BANKRUPTCY
PROCESS
BANKRUPTCY
JUDGE
PROFESSIONALS
attorneys,
accountants,
financial advisors,
agents
DEBTOR
corporate
individual
BANKRUPTCY
CASE
BANKRUPTCY
TRUSTEE
ch 7, 13 or 11
CREDITORS
US TRUSTEE
Timeline
Prepetition
Postpetition
BANKRUPTCY
PETITION FILING
28 USC
§1334
Arising under Title
11
28 USC
§157
Core (§157(b)(2))
Non-core
Arising in a case
under Title 11
Related to cases
under Title 11
•Counterclaims
•Fraudulent transfers
•Personal injury
STAY
APPLIES
Commencement or continuation of prepetition action against debtor or to
recover prepetition claim against the debtor
Enforcement against debtor or property of the estate or prepetition
judgment
Act to obtain possession or property of the estate
Creation or perfection or enforcement of lien against property of the
estate
Creation of lien to secure prepetition claim against property of the debtor
Act to collect prepetition claim
Set off of prepetition debt owed to debtor against claim against debtor
Commencement or continuation of US tax court proceeding on tax liability
AUTOMATIC
TERMINATION
OF THE STAY
When property no longer property of the estate
Case is closed
Case is dismissed
Discharge of the debtor obtained
Debtor files intent to surrender collateral to secured creditor
Debtor filed second case after first was dismissed within the last
year of the debtor’s current BK case (30 days after petition date)
TERMINATION
BY MOTION
Sec. 362(d)(1)
(d) On request of a party in interest and after notice and a
hearing, the court shall grant relief from the stay provided
under subsection (a) of this section, such as by terminating,
annulling, modifying, or conditioning such stay-(1) for cause, including the lack of adequate protection of an
interest in property of such party in interest;
S. 362(d)(2)
(2) with respect to a stay of an act against property under
subsection (a) of this section, if-(A) the debtor does not have an equity in such property; and
(B) such property is not necessary to an effective
reorganization;
Adequate Protection
§ 361. Adequate protection
When adequate protection is required under section 362, 363, or 364 of this title [11 USCS
§ 362, 363, or 364] of an interest of an entity in property, such adequate protection may be
provided by—
(1) requiring the trustee to make a cash payment or periodic cash payments to such entity,
to the extent that the stay under section 362 of this title [11 USCS § 362], use, sale, or
lease under section 363 of this title [11 USCS § 363], or any grant of a lien under section
364 of this title [11 USCS § 364] results in a decrease in the value of such entity's interest
in such property;
(2) providing to such entity an additional or replacement lien to the extent that such stay,
use, sale, lease, or grant results in a decrease in the value of such entity's interest in such
property; or
(3) granting such other relief, other than entitling such entity to compensation allowable
under section 503(b)(1) of this title [11 USCS § 503(b)(1)] as an administrative expense, as
will result in the realization by such entity of the indubitable equivalent of such entity's
interest in such property.
11 USC s. 362 (d)(3) (SARE)
(3) with respect to a stay of an act against single asset real estate under subsection (a),
by a creditor whose claim is secured by an interest in such real estate, unless, not later
than the date that is 90 days after the entry of the order for relief (or such later date as
the court may determine for cause by order entered within that 90-day period) or 30
days after the court determines that the debtor is subject to this paragraph, whichever
is later-(A) the debtor has filed a plan of reorganization that has a reasonable possibility of
being confirmed within a reasonable time; or
(B) the debtor has commenced monthly payments that-(i) may, in the debtor's sole discretion, notwithstanding section 363(c)(2) [11 USCS
§ 363(c)(2)], be made from rents or other income generated before, on, or after the
date of the commencement of the case by or from the property to each creditor whose
claim is secured by such real estate (other than a claim secured by a judgment lien or
by an unmatured statutory lien); and
(ii) are in an amount equal to interest at the then applicable nondefault contract
rate of interest on the value of the creditor's interest in the real estate;
362(d) (4) with respect to a stay of an act against real property under subsection (a), by
a creditor whose claim is secured by an interest in such real property, if the court finds
that the filing of the petition was part of a scheme to delay, hinder, or defraud creditors
that involved either■
■
(A) transfer of all or part ownership of, or other interest in, such real property
without the consent of the secured creditor or court approval; or
(B) multiple bankruptcy filings affecting such real property.
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Public Benefits
522(d)(10)(A) - Public assistance, Social Security, Veteran’s benefits, Unemployment
Compensation.
522(d)(11)(A) - Crime victim’s compensation.
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Tools of Trade
522(d)(6) - Implements, books, and tools of the trade, up to $2,525.
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Alimony and Child Support
522(d)(10)(D) - Alimony and child support needed for support.
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Insurance
522(d)(7) - Unmatured life insurance policy except for credit insurance.
522(d)(8) - Life insurance policy with loan value up to $13,400.
522(d)(10)( C ) - Disability, unemployment or illness benefits.
522(d)(11)( C ) - Life insurance payments for a person you depended on, which you need for
support.
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Wildcard
522(d)(5) - $1,325 of any property, and the unused portion of homestead exemption up to
$12,575.
Week 2: Property of the Estate and the Automatic Stay
Last week’s problem sets and Stern v. Marshal, Belingham etc.
I. STRUCTURE OF THE BANKRUPTCY CODE
II. ROLES OF EACH PARTY INVOLVED IN BANKRUPTCY CASE
III. PURPOSE OF BANKRUPTCY
I. Equal distribution to creditors
II. Giving a debtor a fresh start
IV. 3 IMPORTANT CONSEQUENCES OF A BK FILING
V. PROPERTY OF THE ESTATE (Sec. 541)
I. Exception: (retirement and educational trust accounts; income from services
rendered by an individual D postpetition)
VI. AUTOMATIC STAY
I. 2 Purposes
Federal Bankruptcy Exemptions Amounts
■
Section 522(d). The amounts allowed under the federal bankruptcy exemptions are adjusted every three
years on April 1 to reflect changes in the Consumer Price Index. The federal bankruptcy exemption figures
listed in this article are the April 1, 2019 figures. The federal bankruptcy exemptions will be adjusted
again on April 1, 2022.
■
Homestead
522(d)(1), (5) - Real property, including mobile homes and co-ops, or burial plots up to $25,150. The
unused portion of the homestead exemption up to $12,575 can be used for other property.
■
Personal Property
522(d)(2) - Motor vehicle up to $4,000.
522(d)(3) - Animals, crops, clothing, appliances and furnishings, books, household goods, and musical
instruments up to $625 per item, and up to $13,400 total.
522(d)(4) - Jewelry up to $1,700.
522(d)(9) - Health aids.
522(d)(11)(B) - Wrongful death recovery for a person you depended upon.
522(d)(11)(D) - Personal injury recovery up to $25,150 except for pain and suffering or for pecuniary loss.
522(d)(11)(E) - Lost earnings payments.
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Pensions
522(b)(3)(C) - Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money
purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).
522(b)(3)(C)(n) - IRAS and Roth IRAs to $1,362,800.
Claims
Prepetition Interest
•Unsecured creditors
•Secured creditors
•Agreement must provide for allowance of interest payment
Prepetition Attys Fees/Cost
•Unsecured creditors
•Secured creditors
•Ageement must provide for the atty fees/costs or by statute
Postpetition Interest
•Oversecured creditor until equity is exhausted
Postpetition Attys Fees/Cost
•Oversecured creditor until equity in exhausted
•Undersecured creditor entitled to fees if contract provides for it
Claims (controlling statutes)
s. 502
s. 503
s. 507
S 506
•Properly filed proof of
claim is deemed allowed
unless a party objects
•Unmatured interest is
disallowed
•Arise postpetition
•Receives priority over all
claims
•Actual and necessary
cost of the estate
•Priority scheme in
bankruptcy
1.Domestic support and
related trustee’s fees
2.Admin expenses under
s. 503
3.Ordinary course claims
during gap period
4.Employee wages
5.Employee benefits
6.Claims of grain
producers
7.Deposit for purchase,
lease or rental property
8.Income taxes
9.Claism toamintain
capital of fed depository
institution
10.Personal injury claims
or death due to DUI
•Secured claim is only to
the extent of the value of
the collateral
•Undersecured claim is
bifurcated as secured
and unsecured portions
•Oversecured claim
entitled to postpetition
interest and fees
Distribution of property of the estate
(s. 726) (waterfall)
1.
priority claims under 507 (which will include administrative claims) (pro rata among
claimants of the same claims; except if converted from chapter 11, then chapter 7
administrative claims over chapter 11 priority claims)
2.
timely filed unsecured claims
3.
untimely filed unsecured claims if creditor did not receive notice of the BK to file a
timely claim and POC is filed in time to participate in distribution
4.
untimely filed unsecured claim
5.
penalties and punitive damages
6.
interest payments on all of the above
7.
debtor
Discharge
s. 523
Nondischargeability
s. 727
Objection to
discharge
s. 524(c)
reaffirmation
s. 722
redemption