Seven Overview of by jennyyingdi

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									Chapter Ten. Trustees, Official
Creditor Committees, and Examiners
 After reading this chapter, you will be able to:
      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.
      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:
      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
    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
Chapter Twelve. The Automatic
Stay—11 U.S.C 362
 After reading this chapter, you will be able to:
   Describe litigation that occurs in the bankruptcy
     system
   Understand the concept of the automatic stay as
     an element of debtor relief
   List creditor activities subject to the automatic stay
   List creditor activities not subject to the automatic
     stay
   Understand the procedures utilized by creditors to
     obtain relief from the stay
Adversary Proceedings
 When an issue is brought before the court in
  the form of a motion and is opposed, it is
  considered a contested matter.
 A contested matter is treated as an adversary
  proceeding pursuant to Federal Rule of
  Bankruptcy Procedure 9014.
Automatic Stay
 Automatic stay is a statutory bar to the
  conducting of any collection activity by
  creditors after a bankruptcy petition has been
  filed.
Activity Subject to the Automatic Stay
 Section 362(a)(1) prohibits the
  commencement or continuation of any
  judicial, administrative, or other proceeding
  against the debtor that was or could have
  been commenced before the filing of the
  petition to recover a prepetition claim.
Actions Subject to Automatic Stay
 Civil actions or administrative legal proceedings.
 Enforcement of judgments
 Acts to obtain possession or control of property of the
    estate
   Acts to perfect liens upon property of the estate.
   Acts to perfect liens upon property of the debtor
   Any act to collect a prepetition claim
   The making of setoffs (the common law right of a
    creditor to balance mutual debts with a debtor)
   Proceedings before the United States Tax Court
Common Actions Excepted from the
Automatic Stay
 Criminal prosecutions
 Collection of alimony, maintenance or support from
    other than property of the estate
   Lien perfection within statutory grace period
   Governmental proceedings to enforce police or
    regulatory powers other than enforcement of money
    judgments
   Limited setoffs in commodity broker or stockbroker
    proceedings
   HUD foreclosures subject to National Housing Act

                          Slide 1 of 2
Common Actions Excepted from the
Automatic Stay
 Issuance of notice of tax deficiency, audit, demand
  for returns or assessment
 Expired nonresidential real property lease
 Retirement loan repayments
 Residential evictions




                          Slide 2 of 2
Motion for Relief from Automatic
Stay
 Moving Party
     Notice of motion
     Motion
     Declaration of provable value
     Exhibits
          Promissory note
          Document evidencing security interest (UCC-1,
           mortgage, or trust deed
          appraisal
     Any other document required by local rule
Motion for Relief from Automatic
Stay
 Opposing Party
     Request for hearing
     Declaration or affidavits in opposition
     Points and authorities
     Exhibit: appraisals
     Any other document required by local rule
Motion for Relief from Automatic
Stay
 Motion to Impose Stay for Cause Shown
   1. Serial filings 11 U.S.C. §362(c)(3), (4)
   2. Statement of Intention 11 U.S.C. §362(h)
   3. Small Business Cases 11 U.S.C. §362 (n)
   4. Residential evictions 11 U.S.C. §362(b)(22), (l)
30/30/30 Rule
 30 days after a request for relief the stay will
  terminate
 a preliminary hearing must be held within 30
  days of the motion
 a final hearing, if necessary, must be held
  within 30 days of the preliminary hearing.
Chapter Thirteen. Objections to
Discharge and Dischargeability of Debts
 After reading this chapter, you will be able to:
    Understand that a discharge may not relieve a debtor
     from all debts and that, in certain circumstances, a
     debtor may be denied a discharge altogether.
    Describe which debts are automatically not
     dischargeable
    Describe which debts are not dischargeable only if a
     creditor obtains a judgment that the affected debt is not
     dischargeable
    List those acts which can prevent a debtor’s discharge
     altogether
    Understand the procedure for filing a complaint to
     determine the dischargeability of a debt or the debtor’s
     discharge.
Practice Pointer
 Even if the creditor takes no action, the
  debtor will normally not be discharged of
  most debts relating to taxes, domestic
  support obligations, governmental fines or
  penalties, and death or personal injury
  caused by drunk driving.
Nondischargeable Debts
 A debt not subject to a debtor’s discharge.
 A debtor is not relieved from legal liability for
  the affected debt.
 Some types of nondischargeable debts
  require the filing of a Complaint to Determine
  Dischargeability of Debt for the debt to
  become nondischargeable.
 Nondischargeable debts are described in
  Bankruptcy Code Section 523(a).
 Nondischargeable Debts
  The following debts are nondischargeable without an
     affected creditor being required to take any affirmative
     action:

Priority tax claims                  Unlisted debts
Domestic support obligations         Certain fines and penalties
Guaranteed student loans             Damages from DWI conviction
Debt nondischarged in prior          Financial institution fraud
bankruptcy
Restitution award                    Loans obtained to pay
                                     nondischargeable taxes
Postpetition homeowner’s             Prisoner court costs
assessments
Pension plan loans                   Debts arising from federal or state
                                     securities law violations
A Creditor May Object to Discharge of
the Following Debts
 Fraud
      Intentional fraud
      False written financial statement
      Limited prepetition credit transactions
 Defalcation, larceny, embezzlement
 Willful and malicious injury
Fresh Cash Rule
 The fresh cash rule covers the portion of a
  debt incurred by use of a false written
  financial statement.
Chapter Fourteen. Property of the
Estate and Turnover Complaints
 After reading this chapter, you will be able to:
      Define “property of the estate”
      Identify those assets which are not property of
       the estate and therefore not subject to the
       trustee’s administration
      Describe the trustee’s various rights to recover
       estate property, the turnover rights and the
       avoiding powers
Property of the Estate
 All property in which the debtor has a legal or
  equitable interest at the commencement of a
  case is property of the estate.
 During the course of the case, the trustee
  must “administer” all the property.
 The figure (next slide) illustrates a typical
  consumer no-asset Chapter 7 where all
  property is either collateral for one or more
  secured creditors, exempt, or abandoned by
  the trustee as burdensome or of
  inconsequential value to the estate.
Property of the Estate




                         Exempt
                         abandoned
                         secured
Avoiding Powers
 The ability of a trustee to set aside certain
  pre- or postfiling transactions that might
  otherwise be valid under nonbankruptcy law.
 Preferences, fraudulent transfers, and the
  ability to set aside unauthorized postpetition
  transfers are the most common of the
  trustee’s avoiding powers.
Included as Property of the Estate
 Community property
 Property recovered by the trustee
 Property acquired within 180 days of filing by
  bequest, inheritance, or devise, domestic
  property settlement, life insurance proceeds
 Proceeds, product, or offspring from property
  of the estate
 Property subject to an ipso facto clause
Excluded as Property of the Estate
 Personal postfiling earnings of an individual
  Chapter 7 or 11 debtor
 Powers exercisable for the benefit of another
  (e.g. power or attorney)
 Interest in an expired nonresidential lease
 Principal assets of a spendthrift trust
 Property in which the debtor holds bare legal
  title
Turnover
 The concept of turnover is simple.
 Someone has property of the estate: It may
  be the debtor, it may be a third party, it could
  be anyone.
 If the third party refuses to voluntarily turn the
  property over to the trustee, the court can
  order the third party to turn it over.
Chapter Fifteen. Avoiding Powers--
Introduction
 After reading this chapter, you will be able to:
      Describe the concept and purpose of the
       trustee’s avoiding powers
      List the general limitations upon the trustee’s
       avoiding powers
Avoiding Powers
 The abilities given a trustee to avoid certain
  pre- or postfiling transactions that would
  otherwise be valid under nonbankruptcy law
  are known as the avoiding powers.
 Preferences, fraudulent transfers, and the
  ability to set aside unauthorized postpetition
  transfers are the most common avoiding
  powers.
Strong Arm Clause
 Section 544 gives the trustee various powers
  collectively and commonly known as the
  strong arm powers, or the strong arm clause.
 The strong arm rights collectively place the
  trustee in full command of all a debtor’s
  assets affected by the bankruptcy
  proceeding.
Chapter Sixteen. Avoidable
Preferences—11 U.S.C. §547
 After reading this chapter you will be able to:
      Describe the avoidable preferences under the
       Bankruptcy Code
      List he elements of an avoidable preference
      Understand the affirmative defenses which a
       creditor may assert to defeat a trustee’s claim
       of an avoidable preference
      Describe the basic procedures of a preference
       complaint
Preferences
 A preference is a transfer of property or an
  interest in property to a creditor, on the eve of
  bankruptcy, in full or partial satisfaction of
  debt to the exclusion of other creditors.
 A preference meeting certain defined
  conditions will be avoidable by a bankruptcy
  trustee.
Practice Pointers
 The Code defines a ‘‘transfer’’ to mean:
     (1) the creation of a lien
     (2) retention of title
     (3) foreclosure of the debtor’s equity of
      redemption
     (4) any mode, ‘‘direct or indirect, absolute or
      conditional, voluntary or involuntary, of
      disposing of or parting with property or an
      interest in property.’’
Elements of a Preference
 Transfer of property or an interest in property
 To or for the benefit of a creditor
 On or for account of an antecedent or
  preexisting debt
 Made while the debtor is insolvent
 Made within 90 days of filing or within one
  year if the transferee is an insider
 That enables the creditor to receive a greater
  Chapter 7 dividend than it would otherwise
  receive
Preference Defenses
 A contemporaneous exchange for new value
 A debt incurred and paid in the ordinary course of
    business
   Within any nonbankruptcy perfection periods or within
    30 days of debtor receiving possession
   Unsecured debt incurred for new value
   Floating liens, except for improvement of position
   Unavoidable statutory liens
   Domestic support obligations
   A consumer debtor’s consumer debts of up to $600
    (permits preferential payment of nominal debts)
   Business transfers less than $5,475
   Consumer approved repayment plan
   Noninsider security interests for the benefit of insider
Plaintiff/Trustee Pleadings
 Summons and Complaint
 Cover Sheet, as required by local rule
 Evidence Proving Preference:
     Checks
     Contracts
     Recorded documents
     Documents of title
Defendant/Transferee Pleadings
 Answer
 Evidence Proving Defense
     Checks
     Contracts
     Recorded documents
     Documents of title
Chapter Seventeen. Fraudulent and
Postpetition Transfers

 After reading this chapter, you will be able to:
   Understand fraudulent transfers as they exist in
     the bankruptcy code
   Describe the avoidability of unauthorized
     postbankruptcy filing (postpetition) transactions
   List the damages recoverable by a trustee who
     successfully exercises the avoiding powers
   Describe the bankruptcy code’s treatment of a
     creditor’s common law right of setoff.
Fraudulent Transfer
 A fraudulent transfer is a transfer made by a
  debtor with an intent to hinder, delay, or
  defraud creditors.
 A transfer without reasonable or fair
  consideration made while a debtor is
  insolvent or that renders a debtor insolvent
  will also be fraudulent.
 Fraudulent transfers are the subject of
  Bankruptcy Code Section 548.
 Fraudulent transfers are one of the trustee’s
  avoiding powers.
Postpetition Transfers
 A transfer of estate property after a
  bankruptcy filing that is made without court
  approval or is not otherwise authorized by the
  Bankruptcy Code.
 An unauthorized postpetition transaction may
  be avoided by a bankruptcy trustee.
 Postpetition transactions are the subject of
  Bankruptcy Code Section 549.
Setoffs
 A setoff is the common law right of a creditor
  to balance mutual debts with a debtor.

								
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