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					Chapter 7: Post-Petition Activities
& Creditors’ Claims



Bankruptcy Law          PAR 235

       Mike Brigner, J.D.
                                  1
Today
• Text Chaps 9 & 12
• What happens from
  time the petition is
  filed until case is
  closed?
  –   Clerk
  –   Trustee
  –   Debtor
  –   Creditors
  –   Clerk
                         2
Clerk: Bankruptcy Notice
• Official Notice
• Must be sent not less than 20 days prior to
  341 Meeting
  –   Appoints Trustee
  –   Meeting of creditors time/place
  –   Deadlines
  –   Creditors may not take certain actions
  –   Do not file POC unless you receive a Ct Notice
  –   Explanations                                     3
    Rule 341 Meeting of Creditors
• 20–40 days after Notice
• Trustee presides
• Recorded
• Debtor must appear & testify
  under oath
• Purpose to see if any assets
  concealed or disposed of
  improperly
• Trustee must determine
  debtor’s awareness of rights      4
The Chapter 7 Trustee
                • Appointed by the U.S.
                  Trustee
                • From a panel of local
                  trustees
                • Per 11 U.S.C. § 701(a)(1)

                • We will review duties
                  of trustee in Text
                  Chapter 9

                                              5
Trustee’s Powers Include
•   Abandon property of the estate
•   Assume or reject executory contracts
•   Seek disallowance of a creditor’s claim
•   Avoid prepetition transfers
    – Voidable preference
    – Fraudulent transfers
• Avoid certain postpetition transfers
                                              6
Trustee Power: Abandonment
               • Trustee “ignores”
                 property of the
                 debtor; it is no
                 longer included in
                 the debtor’s estate
                 11 USC 554(a)
               • Text p. 199-202



                                       7
Trustee Power: Assume/Reject
Executory Contracts
• Trustee can
  require debtor to
  perform
  uncompleted
  contract
• Or can cancel
  contract
• Text pp. 43-44
• (More common in
  Chapter 11)
                               8
Trustee’s Powers: Disallow
• Trustee can seek disallowance of a
  creditor’s claim
• WHY?
  –   No documentation
  –   Error in proof of claim
  –   No evidence of actual debt
  –   Excessive interest

                                       9
Trustee Power: Avoidance
• Trustee “voids” certain transfers by
  a debtor to a third party and such
  property is brought into the estate
• 1. Pre-petition transfer
  – Text Chapter 9
  – Time limit: 90 days before filing
  – Time Limit: one year if an insider
  – Exceptions: Ordinary business debt,
    child or spousal support, or total value
    under $600
                                               10
Trustee Power: Avoidance
• 2. Pre-petition fraudulent transfer
  – Text pp 197-199
  – Time limit: up to 1 year
  – If: transfer involved an actual intent to
    hinder, delay, or defraud creditors
  – Or, if transfer was for less than
    reasonable value


                                                11
Trustee Power: Avoidance
• 3. Post-petition transfers
  – Text pp. 186-187
  – All post-petition transfers must be
    authorized by statute or court




                                          12
Creditors’ Claims - Types
               • Secured (collateral,
                 security agreement)
               • Unsecured
               • Priority
               • Unliquidated
               • Disputed



                                        13
   Creditors: File Proofs of Claim
• This is creditor’s:
   – Statement of debtor’s
     obligation,
   – & claim for share of
     bankruptcy estate
• Text pp. 330
• Official Form 10
• Must attach supporting
  documents, or summary,
  or explain why not                 14
Debtor & Creditor:
Reaffirmation
• See info & sample Reaffirmation
  Agreement, text pp. 162-168
• By resigning, debtor gives up bankruptcy
  discharge for this debt
• Debtor can rescind within 60 days
• Attorney must certify:
  – Fully informed & voluntary agreement
  – Does not impose a hardship on debtor/family

                                                  15
Court:
Reaffirmation
• Court must hold hearing, scrutinize
  – No undue influence on debtor
  – No undue hardship on debtor
  – Debtor has income to pay this debt
• Debtor advised of right to rescind
• Court can “cram down” different
  – Principal amount, &/or
  – Interest rate
                                         16
Bankruptcy Litigation

• Mostly we will cover this topic in Week 9
• Review text, Chapter 6
• Adversary Proceeding: Starts by Complaint
  – Text, p. 89-
• Contested Matter: Starts by Motion
  – Text, p. 95

                                          17
Trustee: Distribution of Estate




• See Text p. 15           • Distribution first to
• After Trustee has          Priority Claims
  collected property       • Then to Non-priority
  and reduced it to cash   • Per §§ 507, 726, 503(b)
                                                   18
19
Priority Claims
•   Administrative Expenses
•   Wages due to workers
•   Employee benefits due        (see
•   Farmer-Fishermen claims       p. 15]
•   Consumer $ on deposit
•   AMS = Alimony, Maintenance & Support
•   Taxes & some penalties
                                           20
Non-priority Claims
•   Unsecured claims
•   Tardy secured
•   Tardy unsecured
•   Penalty claims
•   Interest on claims
•   Debtor

                         21
Trustee:
Closing the Case

• Trustee Issues Final Report & Proposed
  Distribution
• Notice given to creditors
  – 30 days to object
• Trustees Final Account After Distribution &
  – Final Account, pp. 226-228
                                                22
Court:
Closing the Case

• Final Decree of Discharge
• Case can be reopened at discretion of
  court (usually to add a forgotten creditor)
  – Question: If court says “no,” is attorney/
    paralegal liable to pay the “forgotten” debt?
• Note: Discharge can be revoked if obtained
  by fraud!
                                                    23
Court: Discharge Hearing
               • Not required since
                 1986
               • Some courts still
                 hold discharge
                 hearing
               • Some do a video
               • Some do video + brief
                 appearance by judge
                                     24
Chapter 7: Post-Petition & Creditors



Bankruptcy Law        Concluded

       Mike Brigner, J.D.
                                  25

				
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