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Bankruptcy Forms Administrative Claims document sample
Bankruptcy Forms Administrative Claims document sample
Bankruptcy Considerations June 15th, 2010 What is Bankruptcy? • “Fresh start” for honest debtors – discharge or elimination of many debts • Legal process governed by federal law – extremely orderly – priority scheme Major Bankruptcy Chapters – Chapter 7 – liquidation (business or individual) – Chapter 9 – municipality (city, town, school district) – Chapter 11 – reorganization (usually business) – Chapter 12 – family farmer or fisherman – Chapter 13 – reorganization (individual) – Chapter 15 – ancillary and cross-border Many Parties • Bankruptcy cases often involve many parties with many different interests: – debtor – creditors – court – case trustee – U.S. Trustee – other parties in interest Key Concepts • Automatic Stay • Dismissal vs. Discharge • Proofs of Claim • Tight Deadlines Notice of Bankruptcy • Designate an address for notices • Notification from Bankruptcy Court or DOJ • Bankruptcy notification service • Publication notice • Copy of court pleading • Phone call or correspondence from debtor or debtor’s attorney Next Steps • Confirm that a bankruptcy petition was actually filed. • Obtain copy of petition & list of creditors – Ask debtor or debtor’s attorney to provide copy – Contact Bankruptcy Court (www.uscourts.gov) – PACER (pacer.uspci.uscourts.gov) Determine your Claim • A “claim” in bankruptcy includes: – a right to payment, whether or not reduced to a judgment, liquidated/unliquidated, fixed/contingent, matured/unmatured, disputed/undisputed, legal/equitable, secured/unsecured – a right to an equitable remedy for breach of performance if such breach gives rise to a right to payment • Determine whether you have a claim; basis for claim; what type of claim you have; amount or estimated amount of claim. The Process • Case begins when the bankruptcy petition is filed – by debtor (voluntary) – by creditors (involuntary) • Notice to Creditors – bankruptcy petition includes a schedule which lists creditors • Appointment of Bankruptcy Case Trustee – a trustee is generally not appointed in chapter 11 cases – investigation of assets • court hearings, debtor examinations, etc. The Automatic Stay • Automatic Stay = STOP! – Automatically prohibits most collection actions against the debtor or the debtor’s property – Provides “breathing space” – Violations punishable as contempt The Automatic Stay no demand letters or phone calls stop foreclosures or other liquidation remedies stop all administrative wage garnishments & credit bureau reporting notify your billing and collection departments notify FMS if debt is in cross-servicing or TOP notify DOJ (if relevant) The Automatic Stay • Stay applies even if: – debt is non-dischargeable – debt not listed on list of creditors and no notice was provided – a prepetition contract with debtor specifically allows for collection action Limited Exceptions to the Stay • sending mere notices • criminal proceedings • revocation of licenses • offset of tax refunds to collect tax debt • certain acts to collect domestic support obligations and postpetition claims • certain foreclosure actions Violations of the Stay • What do you do if you realize that your agency has violated the automatic stay? – Must you return the funds? • Probably, but not necessarily. • Consult your legal department. • Determine whether to return funds to debtor or trustee. – Take steps to make sure violation does not happen again. Lawsuits, Adversary Proceedings . . . • If your agency is being sued, immediately refer case to your legal department. – Deadlines in bankruptcy cases are extremely tight and missed deadlines may result in default judgments. – A “lawsuit” can come in various forms: • Adversary Proceeding • Motion for Contempt • Motion to Compel • Motion for Turnover of Funds • Preference Actions Determine if Active Role is Warranted • How large is your claim? Is it secured? Does it get priority treatment? • Does the debtor have any assets? Are they exempt or encumbered? • How much debt does the debtor have? • Is this a liquidation case or a plan case? • Is your debt non-dischargeable? • Do you suspect any fraud? • Is there a non-debtor guarantor? Determine if Active Role is Warranted • Attend the meeting of the creditors? • Move to lift automatic stay? – Note: if the stay is lifted, agency can continue collection action only as allowed by court order • Object to dischargeability of debtor or debt? • Move to appoint a trustee? • Get appropriate approvals from the court. • Vote on a plan of reorganization. Proofs of Claim • File a proof of claim (Form B10) – Without a proof of claim, you might not recover any money. – Subjects you to jurisdiction of the court and waives sovereign immunity. – Postpetition debts must file application. – Consult your legal department. • Bar Date – Usually 180 days for the government. Secured Creditors • Interest in property – liens, security interests, set-off rights, etc. – fully secured vs. undersecured • Determine need to actively protect your property interest: – relief from stay? – adequate protection? Priority Scheme • Secured claims • “Priority” claims (see next slide) • General unsecured claims • Punitive damages and certain other fines • Tardily filed claims • Interest payments Priority Scheme • Priority claims include: – certain domestic support obligations – expenses incurred during the bankruptcy case – certain wages and benefits owed to employees – taxes owed to the government – penalties owed to the government (to compensate for actual pecuniary loss) – damages resulting from DUIs • Consult agency counsel to determine if your debt gets priority Non-dischargeable Debts • Some debts cannot be discharged, including: – domestic support obligations – student loans – certain wages and benefits owed to employees – taxes and penalties owed to the government – criminal restitution debts; damages caused by willful injury to another person; damages caused by DUIs – debts not listed in the bankruptcy petition (possibly) – fraud and misrepresentation – debts assumed pursuant to a valid reaffirmation agreement Non-dischargeable Debts • Consult agency counsel to determine if debt may be non-dischargeable. • If debt should not be discharged, may need to file pleadings to protect your interest. Exempt Assets • Some assets are exempt from distribution: – applies to individual bankruptcy filings only – applies to unencumbered property only – depends on state law – common examples include: • car, up to a certain value • primary residence, up to a certain value • certain retirement benefits • personal items, including clothing, books, bedding, family pictures, food, up to a certain dollar threshold End of Bankruptcy Case • Funds (if any) are distributed to creditors – funds are either distributed at end of the case or pursuant to court-approved plan • Discharge • Terminate collection • Write-off debt Discharge • A “discharge” means that the debtor’s slate has been wiped clean. • Has there been a discharge? What debts were discharged? Did debt arise before or after discharge order? – Some debts are automatically discharged. – Some debts are discharged only if requested by debtor. – Some debts will not be discharged if requested by creditor. • Discharged debt cannot be collected against. • A dismissal is not a discharge. Dismissal • Dismissal can occur at any time: – Debtor changes its mind and withdraws petition – Debtor fails to follow rules (e.g., failed to pay filing fees or file reports) – Debtor is abusing the bankruptcy process • Dismissal means that the debtor was not discharged and collection may continue. • Warning: If debtor re-files for bankruptcy, a new automatic stay is in effect. Review of Key Concepts • Automatic Stay – Immediately stop collection activity, unless a specific exception applies. • Dismissal vs. Discharge – Determine whether: • case is on-going • case was subsequently dismissed • debtor has been discharged – If there has been a discharge, determine whether: • debt was incurred before or after the discharge date • debt was actually discharged • Tight Deadlines – Proof of claim and bar date. – Motions and complaints filed against your agency. Bankruptcy Terminology Bankruptcy Terms • Adversary proceeding - A lawsuit • Bankruptcy Trustee - A private arising in or related to a bankruptcy individual or corporation appointed in case. all bankruptcy cases to represent the interests of the bankruptcy estate and • Automatic stay - An injunction that the creditors. automatically stops all collection activity against the debtor the • Creditor - A person to whom the moment the bankruptcy petition is debtor owes money or that claims to filed. be owed money by the debtor. • Bankruptcy Code - The informal • Debtor - A person who has filed a name for title 11 of the United States petition for relief under the bankruptcy Code, the federal bankruptcy law. laws. • Bankruptcy estate - All property in • Defendant - An person or entity which the debtor has an interest. against which a lawsuit is filed. • Bankruptcy petition - A formal • Discharge - A release of the debtor request for protection under the from personal liability for certain federal bankruptcy laws dischargeable debts. Bankruptcy Terms • Liquidated claim - A creditor’s claim • Dischargeable debt - A debt for for a fixed amount of money. which the Bankruptcy Code allows the debtor’s personal liability to be • No asset case - A chapter 7 case eliminated. where there are no assets available to pay any portion of the creditors’ • Dismissal - Court-ordered unsecured claims. termination of further bankruptcy proceedings in connection with a • Nondischargeable debt - A debt that debtor’s bankruptcy petition cannot be eliminated in bankruptcy. • Exempt property - Property or • Secured creditor - A creditor with a value in property that a debtor is claim against the debtor that is secured allowed to keep, free from the by a lien on property of the estate or claims of creditors who do not have that is subject to a right of setoff. liens. • Schedules - Lists submitted by the • Joint petition - One bankruptcy debtor along with the petition showing petition filed by a husband and the debtor’s assets, liabilities, and wife together. other financial information. Bankruptcy Terms • Unliquidated claim - A claim for which a specific value has • Source: Bankruptcy Basics by not been determined. Leonidas Ralph Mecham, Director, • Unscheduled debt - A debt Administrative Office of the United that should have been listed by States Courts, Washington, DC a debtor in the schedules filed • A copy of the manual may be found at with the court, but was not. www.uscourts.gov//bankruptcycourts Depending on the circumstances, an unscheduled debt may or may not be discharged. • Unsecured claim - A claim or debt for which a creditor does not have any special assurance of payment, such as a mortgage or lien.
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