequate Assurance of Future Performancei. Trustee provides adequate assurance of future performance under contract or lease

ii. Shopping Center Leases [ 365(b)(3) ](I) Separate Requirements for Adequate Assurance of Future Performance(II) ELEMENTS 4x

(A) Proof of source of rent AND ability to perform in future(B) Proof that any percentage rent will NOT decline substantially(C) Proof that assumption OR assignment includes all terms (use,

exclusivity, etc.)(D) Proof that assumption OR assignment will NOT disrupt tenant mix

2. EXCEPTIONS 4x [ 365(b)(2) ]a. Trustee NOT required to cure defaults that is breach of provision relating to

i. Bankruptcyii. Insolvency or financial condition of debtor iii. Filing petition for bankruptcyiv. Failure to pay penalty provision relating to default

IV. Non-Assumable and Non-Assignable Executory Contracts [ 365(c) ]

A. Trustee may NOT assume OR assign executory contract if 1. TYPES 3x

a. Applicable non-bankruptcy law excuses other party from accepting performance from OR rendering performance to entity OTHER THAN debtor

i. Ex. personal services contract is not assigned under state law

b. Contract to make loan OR extend financing to debtor OR to issue security of debtor

c. Lease for non-residential real property AND lease terminated BEFORE date of filing


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V. Assignment of Executory Contracts [ 365(f)(1) ] contract terms

A. Trustee may assign contract NOTWITHSTANDING contract provisions that prohibits, restricts, or conditions assignment if

1. Trustee assumes contractAND

2. Assignee provides adequate assurance of future performance

B. EXCEPTION [ 365(c)(1) ] non-bankruptcy law1. Applicable non-bankruptcy law excuses other party from accepting performance from or rendering

performance to entity other than debtor a. Where it is clear from applicable statute that identity of contracting party is crucial to contract

OR public safety is at issue

VI. Time Restrictions [ 365(d) ]

Chapter 7 Chapter 13 Chapter 11

Residential LeaseTrustee has 60 days after

order for relief to assume or reject OTHERWISE ,

deemed rejected

[ 365(d)(1) ]

Trustee may assume or rejectat ANY time beforeconfirmation of plan

[ 365(d)(2) ]

Trustee may assume or rejectat ANY time beforeconfirmation of plan

[ 365(d)(2) ]

Non-ResidentialLease

Trustee shall timely perform all obligations of debtor UNTIL trustee assumes or rejects

Trustee has 120 days after order for relief OR until confirmation of plan to assume or reject OTHERWISE , deemed rejected

[ 365(d)(3) + (d)(4) ]

Personal Property orEquipment Lease

Trustee has 60 days after order for relief to assume or

reject OTHERWISE ,deemed rejected

[ 365(d)(1) ]

(No Restriction?)

[ No Statutory Provision ]

Trustee shall timely performall obligations of debtor

arising after 60 days after order for relief UNTIL

trustee assumes or rejects

[ 365(d)(5) ]


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AVOIDING POWERS

I. Trustees Avoiding Powers

A. Trustee may set aside certain pre-petition transfers of property by debtor

1. DEFINE Transfer [ 101(54) ]a. Creation of lien

b. Retention of title as security interestc. Foreclosure of debtors equity of redemptiond. Each mode of disposing of OR parting with property OR interest in property

i. direct OR indirectii. absolute OR conditionaliii. voluntary OR involuntary

B. TYPES 5x1. Unperfected Interests Strong Arm Clause [ 544 ]2. Statutory Liens [ 545 ]3. Preferences [ 547 ]4. Fraudulent Conveyances [ 548 ]5. Post-Petition Transfers [ 549 ]

C. LIMITATIONS 3x [ 546 ]

1. Statute of Limitations [ 546(a) ]

a. Trustee must bring lawsuit before the earlier of i. 2 years from date of filing

ORii. 1 year from date of trustee appointment (before 2 years from dating of filing)

2. Post-Petition Perfection [ 546(b)(1) ] Relation Back

a. Trustee may NOT avoid if i. Applicable (state) law permits perfection of interest in property post-petition

ORii. Applicable (state) law provides for maintenance or continuation of perfection of

interest in property post-petition

b. Exception to Automatic Stay [ 362(b)(3) ]i. Property will be exempt from automatic stay if

(I) Post-petition perfection, maintenance or continuation of perfection is timely(A) Within 30 days AFTER transfer of property

3. Post-Petition Perfection [ 546(b)(2) ] Seizure of Property or Commencement of Action

a. Trustee may NOT avoid if i. Creditor gives notice of post-petition perfection of interest in property when

(I) Applicable law requires seizure of property OR commencement of action inorder to perfect interest

ii. Creditor has NOT seized property OR commenced action at date of filing


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D. Transferees of Avoided Transfer [ 550 ]1. Trustee may recover for benefit of the estate

a. Transferred property OR value of property

2. Trustee may NOT recover property froma. TYPES 2x

i. Transferee that takes property(I) For value(II) In good faith(III) Without knowledge that transfer was avoidable

ii. Immediate OR intermediate good faith transferee of initial transferee

3. Good faith transferee may obtain lien on recovered property

E. Preservation [ 551 ]

1. ANY transfer avoided is preserved for benefit of the estate

2. ANY lien avoided is preserved for benefit of the estatea. Ex. - Junior Lien Holders

i. If trustee avoids first lien junior lien holders position is NOT improved(I) Amount of first lien distributed to pay unsecured claims

I. Unperfected Interests / Strong Arm Clause [ 544 ]

A. Hypothetical Creditor [ 544(a) ]

1. Trustee may avoid any transfer of debtors property OR any obligation incurred by debtor that isvoidable unperfected interests

a. Ex. improper UCC filing not signed by debtor, inadequate description of collateralb. Ex. improper transfer of real property missing description, not notarized c. Ex. improper documentation or procedures using deed of trust when UCC-1 is

required for personal property

2. Trustee obtains rights and powers of hypothetical creditor on date of filing

a. Hypothetical Judgment Lien Creditor [ 544(a)(1) ]i. Trustee may avoid transfer or obligation that would be avoidable by creditor who has

judgment lien on debtors property

b. Hypothetical Unsatisfied Holder of Writ of Execution [ 544(a)(2) ]i. Trustee may avoid transfer or obligation that would be avoidable by creditor who has

obtained execution against debtor that is returned unsatisfied

c. Hypothetical Bona Fide Purchaser (BFP) of Real Property [ 544(a)(3) ]i. Trustee may avoid transfer that would be avoidable by bona fide purchaser of real

property who has perfected transfer by date of filing

B. Actual Creditor [ 544(b) ]1. [???]


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II. Statutory Liens [ 545 ]

A. Trustee may avoid liens arising under statutes if

1. Statute provides lien to creditor because of a. Debtors financial condition

b. Debtor files bankruptcy petitionc. Debtor is insolvent

i. Ex. state law provides wholesaler with lien on inventory when debtor is insolvent d. Debtor has a receiver appointed to take possession of debtors property

OR2. Statutory lien is NOT perfected on date of filing AND would be avoidable by creditor

III. Preferences [ 547 ] within 90 days (if non-insider benefited) OR within 1 year (if insider)

A. Trustee may avoid any preferential transfer of interest in property

1. DEFINE Preference [ 547(b) ]a. Preferential transfer is transfer of interest in property

b. ELEMENTS 5x

i. To creditor OR for benefit of creditor (I) Ex. payment of guaranteed debt to bank reduced exposure of insure who

guaranteed debt benefit to insider

ii. On account of antecedent debt(I) Debt that was past due

iii. Made while debtor was insolvent(I) Debtor is not paying debts as they come due

OR(II) Balance sheet insolvency debts > FMV of property (excluding exempt

property)

iv. Within 90 days before filing (if non-insider) OR within 1 year (if insider)

v. That enables creditor to receive more than if (I) Case filed in Chapter 7 AND transfer not made

(A) Ex. [ In re Pysz ] (p. 478)(1) Unsecured creditor obtained attachment lien becomes

secured with lien (higher priority than unsecured)

B. Time between Transfer and Perfection [ 547(e)(2) ]1. 30 Days


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C. EXCEPTIONS 4x [ 547(c) ]

1. Contemporaneous Exchange [ 547(c)(1) ]a. Transfer was intended to be contemporaneous exchange for new value to debtor

i. DEFINE New Value [ 547(a) ](I) Money(II) Moneys worth in goods, services, or new credit(III) Release by transferee of property (previously transferred to transferee) in

valid transaction by debtor AND

b. Actual transfer is substantially contemporaneous exchange

2. Ordinary Course [ 547(c)(2) ]a. Transfer was made in ordinary course of business or financial affairs of debtor and transferee

OR b. Transfer was made according to ordinary business terms

3. Purchase Money Security Interests [ 547(c)(3) ]a. Transfer created security interest in property acquired by debtor

AND b. Transfer was perfected within 30 days of debtor receiving possession of property

4. Small Transfers [ 547(c)(8) + (9) ]a. Consumer case aggregate value of property < $600

b. Business case aggregate value of property < $5000


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IV. Fraudulent Conveyances [ 548 ] within 2 years

A. Trustee may avoid any fraudulent transfer made within 2 years before date of filing if 1. Debtor voluntarily OR involuntarily made transfer or incurred obligation with actual OR constructive

fraud

2. DEFINE Actual Fraud [ 548(a)(1)(A) ]a. Debtor made transfer with actual intent to hinder, delay, or defraud other creditors

i. NOT required to be insolvent

3. DEFINE Constructive Fraud [ 548(a)(1)(B) ]a. Debtor received less than reasonably equivalent value in exchange for transfer or obligation

ANDi. Debtor was insolvent when transfer made OR became insolvent as result of transfer

(I) DEFINE Insolvent(A) NOT paying debts as they become due

OR(B) Balance Sheet Insolvency

(1) Liabilities > Assets

ORii. Debtor was engaged in business or transaction that left debtor with unreasonably

small capitalOR

iii. Debtor intended to incur or believed that debtor would incur debts beyond debtorsability to pay as debts maturedOR

iv. Debtor made transfer to insider OR for benefit of insider

B. RESULT Transferees Lien [ 548(c) ]1. Transferee may claim lien on property

a. Value of Lien value of transferees consideration

C. Self Settled Trusts [ 548(e) ] within 10 years

1. Trustee may avoid transfer made within 10 years before date of filing if a. ELEMENTS 4x

i. Transfer was made to self-settled trust(I) Ex. -

ii. Transfer was made by debtor iii. Debtor is beneficiary of trustiv. Debtor made transfer with actual intent to hinder, delay, or defraud other creditors

V. Post-Petition Transfers [ 549 ]

A. Trustee may avoid post-petition transfer of property of the estate if 1. Transfer was unauthorized

a. NOT allowed under Bankruptcy CodeOR

b. NOT allowed by court


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CHAPTER 7 BANKRUPTCY - LIQUIDATION

I. Duties of Chapter 7 Trustee [ 704(a) ]A. Collect and reduce to money the property of the estateB. Close estate as expeditiously as is compatible with best interests of partiesC. Be accountable for all property received by estateD. Ensure that debtor performs intentions regarding retention or surrender of certain propertyE. Investigate financial affairs of debtor F. Examine proofs of claims AND object to improper claimsG. Oppose discharge of debtor if advisableH. Furnish information concerning estate and its administration to parties of interestI. Make final report and file final accounting with court and U.S. Trustee

II. Dismissal / Conversion [ 706 + 707 ]

A. Conversion to Chapter 11 or 13 Case [ 706 ]1. Court may convert case if debtor requests OR consents

B. Dismissal of Chapter 7 Case [ 707(a) ]1. Court may dismiss for cause

a. INCLUDESi. Unreasonably delay by debtor that is prejudicial to creditorsii. Debtors non-payment of fees or chargesiii. Debtors failure to file schedules and statements within 15 after filing

C. Dismissal of Chapter 7 Case OR Conversion to Chapter 11 or 13 Case [ 707(b) ]1. Presumption of Abuse means test

III. Discharge [ 727(a) ] global denial - NO discharge of ALL debtsB. Court must grant discharge UNLESS

1. Individuals ONLY a. Debtor is NOT individual

2. Fraudulent Conveyancea. Debtor has transferred OR concealed property with intent to hinder, defraud, or delay

creditors or trusteei. Transfer occurred within one year BEFORE date of filing OR at any time AFTER

3. Financial Documentsa. Debtor has concealed, destroyed or failed to preserve documents and records revealing

debtors financial condition or business transactionsi. UNLESS debtor was justified under the circumstances

4. False Oath or Claima. Debtor knowingly and fraudulently made false oath or presented false claim

5. Failure to Explain Loss Assetsa. Debtor failed to explain any loss of assets or deficiency of assets to meet liabilities

6. Court Order Violationa. Debtor has refused to obey court order

7. Prior Discharge in Bankruptcya. Debtor has been granted discharged

i. Within 8 years before date of filing Chapter 7 or 11ii. Within 6 years before date of filing Chapter 13


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IV. Chapter 7 Eligibility

A. Presumption of Abuse [ 707(b)(1) ]1. ANY debtor with primarily consumer debts NOT business-related debts

a. Ex. small business is exempt from presumption2. Rebuttal [ 707(b)(2)(B)(i) ]

a. Special Circumstances i. Ex. serious medical condition

B. Threshold Test [ 707(b)(2) ]

1. IF Debtors Income < State Median Family Incomea. RESULT Eligible for Chapter 7

2. IF Debtors Income State Median Family Incomea. RESULT Move to Means Test

1. CALCULATE Debtors Income =a. ( Current Monthly Income of Debtor AND Spouse Combined ) X ( 12 months )

i. DEFINE Current Monthly Income [ 101(10A) ](I) Average monthly income from all sources of income that debtor receives

during 6-month period ending on last day of calendar month immediately preceding date of filing

(A) INCLUDES any amount paid by other entity on regular basis for household expenses of debtor or debtors dependents

(B) EXCLUDES Social Security benefits

C. Means Test [ 707(b)(3) ]

1. IF (Current Monthly Income Expenses) X 60 NOT less than the LESSER of a. 25% of debtors non-priority unsecured claims OR $6,575

i. Whichever is GREATER OR

b. $10,950

c. RESULT NOT Eligible for Chapter 7i. Debtor must convert to Chapter 13 or Chapter 11

2. OTHERWISE (Current Monthly Income Expenses) X 60 < [ Above Calculation ]a. RESULT Eligible for Chapter 7

3. CALCULATE Expenses =a. IRS National Standardized Expenses

i. Almost All Expenses b. IRS Local Standardized Expenses

i. Housing Expensesii. Utilitiesiii. Transportation

(I) Operating Costs(II) Ownership Costs

c. EXCEPTION Actual Expenses for Secured Debts


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REDEMPTION, REAFFIRMATION, AND RIDE-THROUGH

I. Statement of Intention [ 521(a)(2) ] secured real AND personal property ONLY

A. Statement of Intention1. Debtor must file statement of intention within 30 days after date of filing

a. What debtor intends to do with secured property real AND personal property

B. Debtors Intended Course of Action1. Debtor must perform intended course of action within 30 days after Meeting of the Creditors

C. Failure to File or Perform [ 362(h) ] personal property ONLY 1. Personal property shall no longer be property of the estate

II. Redemption [ 722 ]

A. Debtor may redeem property from lien holder by paying in full the LESSER of 1. Amount of loan

OR 2. Fair market value of collateral

B. Payment in Full NOT periodic payments

C. Redeemable Property1. ELEMENTS 4x

a. Property is subject to lien that secures dischargeable consumer debti. Ex. NOT luxury goods

b. Property is tangible personal propertyc. Property is intended primarily for personal, family, or household used. Property has been exempted OR abandoned

III. Reaffirmation [ 524(c) ] EXCEPTION to Discharge

A. Debtor may make voluntary promise to repay dischargeable debt AFTER discharge1. EVEN THOUGH discharge would normally cover debt

a. Secured Reaffirmationi. So debtor can keep collateral

b. Unsecured Reaffirmationi. So debtor has access to future credit

2. LIMITATION contract enforceable under non-bankruptcy law

3. Debtor waives discharge of debta. RESULTS

i. Debtors debt NOT discharged AND treated as if no bankruptcy filedii. Creditors repossession and foreclosure rights reinstated if debtor later defaultsiii. Creditors deficiency claim restored if undersecured

B. Debtors Right of Rescission [ 524(c)(4) ]1. Debtor has 60 days AFTER filing reaffirmation agreement with court to rescind


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C. Procedure for Reaffirmation [ 524(c) ]

1. Represented Debtor IF Lawyer Involveda. Debtor signs reaffirmation agreement BEFORE discharge entered

b. Lawyer gives 524(k) disclosures to debtor c. Debtor files reaffirmation agreement with courtd. Debtor has NOT rescindede. Lawyer certifies that

i. ELEMENTS 3x(I) Fully informed AND voluntary agreement by debtor (II) Agreement does NOT impose undue hardship on debtor (III) Lawyer advised debtor of consequences of reaffirmation AND default

2. Unrepresented Debtor IF Lawyer NOT Involveda. Debtor signs reaffirmation agreement BEFORE discharge entered

b. Debtor receives 524(k) disclosuresc. Debtor files reaffirmation agreement with courtd. Debtor has NOT rescindede. Court review determines that

i. ELEMENTS 2x(I) Agreement does NOT impose undue hardship on debtor (II) Agreement is in best interest of debtor

ii. EXCEPTION [ 524(c)(6)(b) ] no review by court(I) Debt is consumer debt AND secured by real property

3. Presumption of Undue Hardship [ 524(m) ]a. If debtors monthly income monthly expenses < scheduled payments on reaffirmed debt

i. NOTE NOT income and expenses from means test(I) From debtors completed and signed statement in support

b. Court Review of Presumption of Undue Hardshipi. Rebuttal

(I) Debtors statement identifies additional sources of fundsii. EXCEPTION [ 524(m)(2) ] no court review AT ALL

(I) Debt owed to credit union

IV. Ride-Through NOT allowed in Ninth Circuit

A. Debtor may continue to make periodic payments AS LONG AS debtor has NOT defaulted at date of filingAND

B. Creditor does NOT do anything to reclaim collateral


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PAYMENT OF CLAIMS IN CHAPTER 7

I. Payment of ClaimsA. 1st Consensual Secured Claims

1. Full amount of allowed secured claim OR value of collateralB. 2nd - Exemptions

1. Full OR partial amount of exemptiona. NOTE Avoidance of Judicial Liens and Non-PMSI

C. 3rd - Priority Claims 1. Full amount of claim OR pro rata treatment

D. 4th - Unsecured Claims 1. Full amount of claim OR pro rata treatment

E. 5th - Debtor 1. Remainder

II. Disposition of Property of Secured Creditors [ 725 ]

A. Trustee must dispose of any property of secured creditor not already disposed of after commencement of case but before final distribution of property of the estate

III. Distribution of Property of the Estate [ 726(a) ]

A. Priority of Distribution Classes

1. 1st Priority Claims (timely OR tardily filed)

2. 2nd Unsecured Claims (timely filed)

3. 3rd Unsecured Claims (tardily filed)

4. 4th Fines, Penalties, Forfeitures ( NOT for actual pecuniary loss suffered by creditors)

5. 5th Post-Petition Interest for Priority AND Unsecured Claims (at legal rate )

6. 6th Debtor

B. Pro Rata Treatment [ 726(b) ]1. IF insufficient funds to cover entire distribution class

C. EXCEPTION Case Converted to Chapter 7 Case1. Post-conversion administrative expense claim has priority over similar pre-conversion administrative

expense claim


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CHAPTER 13 BANKRUPTCY WAGE EARNERS PLAN

I. Chapter 13 Eligibility [ 109(e) ]

A. ELEMENTS 3x1. Debtor is individual ( NOT business) with regular income2. Debtor has non-contingent AND liquidated unsecured debts < $336,900 on date of filing3. Debtor has non-contingent AND liquidated secured debts < $1,010,650 on date of filing

B. DEFINE Individual with Regular Income [ 101(30) ]1. Income is sufficiently stable AND regular to enable individual to make payments under plan

a. From ANY source as long as stable and regular

C. DEFINE Non-Contingent Debt1. ALL events giving rise to liability occurred BEFORE date of filing

a. Ex. if betting on game that has not occurred contingent b. Ex. person promises to pay only if other person fails to pay contingent c. Ex. 30-day warranty contingent during 30 days

D. DEFINE Liquidated Debt1. Ready determination AND precision in computation of amount due

a. Amount of Debt NOT in dispute2. CONSIDER whether process for determining claim is fixed, certain, or otherwise determined by

specific standard

II. Duties of Chapter 13 Debtor A. Filing of Plan [ 1321 ]

1. Debtor must file plan timelyB. Payments [ 1326 ]

1. Debtor must make payments within 30 days AFTER date of filing plan OR date of filing petition(whichever is earlier )

i. Amount of Payments proposed by plan

III. Duties of Chapter 13Trustee [ 1302(b) ]

A. Similar Duties as in Chapter 7 [ 1302(b)(1) ]1. Be accountable for all property received by estate2. Ensure that debtor performs intentions regarding retention or surrender of certain property3. Investigate financial affairs of debtor 4. Examine proofs of claims AND object to improper claims5. Oppose discharge of debtor if advisable6. Furnish information concerning estate and its administration to parties of interest7. Make final report and file final accounting with court and U.S. Trustee

B. Other Duties [ 1302(b)(2) (6) ]1. Appear AND be heard at any hearing concerning

a. Value of property subject to lien b. Confirmation of planc. Modification of plan after confirmation

2. Dispose of moneys received or to be received3. Advise and assist debtor in performance under plan NOT legal matters4. Ensure that debtor makes timely payments

a. If missed paymentsi. Trustee may seek wage attachment order

(I) Trustee may file motion to convert or dismiss b. Provide applicable notice for alimony and child support


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IV. Property of the Estate [ 1306 ]

A. Included Property [ 1306(a) ]1. All 541 property that debtor acquires AFTER date of filing and before case is closed

AND2. Earnings from services performed by debtor AFTER date of filing and before case is closed

B. Possession of Property of the Estate [ 1306(b) ]1. Debtor remains in possession of all property of the estate

a. UNLESS otherwise provided for in confirmed plan

C. Control of Property of the Estate [ 1303 ]1. Debtor may use, sell, or lease property of the estate

V. Dismissal / Conversion [ 1307 ]

A. Conversion to Chapter 7 Case [ 1307(a) ]1. Debtor may convert to Chapter 7 case at ANY time

B. Voluntary Dismissal of Chapter 13 Case [ 1307(b) ]1. Debtor may dismiss Chapter 13 case

C. Dismissal of Chapter 13 Case / Conversion to Chapter 7 Case [ 1307(c) ]

1. Court may convert or dismiss case for causea. Unreasonable delay by debtor that is prejudicial to creditors

b. Debtors non-payment of fees and chargesc. Failure to file plan timelyd. Failure to commence making timely paymentse. Denial of confirmation of planf. Material default by debtor with respect to term of confirmed plang. Termination of confirmed plan by reason of occurrence of condition in plan

2. Dismissal vs. Conversiona. Court Determination Best Interests of Creditors and Estate

VI. Discharge [ 1328 ]

A. Court must grant discharge as soon as practicable after debtor completes all payments under plan


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CRAMDOWN AND CURE

I. Modification of Claims [ 1322(b)(2) ]

A. Debtor may modify rights of secured AND unsecured claims

B. Cramdown [ 1325(a)(5) ] UNDERSECURED CLAIMS 1. Debtor may pay value of collateral with interest to undersecured creditor over life of plan

2. EXCEPTIONS 3x NO cramdown available

a. Principal Residence (Home Mortgage) [ 1322(b)(2) ]i. Security interest granted in debtors principal residence

b. Motor Vehicle [ 1322(a)(9) ]i. Security interest in motor vehicle granted within 910 days (2.5 years) BEFORE date

of filing

c. Purchase Money Security Interest [ 1322(a)(9) ]i. Purchase money security interest granted within one year BEFORE date of filing

II. Curing of Defaults

A. Cure [ 1322(b)(3) ]

1. Debtor may catch up on past-due arrearage WHILE making current payments as they come duea. Arrearages paid over life of plan

2. INCLUDES Home Mortgage [ 1322(c) ]


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CONFIRMATION OF CHAPTER 13 PLAN

I. Chapter 13 Plan

A. Contents of Chapter 13 Plan [ 1322 ]

1. Mandatory Provisions 3x [ 1322(a) ] plan must provide for

a. Debtors Future Earningsi. Submission of all or some of debtors future earnings or income to trustees

supervision and control as necessary for execution of planb. Full Payment to Priority Claims

i. Full payment of priority claims in deferred cash payments(I) UNLESS priority claim holder agrees to different treatment of claim

c. Same Treatmenti. Same treatment for similar claims within particular class

2. Optional Provisions [ 1322(b) ] plan may provide for

a. Designation of classes of unsecured claimsi. BUT no unfair discrimination against any class

b. Modification of rights of secured AND unsecured creditorsi. EXCEPTION Home Mortgage (of Debtors Principal Residence)

(I) Claim secured only by security interest in real property that is debtors principal residence

c. Curing of defaultsi. INCLUDES Home Mortgages

d. Assumption, rejection, or assignment of executory contract or unexpired lease

B. Life of Chapter 13 Plan [ 1322(d) ]

1. IF Debtors Income State Median Family Incomea. Payments over period of 5 years or less

2. IF Debtors Income < State Median Family Incomea. Payments over period of 3 years or less

OR b. Payments over period of 5 years or less only if court approves longer period for cause

3. Debtors Income =a. ( Current Monthly Income of Debtor AND Spouse Combined ) X ( 12 months )


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II. Confirmation of Chapter 13 PlanA. Confirmation Requirements [ 1325(a) ]

1. Satisfaction of Plan Requirements [ 1325(a)(1) ]a. Plan satisfies Chapter 13 provisions and other application provisions of Code

i. SEE Contents of Chapter 13 Plan [ 1322 ]

2. Good Faith [ 1325(a)(3) ]a. Plan proposed in good faith AND NOT by any illegal means

3. Secured Claims [ 1325(a)(5) ]a. OPTIONS 3x

i. Acceptance of Plan(I) Secured creditor has accepted plan

ii. Cramdown of Undersecured Claims(I) Debtor makes payments totaling value of collateral with interest

iii. Surrender of Collateral(I) Debtor surrenders property to secured creditor

4. Best Interests of Creditors Test [ 1325(a)(4) ]a. Secured AND unsecured creditors are receiving at least as much as they would in Chapter 7

liquidationi. NOTE debtors post-petition wages are NOT property of the estate in Chapter 7

5. Feasibility Test [ 1325(a)(6) ]a. Debtor will be able to make ALL payments under plan

AND b. Debtor will be able to comply with plan

6. Domestic Support Obligations [ 1325(a)(8) ]a. Debtor has paid all amounts to be paid under domestic support obligation

7. Tax Returns [ 1325(a)(9) ]a. Debtor has filed all tax returns

B. Other Requirement [ 1325(b) ] objection by trustee OR unsecured creditor

1. Disposable Income Test [ 1325(b)(1) ]a. Plan provides that ALL of debtors projected disposable income for life of plan

2. CALCULATE Projected Disposable Income [ 1325(b)(2) ]a. (Current Monthly Income Reasonably Necessary Actual Expenses)

OR b. (Current Monthly Income IRS Standardized Expenses)

3. DETERMINE Expenses

a. IF Debtors Income State Median Family Incomei. USE IRS Standardized Expenses

b. IF Debtors Income < State Median Family Incomei. USE Reasonable Necessary Actual Expenses

(I) Reasonable AND necessary for maintenance and support of debtor (A) CONSIDER excessiveness AND circumstances

4. Debtors Income =a. ( Current Monthly Income of Debtor AND Spouse Combined ) X ( 12 months )


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PAYMENT OF CLAIMS IN CHAPTER 13

I. Payment of Claims

A. Secured Claims [ 1325(a)(5) ]1. Full amount of allowed secured claim WITH interest over life of plan

a. NOTE cramdown for undersecured claims

B. Administrative Claims [ 1322(a)(2) ]1. Full amount of administrative claims over life of plan

C. Priority Claims [ 1322(a)(2) ]1. Full amount of priority claims over life of plan

D. Unsecured Claims [ 1325(b)(2) ]1. Pro Rata Treatment based on debtors projected disposable income


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CHAPTER 11 BANKRUPTCY BUSINESS REORGANIZATION

III. Chapter 11 Eligibility

A. NOTE Insolvency is NOT requiredB. Any business may file petition

1. BUT courts will quickly lift stay, dismiss or convert cases for a. Bad Faith

i. b. No Prospect of Successful Reorganization

IV. Debtor-in-Possession vs. Chapter 11 Trustee

A. Appointment of Chapter 11 Trustee [ 1104 ] request by creditor OR U.S. Trustee1. Court shall order appointment of trustee if

a. For Cause [ 1104(a)(1) ]i. Fraud, dishonesty, incompetence, or gross mismanagement of debtors affairs before

OR during case by current management (debtor-in-possession)

b. Best Interests of Creditors and the Estate [ 1104(a)(2) ]i. In interests of creditors, equity holders, and other interests of the estate

(I) Ex. [ In re Sharon Steel ] (p. 431)

c. Grounds to Convert or Dismiss under 1112 [ 1104(a)(3) ]i. BUT court determines that appointment is in best interests of creditors and the estate

2. Appointed Trusteea. If more complex case private trustee

b. If less complex case panel trustee

B. Duties of Chapter 11 Trustee [ 1106 ]1. Perform similar duties under Chapter 7

a. Be accountable for all property received by estatea. Examine proofs of claims AND object to improper claims

b. Furnish information concerning estate and its administration to parties of interestc. File periodic reports and summaries of business operations to the courtd. Make final report and file final accounting with court and U.S. Trustee

2. File schedules and statements if debtor has not done so3. Investigate acts, conduct, assets, liabilities, and financial condition of debtor 4. Investigate operation of debtors business AND desirability of continuance of business5. File plan for reorganization OR recommend conversion or dismissal of case6. File tax returns that are late7. File necessary reports to court after confirmation of plan


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C. Debtor-in-Possession [ 1107 ]1. Debtor-in-Possession debtor who files case

a. Receives rights and powers of Chapter 11 Trusteei. EXCEPTION right to compensation

b. Performs most duties of Chapter 11 Trusteei. EXCEPTION investigate debtors own business

2. CONSIDER Leaving Debtor-in-Possessiona. Poor Leadership

b. Bad Business Judgmentc. Financial Circumstances Outside of Debtors Control ex. economyd. Suppliers patient (earn out money through later purchases)e. Secured Creditors impatient (dont want delay)f. Equity depends (could be on managements side)

I. Dismissal / Conversion [ 1112 ]

A. Conversion to Chapter 7 Case [ 1112(a) ] request by debtor 1. Debtor may convert Chapter 11 case to Chapter 7 case

a. EXCEPTIONS 3xi. Debtor is NOT debtor-in-possessionii. Case was originally involuntary Chapter 11 caseiii. Case was converted to Chapter 11 case NOT by debtors request

B. Dismissal of Chapter 11 Case / Conversion to Chapter 7 Case [ 1112(b) ]1. Court shall convert to Chapter 7 case OR dismiss Chapter 11 case for cause

2. DEFINE Cause [ 1112(b)(4) ]a. Substantial or continuing loss to estate AND lack of reasonable likelihood of rehabilitation

b. Gross mismanagement of the estatec. Unauthorized use of cash collateral substantially harmful to one or more creditorsd. Failure to comply with court order e. Failure to attend meeting of creditorsf. Failure to file disclosure statement within time fixedg. Failure to confirm plan within time fixedh. Inability to effectuate substantial consummation of confirmed plani. Material default by debtor with respect to confirmed plan

C. Conversion to Chapter 7 Case vs. Dismissal of Chapter 11 Case1. Court Determination Best Interests of Creditors and Estate


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BUSINESS OPERATIONS

I. First Day OrdersA. Debtors court order on same time as date of filing

1. Additional injunctive relief beyond automatic stay2. Requirements for operating reports3. Authorization to buy or sell outside of ordinary course4. Use of cash collateral5. Approval of post-petition financing arrangement6. Employment of counsel for debtor and for creditors committee

II. Sale of Assets / Sub Rosa Plan [ 363(b) ]A. Trustee may , with notice to creditors, use, sell, or lease assets OUTSIDE of ordinary course of business

1. Ex. tangible assets (vehicles), intellectual property assets, other intangible assets

B. STANDARDS Business Judgment OR Best Interest of Creditors1. Sub Rosa Plan vs. Chapter 11 Reorganization Plan

a. DEFINE Sub Rosa Plani. Sale of assets in place of Chapter 11 reorganization plan

2. (OLD) FACTORS 6x [ Lionel ] (2nd, 1983)a. Value of asset compared to value of the estate as a whole

b. Amount of time that has elapsed since date of filingc. Likelihood that reorganization plan will be proposed and confirmed in near futured. Effect of proposed disposition of assets on future reorganization planse. Sale price from disposition compared to appraisal valuef. Whether value of asset is increasing or decreasing

III. Use of Cash Collateral [ 363 ] use of proceeds from property subject to security interest

A. DEFINE Cash Collateral [ 363(a) ] lien on cash flow1. Cash OR other cash equivalents that is subject to security interest (lien) that the estate AND entity

other than the estate have interest ina. INCLUDES rents AND proceeds

2. Ex. when lender takes lien on hotel lender also takes lien on rents3. Ex. when lender takes lien on inventory lender also takes lien on sale proceeds

B. Use of Cash Collateral in Ordinary Course of Business [ 363(c) ]1. Trustee may use cash collateral in ordinary course of business if

a. Consent by each entity with interest in cash collateralOR

b. Court approval for use of cash collateral

2. Adequate Protection [ 365(e) ]a. Court may prohibit OR condition use of cash collateral to extent that it is necessary to

provide adequate protection of any creditors interest in propertyi. Impaired IF monthly expenses > monthly cash flow

3. Cash Collateral Motion showinga. Whether monthly income is greater than monthly expenses

b. Whether all disposable income is being devoted to making paymentsc. Whether payments made to insiders, affiliates, or creditors


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4. Setoff [ 553 ] treated as cash collaterala. Creditor may enforce right to offset debt owed to debtor AGAINST debt owed to creditor by

debtor that arose BEFORE date of filingi. NOTE creditor must obtain relief from stay BEFORE enforcing right to setoff

b. LIMITATIONS 2xi. Disallowed Claim [ 553(a)(1) ] invalid claim

(I) TYPES 3x(A) Creditor acted inequitably ex causing delay in litigation (B) Setoff would jeopardize debtors ability to reorganize(C) Setoff results in preference or priority over other unsecured creditors

ii. Assignment within 90 Days [ 553(a)(2) ] trustee recovers setoff amount(I) Claim was transferred to creditor

(A) AFTER date of filingOR

(B) Within 90-day period BEFORE date of filing AND debtor wasinsolvent

IV. Post-Petition Borrowing [ 364 ] post-petition lenders

A. Trustee/DIP may obtain credit and incur debt to continue business operations

B. Unsecured Basis [ 364(a) ] DURING ordinary course of business1. Trustee may obtain unsecured credit AND incur unsecured debt in ordinary course of business

a. RESULT unsecured debt treated as administrative expense priority

C. Unsecured Basis [ 364(b) ] OUTSIDE ordinary course of business1. Trustee may obtain unsecured credit AND incur unsecured debt NOT in ordinary course of business

a. RESULT unsecured debt treated as administrative expense priority

2. LIMITATION court approvala. Transaction on fair and reasonable terms

b. Transaction likely to further interests of the estatec. Transaction will NOT impose unjustifiable burden or risk on creditors

D. Super-Priority and Secured Basis [ 364(c) ] IF unable to obtain unsecured financing

1. OPTIONS 3x

a. Super-Priority Basis [ 364(c)(1) ]i. RESULT debt treated as having priority over ALL administrative expenses

b. Secured Basis / New Lien [ 364(c)(2) ]i. RESULT debt secured by lien on property of the estate NOT subject to lien

c. Secured Basis / Junior Lien [ 364(c)(3) ]i. RESULT debt secured by junior lien on property of the estate subject to lien

2. LIMITATION court approvala. Transaction on fair and reasonable terms

b. Transaction likely to further interests of the estatec. Transaction will NOT impose unjustifiable burden or risk on creditors


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E. Priming Lien [ 364(d)(1) ] IF unable to obtain ANY financing

1. RESULT debt secured by senior OR equal lien on property of the estate that is subject to lien

2. ELEMENTS 2xa. Trustee is unable to obtain credit on ANY other terms

AND b. Trustee provides adequate protection of interest of existing lien holder

i. CONSIDER sufficient equity cushion for existing lien(I) Ex. sufficient value in property to accommodate both liens

3. LIMITATIONS court approval AND trustees burden of proof a. Adequate Protection

V. Limitations on Financing

A. Cross-Collateralization NOT allowed1. Lender provides post-petition credit on condition that collateral securing new credit ALSO secures

unsecured OR undersecured pre-petition claim

2. After-Acquired Property [ 552(a) ]a. Property acquired post-petition NOT subject to lien from pre-petition security agreement

b. EXCEPTIONS 2x

i. Proceeds Acquired Post-Petition [ 552(b) ](I) Pre-petition security agreement covers proceeds from collateral allowed

ii. Rents Acquired Post-Petition [ 552(c) ](I) Pre-petition security agreement covers rents from collateral allowed

B. Financing from Old Equity Holders1. Old equity holders will provide financing in return for continued ownership of post-bankruptcy

business

2. Absolute Priority Rulea. Equity may NOT retain value UNLESS all creditors have been paid in full

b. EXCEPTIONi. Equity may retain ownership

(I) IF bargain is fair AND creditors will benefit


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CONFIRMATION OF CHAPTER 11 PLAN

I. Negotiations for Chapter 11 Plan

A. Powerful Aids for Debtor-in-Possession During Negotiations1. Automatic stay2. Possibility of adopting plan that binds ALL creditors (even those rejecting plan)3. Exclusive right to propose plan for first six months4. Avoiding powers

II. Proponent of Plan [ 1121 ]

A. Debtor as Proponent [ 1121(b) ]1. ONLY debtor may file plan for 120 day period AFTER date of filing

III. Confirmation of Chapter 11 Plan

A. Court must confirm plan only if ALL confirmation requirements are met

1. Confirmation Requirements 14x [ 1129(a)(11) ]a. Feasibility Test [ 1129(a)(11) ]

i. Business Judgment Test b. Best Interests of Creditors Test [ 1129(a)(7) ]

i. Chapter 7 Liquidation Analysisc. Acceptance by Impaired Class [ 1129(a)(10) ]

i. At least one impaired classd. Acceptance by All Classes [ 1129(a)(8) ]

i. Amount 2/3ii. Number 1/2

e. Priority Claims [ 1129(a)(9) ]i. Administrative Claims full immediate paymentii. Priority Claims full immediate or deferred payments

f. Plans Compliance [ 1129(a)(1) ]i. Contents of Chapter 11 Planii. Substantially Similar Claimsiii. De Minimis Claims

g. Proponents Compliance [ 1129(a)(2) ]i. Solicitation of Votes and Disclosure Statement

h. Good Faith [ 1129(a)(3) ]i. Plan proposed on good faith

IV. Feasibility Test [ 1129(a)(11) ]A. Confirmation of plan is NOT likely to be followed by liquidation OR need for further financial

reorganization1. UNLESS plan proposes liquidation or reorganization

B. Courts Determination judges best business judgment based on factual inquiry1. Whether business has reasonable prospect of survival or success

a. Ex. - [ In re Malkmus ] (p. 617)i. Debtors past performance (during post-petition period of operations)ii. Debtors projections reliability and accuracy

b. Ex. - [ In re Made in Detroit ] (p. 620)i. Conditional plan with too many contingenciesii. Debtor wanted to borrow more and pay off existing creditors from sale of property

BUT no lender was committed to plan NOT concrete


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V. Best Interests of Creditors Test [ 1129(a)(7) ]A. Each individual creditor has accepted the plan

ORB. Each objecting creditor receives at least as much under Chapter 11 plan as it would have receive in Chapter 7

liquidation

VI. Acceptance by Impaired Class [ 1129(a)(10) ]A. If any class is impaired under plan

1. At least one impaired class has accepted the plan

B. Impairment [ 1124 ]

1. Unimpaired Claim

a. TYPES 2x

i. Plan does NOT alter legal, equitable, or contractual rights of claim holder (I) Ex. oversecured creditor

ii. Plan cures default that occurred before OR after date of filing(I) UNLESS [ 365(b)(2) ]

(A) Default relates to breach due to debtors financial condition or bankruptcy filing

2. Impaired Claimsa. Any claim that is NOT unimpaired

i. Ex. not curing arrearagesii. Ex. delay in payment

b. EXCEPTIONS 2xi. Consent by Creditor [ 1123(a)(4) ]

(I) If creditor consents to less favorable treatment NOT impairedii. Statutory Impairment NOT impaired by plan

(I) Ex. landlords damages limited by statute

VII. Acceptance by All Classes [ 1129(a)(8) ]A. Each class has accepted plan

ORB. Class is unimpaired under plan

C. Acceptance by Class [ 1126(c) ]1. Plan accepted by class if

a. Amount plan accepted by creditors holding at least two-thirds (2/3) the amount of theclaims of the classAND

b. Number plan accepted by creditors holding at least one-half (1/2) the number of claims of the class

D. Presumption of Acceptance of Unimpaired Class [ 1126(f) ]1. Each unimpaired class AND unimpaired claim of unimpaired class is conclusively presumed to have

accepted plan


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VIII. Plans Compliance [ 1129(a)(1) ]A. Plan complies with applicable provisions of Bankruptcy Code

B. Contents of Chapter 11 Plan [ 1223 ]1. [???]

C. Classification of Claims [ 1222 ]

1. Substantially Similar Claims [ 1122(a) ]a. Claim may be placed in same class if claim is substantially similar to other claims in class

i. NOT required to be placed in same class(I) Ex. - similar claims may be placed in separate similar classes

2. EXCEPTION De Minimus Claims [ 1122(b) ]a. Plan may designate separate class of claims for unsecured claims that are NOT substantially

similar i. ELEMENTS 2x

(I) Each claim in class is less than certain amount approved by court(II) Approved amount is found by court to be reasonable AND necessary for

administrative convenience

3. DEFINE Claims Tradinga. Purchase of bankruptcy-based obligations (claims)

i. Purchaser single, large creditor OR outside investors

b. STANDARD allowed if acted in good faithi. Existing creditor acts to preserve his fair share of the estate

(I) Ex. [ In re Figter ] (p. 644)(A) Secured creditor bought claims to have lien covering entire

apartment complexii. NOT obstructing fair and feasible reorganization in hope for higher payout

(I) Ex. competing business that was not pre-existing creditor

IX. Proponents Compliance [ 1129(a)(2) ]A. Proponent of plan complies with applicable provisions of Bankruptcy Code

B. Solicitation of Votes and Disclosure Statement [ 1125(b) ]

1. Proponent of the plan may solicit votes (acceptance or rejection) for plan if a. Proponent solicits votes post-petition

AND b. Proponent provides plan AND written disclosure statement containing adequate information

to claim holder at time of solicitation OR before solicitation

2. DEFINE Adequate Information [ 1125(a) ] must be approved by courta. Information that would enable a hypothetical investor to make informed judgment about plan

i. CONSIDER (I) Complexity of case(II) Benefit of additional information to creditors(III) Cost of providing additional information(IV) Purpose of disclosure(V) Whether discussion of alternative plans is necessary


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3. Standard Disclosure Statement [ In re Malek ] (p. 653)a. Description of Business

b. History of Debtor Prior to Filingc. Financial Informationd. Description of Plane. How Plan Is to Be Executionf. Liquidation Analysisg. Management to Be Retain and Compensation of Personnel Retainedh. Projection of Operationsi. Litigation

j. Transactions with Insidersk. Tax Consequences

C. Safe Harbor Rule [ 1125(e) ] exempt from SEC laws and regulations1. Person connected with solicitation of votes (acceptance OR rejection of plan) is NOT liable for

violation of securities laws (SEC regulations on fraud)a. AS LONG AS

i. Person acted in good faith AND in compliance with Bankruptcy Code(I) Ex. allowed if debtor made fraudulent statements but did it in good faith

D. Pre-Petition Solicitation [ 1125(g) ] Pre-Packaged Bankruptcy Case1. If person began soliciting votes (acceptance OR rejection of plan) pre-petition, person may solicit

vote from claim holder a. AS LONG AS solicitation complies with applicable non-bankruptcy law

2. NOT exempt from SEC laws and regulations

E. Small Business Case [ 1125(f) ]1. Court may determine that plan provides adequate information AND that separate disclosure statement

is unnecessary

X. Priority Claims [ 1129(a)(9) ]

A. Priority claims must be paid in full

1. Administrative Expenses [ 1129(a)(9)(A) ] Administrative Insolvency?a. Cash equal to entire amount of claim paid on effective date of plan

2. Other Priority Claims [ 1129(a)(9)(B) ]

a. If class accepted plani. Deferred cash payments equal to amount of claim paid on plans effective date

OR b. If class rejected plan

i. Cash equal to entire amount of claim paid on plans effective date

XI. Good Faith [ 1129(a)(3) ]A. Plan proposed in good faith


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CRAMDOWN ALTERNATIVE FOR CONFIRMATION

I. Cramdown [ 1129(b) ] if ANY class rejects planA. Court must confirm plan only if cramdown requirements are met

1. REQUIREMENTS 3xa. Standard Chapter 11 Requirements

i. Plan meets all 1129(a) requirements OTHER THAN 1129(a)(8) b. NO Unfair Discrimination

i. Plan does NOT discriminate unfairlyc. Fair and Equitable Test

i. Plan is fair AND equitable with respect to each impaired class that rejected plan

II. Unfair Discrimination A. Ex. preference for one class of unsecured creditors over another

III. Fair and Equitable Test [ 1129(b)(2) ] with respect to impaired classes that rejected plan

A. For Class of Secured Claims [ 1129(b)(2)(A) ] OPTIONS 3x

1. Retention of Lien and Deferred Cash Payments [ 1129(b)(2)(A)(i) ]a. Secured creditor retains lien securing its claim

i. Debtor may either retain OR transfer propertyAND

b. Secured creditor receives deferred cash paymentsi. Full amount of secured claim paid over time with i