Bankruptcy

1) Ineligible UNLESS w/in 180 days of the bankruptcy filing the individual received an individual or group briefing from an approved nonprofit budget and credit counseling agency.
2) Briefing must have at least outlined the opportunities for available credit counseling and assisted in performing a related budget analysis.
3) Briefing can be by telephone or internet
4) Debtor must file certificate of completion with court.

Any person who provides any bankruptcy assistance to an "assisted person" in return for money or other valuable consideration. (Includes attorneys)

A person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $175,750.

Debt incurred by an individual primarily for a personal, family, or household purpose

Must comply with certain restrictions and disclosure requirements and may be liable for damages, costs, loss of fees, and/or subject to injunctions for failing to comply.

That he has performed a reasonable investigation into the circumstances giving rise to the petition and that it's well grounded in fact and law and not an abuse. Also that he has knowledge that the information in the schedules is correct.

A voluntary bankruptcy insittuted by an individual who wants to propose a plan to repay his creditors over time. (Generally withing 3-5 yrs)

By paying off debts (or fractions of debts) with installments. The debts may be extended and reduced in amount. Under 13, debtor assets that might otherwise be sold under Ch.7.

It must meet the "Best Interest of the Creditors" Test.

Each creditor must receive, in present value terms, AT LEAST as much as that creditor would receive if the Debtor were liquidated under Ch.7.

Only INDIVIDUALS with regular income.

1) Liquidated UNSECURED Debts of less than $360,475 AND
2) Noncontingent Liquidated SECURED Debts of less than $1,081,400.

It means that it is clear as to the amount of debt.

They must file Ch.11 (or Ch.7), which is more burdensome than Ch.13.

Applies to BUSINESSES and INDIVIDUALS. Though it is most commonly used to rehabilitate a business by extending, reducing, or modifying the debtor's obligations.

If they have UNSECURED debt of $360,475 or more OR SECURED debt of $1,081,400 or more, if they want to pay off their debts over time. (Individuals with less debt can still file 11, but probably don't want to)

Must also meet the Best Interest of the Creditors test.

By filing a petition

Generally, under Ch.11, the debtor may continue to operate the business under bankruptcy without having to appoint a separate trustee. (In 13 & 7 a trustee is ALWAYS appointed). A trustee may be appointed in Ch.11 FOR CAUSE, including fraud, dishonest, incompetence, or gross mismanagement.

1) The plan must be approved by the CREDITORS: (This determines how much creditors are paid, so there are substantial negotiations between debtor and creditors)
2) Plan must then be CONFIRMED by a bankruptcy judge: (this binds the debtors and creditors to the "Terms of the Plan"

The Debtor's non exempt assets are liquidated and for an individual debtor his debts are discharged.

A Ch.7 petition filed by a debtor with primarily consumer debts may be dismissed (or with debtor's consent converted to Ch.13 or 11) upon finding that granting relief under Ch.7 would constitute an ABUSE.

1) By showing that the debtor filed in BAD FAITH or by establishing LACK OF GOOD FAITH under the "Totality of the Circumstances of the Debtor's financial situation" OR
2) Established through the MEANS TEST

1) Court will look at the debtor's income in the 6 mos before filing. If the income is under the median family income for families of a similar size in that state, D can file ch. 7.
2) If income is over median, the means test is employed.
3) Means Test = (See next card)

If debtors can afford to pay their creditors at least between $7,025 and $11,725 over five years, they should pay under Ch.13 instead of using liquidation under Ch.7 to avoid paying.

Individuals and Entities may file, with the exception of certain specialized industries (railroads, insurance companies, banks, credit unions, and municipalities)

No

Any debtor eligible to file a voluntary petition may be subject to an involuntary petition under Ch..7 (or Ch.11, BUT not Ch.13), except for farmers and nonprofits.

To end the race to the courthouse and to obtain rights only available in bankruptcy (e.g., right of trustee to recover "preferences" made to certain creditors at other creditors expense) NOTE: Preferences are NOT illegal under Utah Law and can't be recovered.

1) Count the Creditors
2) There must be adequate grounds for filing

1) If the D has 12 or more creditors, then 3 or more with aggregate unsecured (or undersecured) claims of AT LEAST $14,425 must file.
2) If the D has fewer than 12 creditors, one or more whose unsecured (or undersecured) claims aggregate $14,425 may file.
3) NOTE: employees, insiders, and creditors who have received transfers voidable by the trustee are NOT included in counting the twelve creditors.

The D is generally not paying debts as they come due, which means:
1) the D must regularly miss a significant number of payments to creditors OR
2) regularly miss payments significant in amount in relation to debtor's operation.
NOTE: If a custodian is appointed to take possession or control over substantially all of the debtor's property within 120 days of the petition, that counts as adequate grounds.

Must file:
1) A list of creditors;
2) A schedule of assets and liabilities;
3) A schedule of current income and current expenditures;
4) A statement of the debtor's financial affairs (e.g., tax returns;
5) Copies of pay stubs w/in 60 days before filing
6) (about 5 more things)
NOTE: in Ch.7 if individual fails to file these things w/in 45 days of filing petition, case may be dismissed.

It halts ALL collection activity from the time of the bankruptcy filing. (This applies to all creditors whether they know of the filed petition or not)

WILLFUL violations of the stay can result in damages, attorney's fees, and even punitive damages.

1) The prosecution of criminal action;
2) The establishment or modification of domestic support obligations;
3) The enforcement of gov't or police actions;
4) The commencement or continuation of civil actions related to domestic affairs;
5) An assessment of a Tax or demand for tax returns
6) (AND several more)

For the duration of the bankruptcy UNLESS a Creditor requests that the stay be lifted and relief is granted. Under what circumstances is relief likely:
1) Lack of Adequate protection
2) Lack of Equity
3) Scheme to defraud creditors
4) Serial filings
5) Compliance with Statement of Intention

A Secured Creditor is entitled to protection against a decline in the value of the collateral during the life of the automatic stay. Adequate Protection = lien, cash payments, or insurance.

A secured creditor can request the court to lift the stay with respect to some item of encumbered property if the debtor does not have any equity in the property AND the encumbered property is not necessary to an effective reorganization.

1) The stay terminates after 30 days if the bankruptcy is filed by or against an individual debtor w/in one year after D had another case dismissed (unless new filing was in good faith):
2) Bad Faith is presumed if: D had more than one case pending w/in last year; there has not been substantial change in D's financial affairs.

Generally speaking, all property of the D acquired PRIOR to bankruptcy, including exempt property, becomes property of the bankruptcy estate. NOTE: under Ch. 7, all POST PETITION property remains the property of the D, except inherited property, life insurance, and property received in divorce if received w/in 180 days of filing.

Provides a minimal amount of property the D is allowed to keep in bankruptcy. (Utah has opted out of the federal exemptions)

1) Household goods such as appliances and food = $500
2) Sofas, chairs = $500
3) Dining/Kitchen tables = $500
4) Alimony and child support received by the debtor;
5) Health aids;
6) Professional books/tools = $3500
7) Motor vehicle = $2500
8) Books, animals, musical instruments = $500

ONLY unsecured creditors, not secured

Allows a single D to keep $20K in value if the property is her primary residence. Joint owners may keep $40K in value of a primary residence.

If D put any non exempt assets into the home during a 10 year period before filing in an attempt to hinder, delay, or defraud a creditor the exemption will be reduced by an amount equal to the value of that non exempt property.

1) If the D wants to claim exemptions of a state, the D must be a resident of the state for 2 yrs before filing.
2) If residency requirement is not met, D may only use the exemptions of the state where he lived for the majority of time in the 180 days BEFORE the 2 yr period.
3) There is also a bad acts limitation to the Homestead Exemption (BUT this doesn't really apply in Utah)

1) Trustee as Hypothetical Lien Creditor
2) Trustee as Hypothetical Bona Fide Purchaser of real estate
3) Trustee claiming rights of other creditors
4) Trustee's power over fraudulent transfers
5) Statutory Liens
6) Trustee's power to avoid preferential transfers

1) The trustee has a hypothetical judicial lien and may avoid any property interest or claim held by a creditor that could be trumped by a judicial lien creditor who established his lien on the date of bankruptcy filing.
2) Under Art. 9 UCC, a secured creditor prevails over a lien creditor if the Creditor is Perfected OR if the C has obtained a security agreement and filed a financing statement by time judicial lien is established.

The trustee is given the rights of a bona fide purchaser of the D's real property as of the date of filing, whether or not such a purchaser exists.

T can avoid any transter what would also be voidable under non bankruptcy law by an actual unsecured creditor who has an allowable claim.

1) T may avoid transfers fraudulent under state law. (State law is preferable bc statute of limitations is normally greater than the 2 yr period. NOTE: Utah generally has a 4 yr statute of limitations).

1) Gives creditors the ability to get property back that a debtor has given away in a fraudulent transfer, even if D is NOT in bankruptcy.
2) Additionally, trustee may avoid conveyances deemed fraudulent under the Federal Bankruptcy code if made within 2 yrs of filing date.

1) Transfers made with Fraudulent intent (Transfers made with actual intent to hinder, delay, or defraud any entity to which the D was or became indebted); OR
2) Transfers for less than Reasonably Equivalent value IF certain conditions exist.

IF:
1) D was insolvent OR became insolvent as a result of the transfer;
2) D as engaged Or about to engage in business with an unreasonably small amount of capital;
3) D intended to incur debts that would be beyond the D's ability to pay as the debts matured;
4) D made the transfer to or for the benefit of an insider (relative, partner, etc) Or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.

Generally yes, statutory liens such as a mechanics, landlords, or garagemens lien are valid.

Trustee may void preference (under Federal law, but probably not Utah) IF:
1) It's a transfer to or for the benefit of a creditor (LOOK FOR- payment to some creditors but not others):
2) If the D is insolvent at time of transfer (PRESUMPTION that D is insolvent 90 days prior to filing);
3) The transfer is on account of past debt;
4) The transfer is w/in 90 days of filing a petition (NOTE: 1 YR if to an Insider); AND
5) Transfer enables C to receive more than it would have by way of its dividend in bankruptcy liquidation.

1) The debt must have been in existence before the transfer.
2) If perfection occurs w/in 30 days of the initial grant of the security interest, then the transfer is deemed to occur at the initial grant of the security interest, thus not falling under the def of an antecedent debt and is not a preference.

1) The transfer is intended as a contemporaneous exchange for new value
2) Purchase Money Security Interest
3) Statutory liens
4) Domestic support obligations
5) Transfers by consumer debtors (if less than $600)
6) Transfers made as part of an alternative repayment schedule between D and C

T has power to assume, reject, or assign executory contracts upon approval of a bankruptcy court. However, T's decision will likely be based on the type of bankruptcy (e.g., t would be unlikely to assume an executory contract in a liquidation)

1) T may opt to reject burdensome executory contract (where contract is a hindrance to an effective reorg plan)
2) If T rejects, estate must pay damages BUT the damages are treated as general unsecured debt and are paid off at a fraction of the dollar by the estate.

1) Will be approved if the assignee can give adequate assurance of future performance and prompt satisfaction of any damages already incurred by the nondebtor party to the contract
2) T is NOT entitled to assign contracts for personal services

1) Secured Claims & Secured Judicial Lien Creditors (claim is secured up to the value of the collateral and includes interest accrued);
2) Priority Claims (Certain Unsecured claims) (If claim exceeds dollar limitations, the excess amount will be a general unsecured claim) (SEE next card)

1) Domestic Support Obligations
2) Administrative expenses
3) Involuntary Gap Claims (claims accruing after an involuntary petition is filed, but before the order for relief or appt of a trustee)
4) Wage Claims (limited to wages earned w/in 180 days of petition and $11,725)
5) Contributions to Employee benefit plans (must arise out of services rendered w/in 180 day of filing, no more than $11,725)
6) Claims against operators of grain or fish storage facilities (Limited to $5,775)
7) Consumer deposits (deposits made by consumer to seller for personal, family, or household use prior to bankruptcy - no more than $2,600)
8) Tax Claims
9) Insured Federal Depository Institutions
10) Personal injuries or death caused by Drug or Alcohol impairment.

Under usual circumstances, the D will be discharged of his obligations and be given a fresh start.

These will prevent any AND all discharge

1) D is NOT an individual (Corps/partnerships to not receive discharge)
2) Fraudulent Transfers or Concealment of Property (If transferred w/in 1 yr of filing w/ intent to defraud)
3) Failure to keep books and records
4) Commission of Bankruptcy crime (Making false oath or account; presenting or using false claim; giving or receiving bribe; withholding records)
5) Failure to explain a loss of assets
6) Refusal to obey orders to answer questions
7) Improper Conduct in an Insiders case
8) Prior discharge in a Ch. 7 or 11 w/in 8 yrs
9) Prior discharge in Ch. 13 w/in 6 yrs.
10) Waiver
11) Failure to complete personal financial mgmt course
12) Bad Acts

Only the particular debt at issue is not discharged

1) Tax claims entitled to priority
2) Debts incurred by fraud (Luxury goods over $600 in aggregate debts owed to single creditor and incurred w/in 90 days of filing);
4) Cash advances on open ended credit to consumers that exceed $875 in the aggregate and are obtained w/in 70 days of filing;
6) Unscheduled debts (failure to list in filings)
7) Debts for Embezzlement, larceny, and fiduciary's fraud.
8) Domestic Support Obligations
9) Liability for willful and malicious injury to property/persons
10) Student loans (UNLESS they would impose an UNDUE HARDSHIP (very strict standard))
11) (And may more)

Allows person in bankruptcy to agree to repay their debts even thought they would have been discharged. (Usually done to improve standing in community)

1) Reaffirmation agreement must have been made BEFORE granting of discharge;
2) Before reaffirmation is signed, Creditor must provide D with prescribed disclosures detailed int the Code;
3) The agreement must be filed with the court;
4) Upon discharge, court must hold a reaffirmation hearing which informs the D that reaffirmation is not required by law and advises D of the legal effect and consequences of reaffirmation (not necessary if D is represented by counsel at reaffirmation negotiations- BUT counsel must file an affidavit);
5) In case of consumer debt, where D is not represented by counsel at negotiations, court must approve agreement upon determination that a) it does not impose an undue hardship on D or his dependents AND b) it is in the best interests of the debtor.