Law Block Chapter 26 PowerPoint

1

Introduction



2
Consumer
Bankruptcy

Chapter 26 3



Business
Bankruptcy
Bankruptcy Law

4

Bankruptcy
Procedure for
the Paralegal



5
Assignment











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1

A Brief History



2
Section 1 Competing

Interests



3
Introduction to Bankruptcy Goals of the


System



4

Sources of Law
















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1| Introduction to Bankruptcy:

A Brief History










 Origins in English law


 Constitutional basis (Art. I, § 8, Cl.

4)

 Bankruptcy Act of 1800

 Bankruptcy Act of 1841


 Bankruptcy Act of 1867

 Bankruptcy Act of 1898 (“The Act”)

 Chandler Act of 1938

 Bankruptcy Reform Act of 1978


(“The Code”)

 Bankruptcy Abuse Prevention and

Consumer Protection Act of 2005


(“BAPCPA”)




© 2018 UEducate

1| Introduction to Bankruptcy:

Competing Interests














 Bankruptcy law serves two


divergent interests, the creditor

and the debtor


 The creditor is legally entitled

to repayment


 The debtor is unable to pay,


and if forced to continue

making marginal payments


may be unable to provide for

herself or her family








© 2018 UEducate

1| Introduction to Bankruptcy:

Goals of the System













▪ The bankruptcy system attempts


to balance the competing interests

of the parties involved


▪ The law endeavors to grant the

debtor a “fresh start” free from the


burden of unmanageable debt

▪ Simultaneously, the law makes an


effort to maximize distributions to

creditors and provide an equitable

distribution between each creditor










© 2018 UEducate

1| Introduction to Bankruptcy:

Sources of Law












▪ Title 11 of the United States

Code


▪ Universal Chapters: 1, 3, & 5

▪ Operative Chapters: 7, 9, 11, 12,

13, & 15

▪ Federal Rules of Bankruptcy


Procedure

▪ Local Rules and Case Law


▪ State law

▪ See generally Fla. Stat. 222

(promulgating many of the state’s

exemptions)






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1
The Automatic

Stay


2

Chapter 7:
Section 2 Liquidation



3

Chapter 13:
Consumer Bankruptcy Restructuring




4
Chapter 12:
Restructuring for

the Family
Farmer or
Fisherman











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2| Consumer Bankruptcy:

The Automatic Stay










 Triggered by the filing of the


bankruptcy petition

 Includes foreclosure


proceedings, collection suits,


repossession, and direct

contact via phone and mail


 Does not include actions to

establish or modify domestic


support obligations, child


custody proceedings, or

actions enforcing payment of


child support




© 2018 UEducate

2| Consumer Bankruptcy:

Chapter 7: Liquidation









 Creation of the bankruptcy estate

is triggered by the filing of the


petition


 11 U.S.C. § 541

 All property owned by the debtor


at the commencement of the


case becomes property of the

estate


 Certain property acquired within

180 days after the filing of the


petition is also included in the


estate





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2| Consumer Bankruptcy:

Chapter 7: Liquidation










 TIB will review the petition


and schedules and determine

if any estate property is


encumbered by any security


interests

 TIB determines the validity of


the exemptions claimed by

the debtor


 TIB is then responsible for


collecting and selling estate

assets and distributing the


proceeds




© 2018 UEducate

2| Consumer Bankruptcy:

Chapter 7: Liquidation












 The 2005 enactment

introduced the “means test” to


replace the former “substantial

abuse” test that was being


applied by the courts


 Creates a presumption of

abuse for any filer whose


current monthly income, less

certain expenses, is greater


than the statutory threshold


(§702)






© 2018 UEducate

2| Consumer Bankruptcy:

Chapter 7: Liquidation











 The Code allows individual

debtors to select between


either the federal


exemptions or the state

exemptions in the state of


filing

 Florida has opted out of the


federal exemptions
 The debtor may not mix-


and-match exemptions from


both state and federal

statute





© 2018 UEducate

2| Consumer Bankruptcy:

Chapter 7: Liquidation









 Creditors must file a proof of

claim form in order to be

eligible to receive a distribution

from the estate


 A claim is allowed unless an

interested party objects and

contests either the validity or


the value of the claim

 Post-petition interest is not

allowed on unsecured claims


 Post-petition interest is allowed

on over-secured claims up to

the value of collateral






© 2018 UEducate

2| Consumer Bankruptcy:

Chapter 7: Liquidation









 Not all debts are dischargeable (§523)


and the TIB or a creditor can challenge

the discharge of otherwise dischargeable

debts under §523 or §727


 Recent back taxes, student loans, and

domestic support obligations, among

others

 Challenges to discharge generally

amount to accusations of fraud

 §727 also disallows a discharge for a


debtor who received a discharge in a

previous case which was commenced

within eight years of filing the current

petition



© 2018 UEducate

2| Consumer Bankruptcy:


Chapter 7: Liquidation







Redemption (§722) Reaffirmation (§524(c))






 The act of paying a lien  An agreement between

holder the amount of the the debtor and a creditor


allowed secured claim not to discharge the debt


 Can only be used on and for the debtor to

exempted tangible continue making agreed

personal property held

primarily for personal, upon payments

family, or household use  Used to retain ownership


 Cannot be used on real of property, including real


property property








© 2018 UEducate

2| Consumer Bankruptcy:

Chapter 13: Restructuring













 Must be a natural person


 Unsecured debt must be <

$250,000


 Secured debt must be <


$750,000

 Debtor must have regular


income

 Means test does not


determine eligibility,


determines repayment period








© 2018 UEducate

2| Consumer Bankruptcy:


Chapter 13: Restructuring








Adequate Protection Adequate Payment






 Can be satisfied by cash,  Refers to the minimum


a replacement lien, or amount the debtor must

insurance on the property pay in order to keep the



 A creditor can use a lack property

of adequate protection to  Governed by


file a motion with the §1325(a)(5), often

court to lift the automatic referred to as the


stay “cramdown” provision












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2| Consumer Bankruptcy:

Chapter 13: Restructuring


















 §507 priority unsecured creditors

entitled to payment in full


 General, unsecured creditors

entitled to pro rata distributions


 No creditor should receive less in


Chapter 13 thazn they would

receive in Chapter 7


(§1325(a)(4) & (a)(5)(B))











© 2018 UEducate

2| Consumer Bankruptcy:

Chapter 13: Restructuring













 Secondary application of the means test


(§1325(b))

 Sets forth two (2) standards for


determining the debtor’s “disposable

income”

 At or below median income debtors =


current monthly income, less amounts

reasonably necessary


 Above median income debtors = current

monthly income, less allowable Chapter 7


expenses






© 2018 UEducate

2| Consumer Bankruptcy:

Chapter 12: Restructuring for the Family


Farmer or Fisherman




















 Adopted with 1986 amendments


to the code


 Made permanent by BAPCPA

 Represents specific policy


considerations

















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1
Section 3 Chapter 7:
Liquidation



2
Business Bankruptcy Chapter 11:

Reorganization
























© 2018 UEducate

3| Business Bankruptcy:

Chapter 7: Liquidation















 Businesses not entitled to a

discharge


 There are no exemptions for


business debtors

 Businesses simply dissolve in


Chapter 7, though it is not the

only place they can go to do this


 Most used chapter for


involuntary bankruptcies










© 2018 UEducate

3| Business Bankruptcy:

Chapter 7: Liquidation













 Involuntary bankruptcy is initiated


by creditors and is governed by

§303


 For policy reasons, relatively

difficult to instigate

 Three (3) or more creditors must join

the petition

 The joining creditors must represent

a certain threshold of aggregate debt

 If involuntary petition is dismissed,

code authorizes award of costs and

attorney’s fees






© 2018 UEducate

3| Business Bankruptcy:

Chapter 11: Reorganization












 Not reserved for businesses,

individuals can file if:


 Debtor did not file a bankruptcy

petition within the preceding

180 days that was dismissed

under §109(g) or §362(d)-(e),

and

 Debtor underwent approved

credit counseling under §§109

& 111 in the 180 days before

filing

 Any business entity is eligible








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3| Business Bankruptcy:

Chapter 11: Reorganization




















 Debtor in Possession (DIP)

acts in place of a TIB


 Creditor protections:

 Adequate protection


 Lift automatic stay
 Creditors’ Committee


 Creditor approval of
reorganization plan












© 2018 UEducate

3| Business Bankruptcy:

Chapter 11: Reorganization








 Influenced by considerations outside

bankruptcy

 Other areas of law

 Pre-bankruptcy negotiations
 Plan can be confirmed in one of two

ways:

 All classes vote in favor (§1129(a))

 A statutory majority of each class of
creditor must vote to confirm the plan

 Class construction is integral to the
process, a power vested in the DIP

 See §1122
 At least one class votes in favor and all

other aspects of §1129(a) are met
(§1129(b))

 Disclosure statement

 Control issues



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1

Initial Intake

Section 4 2


Petitions and
Schedules

Bankruptcy Procedure for the 3



Paralegal §341 Meeting



4
Paralegal Ethics


















© 2018 UEducate

4| Bankruptcy Procedure for the Paralegal:

Initial Intake




















 Extensive information


gathering


 Building Relationships

 Issue-spotting


 Investigation

 Conflict check
















© 2018 UEducate

4| Bankruptcy Procedure for the Paralegal:

Petitions and Schedules



















 Know the appropriate forms and


where to find them

 Second phase of information


gathering


 Preparation and filing of the

petition and required schedules


 Know important deadlines













© 2018 UEducate

4| Bankruptcy Procedure for the Paralegal:

§341 Meeting















 Must be held within a statutorily

proscribed timeframe after the


issuance of the Order for Relief


 TIB conducts meeting

 Debtor submits to questioning by


the TIB and creditors

 TIB informs debtor of certain


rights, responsibilities, and


consequences










© 2018 UEducate

4| Bankruptcy Procedure for the Paralegal:

Paralegal Ethics























 Conflicts of Interest

 Competency


 Compensation


 Confidentiality




















© 2018 UEducate

Section 5



Law Block II
Assignment 3
Assignment




























© 2018 UEducate

7| Assignment:


Law Block II Assignment 3







Bankruptcy Law








For those of you with the Voluntary Petition for Individuals

Filing for Bankruptcy, as you will recall this topic was covered


during Law Block II, in the reading materials. This is an official


form with 7 parts and 20 subsections. Be sure to fill out and


check-off every applicable portion. You should delete the


instructions from the final format prior to submission.


















© 2018 UEducate

7| Assignment:


Law Block II Assignment 3 (Cont’d.)









For those of you with the Proof of Claim, a proof of claim is a


form used by the creditor to indicate the amount of the debt


owed by the debtor on the date of the bankruptcy filing. The


creditor must file the form with the clerk of the same bankruptcy


court in which the bankruptcy case was filed. This is an official


form with 3 parts and 12 subsections. Be sure to fill out and

check-off every applicable portion. You should delete the


instructions from the final format prior to submission.


















© 2018 UEducate

7| Assignment:


Law Block II Assignment 3 (Cont’d.)








For those of you with the Application to Have Chapter 7 Filing


Fee Waived, this is an official form with 5 parts and 20


subsections. Be sure to fill out and check-off every applicable


portion. You should delete the instructions from the final format


prior to submission.






























© 2018 UEducate

7| Assignment:


Law Block II Assignment 3 (Cont’d.)









For those of you with the Debtor’s Motion to Dismiss, the

assignment arises from or involves a debtor that files for


bankruptcy and then wishes to terminate the bankruptcy filing in


order to pay the creditors in full. Given the 6 numbered


instructional paragraphs at the outset of the assignment, you


should essentially correlate the 6 instructional paragraphs to the


6 blank paragraphs in the template. You should delete the


instructions from the final format prior to submission.


















© 2018 UEducate

References













11 U.S.C. §§ 101-1330.





Elizabeth Warren & Jay Lawrence Westbrook, The


Law of Debtors and Creditors 100-796 (6th ed.

2009).





John S. Dzienkowski, Professional Responsibility


Standards, Rules & Statutes 12-86 (2013-2014 ed.).


















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