Chapter Seven.
Overview of Chapter 7
 After reading this chapter, you will be able to:
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Describe the basic events which occur in all
bankruptcy proceedings.
Understand the rules relating to professional
retention and compensation in bankruptcy
proceedings.
Define the concept of discharge
Define the concept of reaffirmation and the
procedures utilized to reaffirm a debt
Consumer No Asset
Chapter 7 Proceeding
 A consumer no asset Chapter 7 proceeding is
a proceeding filed by an individual debtor or
joint debtors in which there will normally be
no assets available for the trustee to
administer for distribution of dividends to
unsecured creditors.
 Any assets owned by the debtor will be either
secured or exempt.
Practice Pointer
 The Bankruptcy Code describes ‘‘joint
debtors’’ as an individual debtor ‘‘and such
individual’s spouse.’’ The Code recognizes
married couples but no other joint filings.
Employment and Compensation of
Professionals
 The Bankruptcy Code regulates the
employment and compensation of
professionals rendering services in any
bankruptcy proceeding.
Bankruptcy Petition Preparers
 Section 110(a) defines a bankruptcy petition preparer
as a person other than the debtor’s attorney or the
attorney’s employee under that attorney’s direct
supervision who prepares for compensation a
document for filing with the Bankruptcy Court.
 An unsupervised paralegal may be a bankruptcy
petition preparer.
 A document for filing is any document prepared for
filing by a debtor in a bankruptcy case.
Exempt
 Exemptions are statutorily defined property
that an individual debtor may protect from
administration by a bankruptcy estate.
 Exempt property is not available for
liquidation to pay a dividend to creditors; a
debtor may keep exempt property.
 Exemptions are a primary element of debtor
relief.
Discharge
 Discharge is legal relief from debt provided
for by Section 524 of the Bankruptcy Code.
 The discharge is one of the three elements of
debtor relief provided for in the Bankruptcy
Code.
Automatic Stay
 Automatic Stay is a statutory bar to the
conducting of any collection activity by
creditors after a bankruptcy petition has been
filed.
 The automatic stay is one of the three major
elements of debtor relief provided by the
Bankruptcy Code.
Fresh Start
 “Fresh Start” is the phrase most frequently
used colloquially to describe the basic
elements of debtor relief:
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Discharge
Exemptions
Automatic Stay
Eight Basic Requirements for
Bankruptcy Petition Preparers
 The preparer must sign the document and include the
preparer’s name and address.
 Provide a notice to the debtor, prior to the preparation
of any document, stating that a petition preparer may
not give legal advice.
 The preparer shall include the preparer’s Social
Security number on the document.
 The preparer shall furnish the debtor with a copy of
the document not later than the time the document is
presented to the debtor for signature.
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Eight Basic Requirements for
Bankruptcy Petition Preparers
 The preparer shall not execute any document on
behalf of a debtor.
 The preparer shall not use the word “legal” or any
other similar term in advertisements or advertise
under any “legal” category.
 The preparer may not receive or collect payment for
court fees.
 The preparer shall, within ten days after filing of a
petition, file a declaration under penalty of perjury
disclosing any fees paid or promised by or on behalf
of the debtor.
Slide 2 of 2
Reaffirmation
 Reaffirmation is a debtor’s agreement to
remain legally liable for repayment of a debt
otherwise dischargeable in a bankruptcy
proceeding.
 For a debt to be legally reaffirmed, strict
compliance with the provisions of Bankruptcy
Code Section 524 is required.
Chapter Eight.
Conversion and Dismissal
 After reading this chapter, you will be able to:
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Define the concept of conversion
Describe how a bankruptcy proceeding may
be dismissed
Describe the procedure to convert or dismiss a
proceeding and to define the effect of the
conversion or dismissal of a Bankruptcy
proceeding upon the debtor’s financial affairs.
Conversion
 Conversion means that a Chapter 7 is
changed to a Chapter 11 or vice versa.
 Commonly, a Chapter 13 or Chapter 11
reorganization that has failed is converted to
a Chapter 7 liquidation.
Dismissal
 A dismissal will terminate a bankruptcy
proceeding and render the proceeding
ineffective.
Practice Pointer
 It is important to understand the distinction
between a ‘‘discharge,’’ which relieves the
debtor of his/her personal liability and a
‘‘dismissal,’’ which returns the debtor back in
his/her prepetition position and reinstates all
of his/her prepetition debts and obligations.
Chapter Nine.
Exemptions
 After reading this chapter, you will be able to:
 Define of exemptions
 Understand the concept of exemptions and their
importance to individual debtors in Bankruptcy
proceedings
 Describe the Code concept of the “opt out” provision
 Understand which exemptions to select, when a choice
is available
 Identify how exemptions are claimed by individual
debtors
 Identify specific exemptions
 Describe the homestead exemption and how a
homestead is claimed in many jurisdictions
 Describe how a claim of exemption is opposed by the
trustee or a creditor
Opt Out
 Although the Bankruptcy Code gives a debtor
an election to use state or federal
exemptions, Congress has also given
individual states the opportunity to “opt out” of
the federal exemptions scheme.
Homestead Exemption
 Homestead is an exemption permitted in an
individual debtor’s place of residence.
 Section 522(d)(1) of the Bankruptcy Code
provides a federal homestead exemption.
 State law also provides homestead
exemptions.
Summary of Federal Exemptions
 Residence of debtor or
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dependent
Motor vehicle
Household goods,
furniture, and wearing
apparel
Personal jewelry
Any property catch all
Tools of trade
Unmatured or term
insurance
 Cash value of insurance
 Professionally
prescribed health aids
 Social Security, welfare,
veterans benefits,
alimony, disability, or
unemployment
 Certain personal injury
claims
 Retirement accounts
Chapter Ten. Trustees, Official
Creditor Committees, and Examiners
 After reading this chapter, you will be able to:
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Describe the role and basic duties of the
bankruptcy trustee.
Define the role of the debtor-in-possession in
Chapter 11 proceedings
Identify the United States Trustee
Describe the Official Creditors Committee
Identify the Examiner
Trustees
 Section 321 provides that a competent
individual who has an office or resides in the
district or in an adjacent district where the
proceeding is pending may be a trustee in a
Chapter 7, 12, or 13 case.
Practice Pointer
 Remember, a ‘‘disinterested person’’ is a
defined term under the Bankruptcy Code. It
includes a person who is not a creditor, an
insider, or someone who holds ‘‘an interest
materially adverse to the interest of the
estate.’’ 11 U.S.C. §101(14).
Practice Pointer
 Remember, once the debtor files for
bankruptcy, all legal interests or actions that
the debtor could have maintained prepetition
now belong to the bankruptcy estate.
 Once appointed, the trustee represents the
estate and may pursue those actions on
behalf of the estate.
Office of the United States Trustee
 The Office of the United States Trustee is
charged with monitoring the progress of all
cases, regardless of Chapter, and to act
appropriately to ‘‘prevent undue delay.”
Debtor-in-Possession
 The debtor-in-possession is the fiduciary
entity created by a debtor filing a Chapter 11
reorganization proceeding.
 The debtor acts as its own trustee.
Official Creditors Committee
 The official creditors committee is an entity
created in a Chapter 11 proceeding to act on
the collective behalf of unsecured creditors.
Examiner
 An examiner is an individual appointed in a
Chapter 11 proceeding to conduct an
independent investigation of some or all of a
debtor’s financial affairs.
Ombudsmen
 An ombudsman may be appointed in two discrete
situations.
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First, where an asset sale involves the sale of
personally identifiable information, then the court shall
order the appointment of an ombudsman to review the
seller’s privacy policy and report on the potential losses
or gains to consumers and the estate by the proposed
sale.
Second, in a health care business bankruptcy, the
court shall order an ombudsman to represent the
interests of patients where necessary to regularly
report to the court on the quality of patient care.
Chapter Eleven. Preparing a
Proceeding for a Trustee
 After reading this chapter, you will be able to:
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Understand the number of simple actions
which can be taken to greatly ease the
handling of any bankruptcy proceeding
Provide a specific checklist of acts which can
be taken in an asset proceeding to enhance
the likelihood of creditor dividends
List questions commonly posed by individual
consumer debtors
Prefiling Checklist
 Value Assets
 Obtain Documents of Title (Such as Vehicle Ownership
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Documents) and Keys to All Vehicles
Obtain Name and Address of Landlord(s)
Obtain Itemized Inventory and Equipment List, with
Values, if Possible
Obtain Bank Records
Compile Accounts Receivable Data
Return Leased Equipment to Lessors
Maintain Security
Obtain Prior Years’ Tax Returns
Postfiling (Asset Case) Checklist
 Learn identity of trustee
 Communicate with trustee
 Close bank accounts and obtain cashier’s
check for trustee
 Encourage insider cooperation with trustee