Document Sample
					                               BANKRUPTCY OUTLINE

1. State-Law Collection Remedies
       a. Almost all collection remedies are governed by state law
               i. Creditors are allowed multiple paths to recover outside of court (call multiple
                   time per day) and there is little a debtor can do
                       1. Debtor’s can sue under tort law, but only for extreme and outrageous
                            conduct, which actually causes severe distress, when the creditor knew
                            that the behavior would cause the severe distress
                       2. Debtor can invoke Fair Debt Collection Practices Act (pg 9)
                                 a. Prevents even mild harassment. Debtor’s can completely
                                      terminate all contact with the collection agent
                                            i. But, it does not apply to a creditor who is trying to
                                               collect a debt originally owed to that creditor
                                           ii. Nor does it apply to business or commercial debts, or to
                                               debtors that are corporations
       b. Judicial Collections
               i. Judgments → When the creditor sues the debtor in court. All judgments are
                   treated as first-in-time is first-in-right
                       1. Must have three characteristics
                                 a. actionable – the creditor may bring a civil action asserting the
                                      judgment itself as the basis for the law suit (particularly when a
                                      creditor is trying to enforce a judgment in another state)
                                 b. executable – the judgment gives the creditor the right to use the
                                      legal process and the state actors (the sheriff) to seize the debtors
                                      property and sell it to satisfy the judgment
                                 c. lienable – creditor may use the judicial process to obtain a lien
                                      on the property of the debtor to secure the payment of the debt
       c. Execution Liens
               i. Six steps in the execution of a money judgment (a.k.a. execution lien)
                       1. the final money judgment is entered
                       2. the writ of execution is issued by the court clerk
                       3. the writ of execution is delivered to the sheriff
                                 a. the writ generally has an expiration date (69 180 days after
                                      issuance). If the expiration date occurs before the sheriff has
                                      levied any property, the writ becomes void. The sheriff ust
                                      return the writ nulla bona. Sheriff can return a writ nulla bono
                                      before the expiration date if he makes a good faith attempt to
                                      find property, yet none is found
                       4. the sheriff levies on ∆’s non-exempt property
                                 a. lien is created = the creation of a property interest in the property
                                      for the creditor
                                 b. the sheriff either takes the property with him, or constructively
                                      seizes it by placing stickers on property
                                 c. sheriff can levy as many times as is reasonable/necessary to
                                      satisfy the judgment
                                            i. Creditor is in control of the levy process, and the sheriff
                                               is to follow all reasonable instructions
                                 ii. necessary and reasonable use of force is allowed in order
                                     to seize ∆’s property
              5. the levied property is sold
                       a. generally 30-60days after levy – allows ∆ time to appeal
              6. the proceeds of the sale, minus sale expenses, are disbursed to the
      ii. The key to enforceability is priority (problems on page 20-21)
              1. Most debtors have multiple creditors chasing after the same assets, thus
                   those first to establish their priority are the ones that are going to get paid
              2. Priority is established when a lien is perfected (UCC) or when it is
                       a. majority view – lien is established when the sheriff actually
                            levies property, and the priority date is the date on which the
                            sheriff levies
                       b. minority view – lien is considered established when the sheriff
                            actually levies property, but the priority dating is the date on
                            which the writ of execution was actually delivered to the sheriff
d. Consensual liens
       i. always secured, and come in two types
              1. consensual liens on real property
                       a. secured by mortgages
              2. consensual lines on personal property
                       a. secured interest → often governed by UCC
                                  i. All Article 9 liens established under the UCC are
      ii. Consensual liens have unique enforcement vehicles that do not require the courts
          → self –help repossession
              1. creditor allowed to repose the property as long as they do not breach the
                   peace – allowed under Article 9 of UCC
     iii. Priority status
              1. Consensual liens that are perfected before a sheriff levies on a property
                   have priority over the judgment creditor, regardless whether the state is a
                   minority or majority state above
                       a. the relation back principle of date of delivery in minority states
                            does not apply in a priority dispute with a valid and perfected
                            security interest under Article 9 of UCC

                 2. secured priority perfection
                        a. Usually has terms in a financing agreement, agreed to by both
                            parties at the time of contracting.
                        b. Creditor must take the financing agreement and file it in the
                            public record
                                 i. Sec. of State office for personal property
                                ii. County recorders office for real property
                                          1. However there are several layers of protection of
                                              owners of real property
                                                  a. the creditor cannot seize and sell the
                                                      property without first having an
                                                      appraisal done of the property
                                                          i. the sale of the property must
                                                              realize a preset percentage of
                                                              the appraisal value or else the
                                                              sale will be declared void
                                                  b. the ∆ generally has a redemption period
                                                     of 6 months after the sale in which to
                                                     pay off the debt in full and get back the
e. Judgment Liens
        i. one of the most powerful tools in the creditors arsenal, it attaches to all real
           property in the county in which the judgment is rendered
               1. attaches in 2 ways
                        a. majority states – created and executed when the clerk dockets the
                        b. minority states – created and executed when creditor takes the
                            lien and files it in the county recorders office
               2. Judgment liens automatically attach to all after-acquired property in the
                   county as well
               3. Remember – the judgment lien merely establishes the lien, in order to get
                   any money the creditor must go thru the execution process of having the
                   property foreclosed on by the sheriff.
                        a. however the priority date goes all the way back to the date the
                            lien was docketed (or filed w/ the county recorder in minority
                        b. ALSO, purchase money mortgages always have priority over
                            judgment liens, even when dealing w/ after-acquired property
                                 i. Moreover, federal tax liens filed after a judgment lien,
                                     but before after-acquired property has come into
                                     existence, will trump judgment liens US v McDermott
                                     pg 33
f. Garnishment
        i. Enables a creditor to capture property or intangible assets of the debtor in the
           hands of a 3d party.
               1. Most often used against bank accounts and future wages
       ii. Process:
               1. Need to get a writ of garnishment in order to levy against property, a
                   normal writ of execution is not enough
                        a. Affidavit filed w/ court saying: 1) creditor holds an unsatisfied
                            debt owed by ∆, 2) that the 3d party holds ∆’s assets or owes ∆
                        b. clerk issues writ of garnishment
                                 i. command to 3d party to hold property from ∆, if 3d
                                     party fails to abide, 3d party can be held civily liable by
                        c. writ is delivered to the sheriff and the sheriff serves the writ
                            (establishing levy and priority against other creditors)
                        d. 3d party answers and either admits allegations or assets a defense
                            (doesn’t have any of ∆’s assets, doesn’t owe ∆ any $, etc.)
                        e. if 3d party challenges writ, a trial is held
                        f. ct order property turned over to creditor
      iii. After-Acquired property
              1. states are split
                        a. Majority – garnishment can only attach to those assets/obligation
                            currently in the hands of the 3d party at the time of service of the
                            writ (which is that time of the lein establishment). Any assets
                            acquired by 3d party post time of service cannot be touched
                        b. Minority – garnishment attaches to after-acquired
                            property/obligations by the 3d party for a specified time period
      iv. Special rules for garnishment of wages
              1. wage garnishments cannot be unlimited. Federal places a ceiling on the
                   amount of wages that can be garnished (pg 38)
g. Dormancy Issues
        i. Judgments don’t last forever.
              1. generally expire after 5–10 years. Creditor must renew a judgment after
                   that time period for another 5-10 years. Renewal can affect priority date
              2. If attempts are not made to collect on the judgment for a certain time
                   period (say 3 years), the judgment becomes non-actionable.
                        a. must petition to have judgment revived by the courts. Revival
                            will likely affect creditors priority date
h. Prejudgment Remedies
        i. These are almost always ex parte
              1. the whole point of these remedies is to prevent ∆ from hiding or getting
                   rid of property

        ii. Five types
                1. Attachment – sheriff levies on ∆’s non exempt assets and holds property
                    pending the outcome of the lawsuit
                2. Garnishment – same as attachment, just the property is seized from a
                    third party instead of directly from the debtor
                3. Replevin – creditor takes possession of property (only when suit is for
                    tort of replevin)
                4. Lis pendens – clouds the title of the property that is the subject of the
                5. preliminary injunction –
                         a. preliminary injunctions are not allowed
                         b. judges cannot invent remedies, legislatures job
       iii. To get prejudgment remedies, the creditor must have already instituted a law suit
                1. If creditor wins suit, his priority date will relate back to the date of the
                    prejudgment lien.
                         a. however, creditor will still have to go thru all execution
                             requirements after he wins the suit in order to liquidate the
                             property and receive $
       iv. Safe guards
                1. Only available for specific causes of action
                2. Creditor must show a high likelihood of prevailing in the suit, and that ∆
                    will attempt to evade paying any following judgment
                         a. showing must be made in an adversarial hearing
                                  i. ∆ must be given adequate notice of the hearing
                3. Creditor often required to post a bond, if ∆ prevails in the suit he can
                    collect damages against the bond
2. Into to Bankruptcy – Title 11 of USC
       a. what is the point of Bankruptcy?
                i. to prevent a creditor’s race to get assets, thus leaving some creditors with nothing
                   – want a more fair way to distribute ∆’s assets b/w multiple creditors
               ii. State collection laws encourage a race to the courthouse
                       1. Also, state collections laws increase economic costs b/c each creditor is
                            acting independently, and each creditor is only interested in liquidating
                            ∆’s property for an amount sufficient to cover the individual debt, not
                            necessarily interested in achieving a fair market value price
              iii. Fresh-Start policy – don’t want people to hounded by problems forever
                       1. only available for individuals
              iv. Not all debts are dischargeable
                       1. can’t discharge intentional torts, court fines, judgments for willful injury,
                            and fraudulent acts (incurring debts w/o intending to pay back)
       b. Prime alternatives to BK
                i. workouts – negotiated deal b/w creditors and ∆ to prevent a run on ∆’s assets
               ii. ABC’s – assignment for the benefit of the creditors
                       1. ∆ gives over all of his assets to a state trustee to be liquidated and the
                            proceeds to be disbursed for the benefit of the creditors
                                a. entire voluntary in terms of participation of creditors, but
                                     creditors can still sue for any part of the debt that was not
       c. Bankruptcy completely displaces state collection law, once it is invoked
                i. BK favors creditors that have already moved to protect their claims
               ii. Creditors cannot opt out of bankruptcy case - §362(a) automatic stay
       d. Chapter 7
                i. available to any debtor
                       1. but for a non-human, chapter 7 is the end of the line b/c companies will
                            be completely dismantled (There are no non-exempt assets for
       e. Chapter 11
                i. available to individuals and corporations
                       1. however, chapter 11 is very expensive, so usually only very large
                            corporations can afford to file it
                                a. Yet, normally chapter 11 is used as a liquidation vehicle – a tool
                                     to hold off creditors while the corporation shops around for a
               ii. ∆ usually still runs the business as a DIP (debtor in possession) and is treated as a
              iii. ∆ must propose a sufficient plan of reorganization – one that will give creditors
                   more than they would have received in a chapter 7
              iv. Chapter 11 discharges are for not for debtors, but for fairness to creditors
               v. Has a creditor committee that monitors the DIP and makes sure u/s creditors
                       1. generally, made up of the 7 largest u/s creditors
                       2. can have multiple creditor committee’s, representing the interests of
                            different classes of creditors
       f. Chapter 13
                i. reorganization plan for individuals only – ∆ keeps all of his property, and pays all
                   of his creditors from all his disposable future income
               ii. All creditors must receive what they would have in a chapter 7 liquidation
                       1. best interest of creditors test
           iii. Only available if ∆ has a regular source of income
3. Commencing A Bankruptcy Case
     a. Debtor eligibility §109 (see problem 2.1)
             i. Generally
                     1. must be a person (individual, partnership, or corporation) who resides or
                          has a place of business or property in the United States
            ii. chapter 7 – §109(b), §101(41)
                     1. can’t be a railroad, insurance company, bank, credit union
           iii. chapter 11 – §109(d)
                     1. can’t be a insurance company, bank, credit union, stockbroker, or
                          commodity broker
           iv. chapter 13 – §109(e), (h), and §101(30)
                     1. ∆ must have regular income
                     2. has a debt cap, if ∆ exceeds the cap, he must file a ch. 11
                               a. maximum of $307,675 in unsecured debts
                               b. maximum of $922,975 in secured debt
                     3. ∆ must file a briefing from a credit counseling agency showing that ∆
                          received info about available credit counseling info, and a budget
                          analysis. The briefing must have occurred w/in 180 days prior to the
                          filing date of the petition -- §109(h)
     b. Venue – 28 USC §1408 (problem 2.2 pg 78)
             i. 2 options
                     1. look back 180 days from the filing date
                               a. wherever ∆ has resided for the majority of that time (at least 91
                                   days) is where venue is proper
                     2. Could have an affiliate of the corporation file in a favorable venue, and
                          then the corporation would be allowed to piggyback into that
                          jurisdiction,, even if it initially would not have been allowed
            ii. If the trustee sues a 3d party on behalf of the estate, and the amount is less than
                $15,000, venue is appropriate in the defendant’s home district
     c. Voluntary vs. Involuntary
             i. voluntary – §301
                     1. to start a voluntary bankruptcy, ∆ himself fills out a petition and files it
                          w/ the court, and pays all filing fees. Petition must be sworn to as being
                               a. filing fees can be waived under informa pauparis, but it is not
                                   mandatory that courts actually waive the filing fee and give the
                                   poor access to bankruptcy relief
                               b. if ∆ is a partnership, all of the general partners must agree to the
                               c. if ∆ is a corporation, state law governs who can place the
                                   corporation into BK voluntarily, but generally a board of
                                   directors resolution is required
            ii. involuntary – §303
                     1. can only occur in chapter 7 and chapter 11 cases, NOT chapter 13
                     2. can only be commenced against a person (but not a farmer) or
                          corporation (but not a non-profit)
                     3. can be filed by ∆’s creditors – must have at least 3 u/s creditors holding
                          an aggregate of $12,300 in debt – §303(b)
                               a. the debts held must be non-contingent and undisputed
                              b. The court can require the creditors to post a security bond to
                                   indemnify ∆ against creditors wrongful filing of BK – see
                                   §303(e), and §303(i)
                                         i. but this only occurs if the debtor contests the involuntary
                                            BK, and wins
                     4. Grounds that must be satisfied – §303(h)
                              a. 2 reasons creditors can use
                                         i. ∆ is generally not paying his debts when they become
                                            due, when the debts are not the subject of a bona fide
                                                1. this is generally a sign of equity insolvency
                                                2. mostly a totality-of-the-circumstances
                                                         a. judges will compare the percentage of
                                                              debts being paid vs those not being paid.
                                                                   i. in this calculation, the non-
                                                                       payment of secured debts counts
                                                                       against ∆, even though secured
                                                                       creditors cannot force an
                                                                       involuntary BK
                                        ii. with in the previous 120 days before filing, a non-BK
                                            custodian was appointed over substantially all of ∆’s
                     5. In a partnership, if some of the general partners wish to enter into BK,
                          but the vote is not unanimous, those general partners can file an
                          involuntary BK. The opposing general partners are free to file opposing
                          motions w/ the court -- §303(b)(3)(A) and §303(d)
      d. Operating in the Gap b/w filing and discharge
              i. who runs the show
                     1. generally, in a chapter 11, the debtor remains possession of a business
                          and all assets, and manages them – §303(f)
                              a. ∆ is allowed to continue to run business as if a BK was never
                              b. ∆ is allowed to accumulate new debt, but must give all post-
                                   petition creditors priority status guarantee
                     2. however, the court can appoint a trustee if it sees fit – §303(g)
4. Dismissal
      a. the mechanism for getting rid of cases that don’t belong in BK, even if they are properly
          commenced cases
      b. most flexible, and easiest for the court to implement – §305
              i. here the court can dismiss any case, or suspend all BK proceedings in a case if
                 the court determines such dismissal would be in the “best interests of the
                 creditors and debtor”
                     1. This gives the court a great deal of discretion to dismiss cases.
                          MOREOVER the decision is not reviewable by the court of appeals or
                          the Supreme Court
             ii. Applies to Chapter 7 and Chapter 11 cases
      c. Chapter 7 – 707(a) and §707(b)
              i. 707(a)
                     1. ∆ can’t dismiss a chapter 7 case on her own volition, she must get court
                          permission, and show cause
                              a. can not get a dismissal to add new creditors and re-file later
                       2. Yet, the court can dismiss a case “for cause”, which could mean almost
                           anything the court wants it too
                                a. failure to file pre-petition tax returns as required under §1308
                                b. Also, many courts unofficially have a requirement that the case
                                    be filed in good faith, if they believe the case was filed under bad
                                    faith, the trustee will dismiss the case under §707(a)
                                          i. but there is no provision in the code that requires a good
                                             faith filing (except for the means testing provision)
                ii. §707(b) – getting rid of can pay debtors
                       1. §707(b)(1)
                                a. Court can dismiss a case (or w/ permission of ∆, convert to a ch.
                                    11 or ch. 13) if granting a discharge would be an abuse of the
                                    bankruptcy provisions
                                          i. only if the debts are primarily consumer debts
                       2. §707(b)(2) – MEANS TESTING (see 11 -34 in supp)
                                a. A certain amount of excess income will constitute presumptive
                                    abuse. If the presumptive abuse is not rebutted, the court MUST
                                    dismiss case
                                b. Only ∆’s whose family income is greater than the state median
                                    income for their family size are subject to the presumption of
                                                  1. Any ∆ with primarily consumer debt, and whose
                                                       family income is above the state median, and
                                                       who has net monthly income of $100 - $166 will
                                                       face the possibility of a presumption of abuse
                                                           a. calculation or presumption goes:
                                                                current monthly income less monthly
                                                           b. multiplied by 60
                                                           c. greater than the lesser of $6,000 or 25%
                                                                of u/s debts; or $10,000
                                                  2. if the net monthly income is greater than $166,
                                                       the presumption will always arise
                                         ii. current monthly income is defined under §101(10A)
                                                  1. determined by looking at the income ∆ received
                                                       during the 6 months prior to filing the BK
                                                       petition, from any source
                                                  2. includes spouses income, even in a non-joint
                                                       case if the spouse contributes to household

      d. Chapter 11 – §305 and §1112
               i. §1112 allows for dismissal if it is in the best interests of the creditors and the
                  estate (just like §305)
                      1. Yet, §1112 is completely reviewable higher courts
      e. Chapter 13 – §1307
               i. ∆ is allowed to voluntarily dismiss a chapter 13 anytime hey want
              ii. court can dismiss a case for case as well
5. Conversion
      a. an alternative to dismissal
      b. Can’t convert a case to ch. 13 without ∆’s consent
               i. Nor can you get around the Means Test by first filing a chapter 13, then
                  converting to a chapter 7
      c. Each chapter has its own conversion provisions (p. 2.9 pg 120)
               i. Chapter 7 – §706
              ii. Chapter 11 – §1112
                       1. just b/c ∆ can’t reorganize successfully, doesn’t mean the case should be
                               a. convert the case to a chapter 7 if it is in the best interest of the
                                   creditors and the debtor
                                         i. very important to look at the proportion of the debts
                                            owed to different creditors. If the majority of debt is
                                            owed to one creditor, it might be in the best interest to
                                            convert the case and distribute proceeds on a pro-rata
                                            basis instead of allowing small creditors to levy ∆’s
                                            property and deny relief to the major creditor. (Rolex pg
             iii. Chapter 13 – §1307
6. Property of Estate
      a. Governed almost exclusively by §541
               i. Although §323 states that the trustee is the representative of the estate
      b. Make up the estate
               i. all legal and equitable interests ∆ had in an asset at the commencement of the
                  case are transferred into the BK estate, whether there are encumbrances on the
                  property or not (whether the property will be of value to the u/s creditors or not)
                       1. Trustee, as the representative of the estate, succeeds ∆ to all interests in
                           property that ∆ had at time of filing, no matter what type of interest it is
                               a. Always ask if ∆ had an interest in a property, and if so, what the
                                   nature of that interest was → that interest is the same interest that
                                   the trustee now has
              ii. All property interests are created and governed by state law, so state law defines
                  the type of ownership interest the trustee succeeds to.
                               a. EXCEPT when a federal interest requires a different result
                       2. Property itself is defined by Federal law, the interest that ∆ has in the
                           property is governed by state law
                               a. if state law says something is not property, BK doesn’t care, the
                                   federal law determines if something is property
                                         i. see Chicago Board of Trade
             iii. Property that the trustee brings into the estate, that was subject to prior liens,
                  through the trustees avoiding powers as a “super creditor”
             iv. All proceeds, offspring, etc of assets in the bankruptcy estate
      c. Ipso Facto Provisions
               i. provisions in agreements that state ∆ is automatically in default if he files BK,
                  whether ∆ is actually behind on his payments or not
                       1. Such provisions are unenforceable in BK b/c the goal is to try and
                           prevent ∆ from filing BK
      d. Exceptions to the property of the estate
               i. §541(c)(2) – spend thrift trusts cannot be brought into the BK estate
              ii. ∆’s post-petition earnings from services performed §541(a)(6)
                       1. but to qualify for the exemptions, the services rendered payment must
                           have arisen from a post-petition activity or agreement (See, Andrews,
                           where pre-petition non-compete agreement payments that were paid
                           post-petition were ruled part of estate)
                       2. Easiest thing to do is split ∆’s life into 2 periods: 1) pre-petition, and 2)
            iii. There are NO exceptions for a corporate ∆ in chapter 11 or chapter 7
                       1. all assets and all offspring come into the estate
      e. Abandonment – §554
              i. trustee has the power to abandon any burdensome property, or any property that
                  is of inconsequential value or benefit to the estate
                       1. mainly an issue in chapter 7 cases
                       2. the property is taken out of the bankruptcy estate, and the creditor and
                           debtor are allowed to fight over it in state court
7. The Automatic Stay
      a. governed by §362 → the automatic stay serves as a “time out,” maintaining the status quo
         until the debtor’s affairs can be sorted out.
              i. It is an injunction that enjoins all efforts to collect pre-petition debts
      b. The automatic stay is “automatic” – don’t need a court order, only have to file a petition
         w/ the court
              i. Don’t care if creditor acted w/o notice, any action taken (foreclosure sale, etc.)
                  will simply be undone
                       1. however, if the creditor knowingly violated the stay, he could be
                           sanctioned under §362(k)
                       2. §342 covers notice procedures for creditors to find out about BK

        c. Scope (prblm 4.1, pg 155)
                i. extremely broad – applies to everyone everywhere
                       1. as long as the collection action stems from pre-petition debts, it will not
                           affect post-petition debts from being acted upon
               ii. Can’t go after ∆, ∆’s property, or property of the estate
                       1. 8 specific categories under §362(a) – know all 8
                               a. commencement or continuation of a proceeding against the
                                   debtor to recover a claim that arose before commencement of the
                               b. enforcement, against ∆ or property of the estate, of a judgment
                                   obtained before commencement of the case
                               c. any act to obtain possession over any property of the estate
                               d. any act to create, perfect, or enforce a lien against property of the
                                         i. unless creditor loaned money for purchase money
                                             interest, and creditor is just perfecting lien, and doing so
                                             within 20 days of ∆ gaining possession of the collateral
                               e. any act to create, perfect, or enforce a lien against property of the
                                   ∆, to the extent such claim arose pre-petition
                               f. any act to collect or recover a pre-petition claim against the ∆
                               g. setoff any debt owed to ∆ against any claim against
                               h. special rules regarding corporate ∆ and tax liabilities
              iii. Stay only applies to pre-petition debts
                       1. collection activities are allowed to commence for post-petition debts
              iv. The Automatic stay is not permanent §362(c) and (d)
                      1. only supposed to preserve the status quo until the court can sort
                          everything out
              v. Turnover of repossessed collateral
                      1. the trustee only succeeds to whatever property interest ∆ had at the
                          filling, and sometimes that interest is not a possessory interest b/c the
                          property has been repossessed – §541(a)
                               a. However, if the property is something that the trustee can use for
                                    the benefit of the estate, a third party must turnover the property
                                    under §542(a)
                                         i. Then §541(a)(7) brings that property into the BK estate
                                             b/c it is technically post-petition property created by the
                                                  1. Whiting Pool
                      2. The above is dependant on the trustee filing a motion for turnover and
                          providing “adequate protection” to the creditor
                               a. see Transouth where ct should have allowed creditor to keep car
                                    until given “adequate protection”
                                         i. Trustee did not succeed ∆ into a right of possession, and
                                             the keeping of the car by the creditor was merely a
                                             keeping of the “status quo” until such time creditor was
                                             provided with adequate protection
      d. Exceptions to the stay – §362(b) (problem 4.2 page 168)
               i. criminal proceedings
              ii. child support payment/alimony payments
             iii. government proceeding to police & regulatory power, including non-monetary
                      1. can’t use BK to escape non-financial duties – polluters can’t continue to
                          pollute just b/c they filed BK
                      2. However, government money judgments are stayed
                               a. to determine if the action is a money judgment break the
                                    injunction into two parts – Penn Terra
                                         i. if an order to stop ongoing violations of the law = viable
                                             use of police power, and thus excepted from the
                                             automatic stay
                                        ii. If the injunction is based solely on past conduct, then it
                                             is a money judgment
             iv. Reason → don’t want ∆ to use BK to gain a strategic advantage over competition
      e. Time Period
               i. the automatic stay is not permanent §362(c) and (d)
                      1. only long enough so that the BK court can sort everything out
8. General Unsecured Claims
      a. General
               i. The bankruptcy estate not only succeeds ∆ to all of his interests in property, but it
                  also succeeds to all of ∆’s liabilities as well.
              ii. Once a ∆ files BK, all of his known creditors are notified
      b. In order to be paid by the BK estate, a creditor must file a Proof of Claim §501(a)
               i. Bar Date – creditors only have a certain window of time to file their claim, if
                  they do not meet the filing deadline, and they lack extreme good cause, their
                  claim will not be allowed
              ii. Claim – §101(5)
                      1. a right to payment
                         a.   disputed or undisputed
                         b.   secured (lien on an asset) or unsecured (no lien)
                         c.   legal or equitable
                         d.   matured or un-matured
                                   i. The only deference between the two types of claims is
                                       the passage of time, so BK accelerates the claim
                         e. fixed or contingent
                                   i. a claim can be made even if the triggering event that
                                       would give rise to a claim has not occurred yet, but is
                                       important to remember that not all contingent claims
                                       become fixed claims
                         f. liquidated or unliquidated
                                   i. liquidated – claim is fixed and can be arithmetically
                                  ii. unliquidated – claim has not been fixed, and/or it cannot
                                       be calculated
                                           1. good example: unresolved tort claim
               2. claims are discharged at the close of the BK case
                         a. regardless of whether creditor filed a proof of claim or not
                         b. regardless of whether the claim unliquidated during the BK case
                              or not
c. The time when a claim arises is critical
       i. if the right to a claim arose before the petition date, the claim will be included in
          the BK. If the claim arose after the petition date, the claim will survive BK, and
          party can pursue all available state law collection remedies that exist
      ii. thus must determine when the claim arose, which can be especially difficult in
          tort cases
               1. RULE: we date a claim to have arisen on the date in which the conduct
                    that ultimately gave rise to the claim occurred, NOT when the injury
                         a. Conduct is the critical factor
                         b. while state law determines if a creditor has a claim, it does not
                              determine when the claim arises
                                   i. but still look to state law to see what actions must occur
                                       to have a claim, and then look independently at all
                                       actions and fix the date when such conduct did occur
                         c. Piper twists to the rule
                                   i. claim against the ∆ is allowed if
                                           1. events occurring before filing created a
                                                relationship b/w ∆ and claimant
                                                    a. contact, exposure, impact, or privity
                                           2. the basis for liability is the ∆’s conduct in
                                                designing, manufacturing, and selling a
                                                defective or dangerous product
               2. What about future claimants who have not been injured yet from already
                    completed conduct, but who will likely be suffer an injury in the future
                    (i.e. claim is both contingent and unliquidated)?
                         a. 2 possible options
                                   i. the court can appoint a “future claims representative”
                                           1. duty to negotiate a fund to be set up for future
                                                claimants, and to negotiate a sufficient amount
                                             to be deposited into the fund to cove all likely
                                             future claims
                                          2. generally only occurs in mass-tort cases
                                 ii. court can simply hold that all future claims will not be
                                     discharged, because the future claimants were not
                                     represented (due process violation issue)
d. The type of claim can matter as well
        i. Pure equitable claims (injunctions) are not discharged by bankruptcy
       ii. However, some equitable claims are dischargeable
               1. if the injunction actually forces a ∆ to perform some type of action (not
                   refrain from committing some act)
               2. the remedy for the failure to perform gives rise to a right to payment, or
                   the payment of money would resolve the obligation
                       a. if the injunction can be converted into a monetary remedy, or if
                            there is an adequate monetary substitute for ∆’s performance,
                            then the claim will be included in the BK, and it will be
                            discharged at the end of the case
               3. EXAMPLE:
                       a. ∆ is ordered not to pollute a stream – after BK, ∆ is still not
                            allowed to pollute the stream
                                  i. no amount of money will equal ∆ not polluting the
                                     stream, the creditor cannot go in and not pollute the
                                     stream and charge ∆ for the cost
                       b. ∆ is ordered to clean up the stream he already polluted
                                  i. this equitable relief would be the exact same thing as
                                     cleaning the stream, and then billing ∆ for the cost
                                          1. thus, the injunction will not survive BK, and the
                                             claim will be paid out of the debtor’s assets
e. Claim Allowance (prblm 5.2, pg 208)
        i. All claims are deemed to be allowed unless a party in interest objects – §502(a)
               1. Unless, the claim falls under one of the 19 kinds of debts that are non-
                   dischargeable, and are thus not allowed as claims – §523
       ii. mechanics of allowing/disallowing a claim – §502(b)
               1. the claim would be unenforceable under applicable non-bankruptcy law
               2. service claims cannot exceed the reasonable value of the service
               3. claims cannot consist of unmatured interests
               4. all claims relating to damages to landlords resulting form a breach of a
                   lease are capped
                       a. damages are capped at the higher of either: 1 year’s rent or 15%
                            of the remaining rent due on the lease (the 15% total of the
                            remaining rent cannot exceed the amount the ∆ would have to
                            pay for 36 months of rent)
                       b. Also, add any amount of rent that was outstanding on the date of
               5. breach of long-term employment contracts are capped at 1 year’s salary
      iii. Disputed Claims
               1. a court has three options when a claim is disputed
                       a. adjudicate the claim (try the claim in the BK court)
                                         i. if the claim is adjudicated, the trial is a judge trial – no
                                            right to a jury in BK
                                                 1. exception: claims for personal injury and
                                                      wrongful death will be given a jury trial in the
                                                      federal court – 28 USC §157
                                b. let the creditor try its claim in the state court
                                         i. creditor is given relief from stay §362(d)(1)
                                                 1. creditor can now litigate in state court, and
                                                      obtain a judgment
                                                           a. However, creditor must return to the BK
                                                               to enforce the judgment. Creditor has
                                                               not been given stay relief for the
                                                               judgment, only to try the case in state
                                c. estimate the value of the claim – §502(c)
                                         i. allowed if fixing or liquidating the claim would be
                                                 1. “burdensome” standard is very flexible, it to
                                                      gives the court a lot of discretion to estimate
                                        ii. A court could do an initial estimate of the value of a
                                            claim when allocating voting rights to particular
                                            creditors at the outset of the case, then hold a full blown
                                            adjudication to determine the real value of the claim
                                                 1. the real value would be the basis for the
                                                      distribution to the creditor, but would not affect
                                                      voting rights
        f. Distributions
                i. creditors are paid in the following order
                       1. Secured Claims
                                a. these are paid out of the liquidation of the collateral
                       2. Unsecured Clams – §507
                                a. domestic support obligations
                                b. administrative expenses – §503
                                c. §507 statutory priority claims
                                d. general unsecured claims
                                e. subordinated claims
                                          i. non-compensatory fines and damages
                       3. Individual debtor or owners (stock holders)
9. Priority Unsecured Claims – §507
       a. Administrative Expenses – treated in detail §503
                i. administrative expenses include actual and necessary costs and expenses of
                   preserving the estate §503(b)(1)(A)
                       1. includes pre-confirmation, post-petition torts committed by DIP, trustee,
                           or estate
                                a. Any claim that arises post-petition AND post-confirmation will
                                    not be allowed
                       2. includes professional serves required by the estate
                                a. lawyers fees
                                b. trustee fees
                       3. 2 part TEST to determine administrative expense status
                                a. the expense must arise from a transaction w/ the DIP, or trustee
                                     (thus, the expense must be post-petition / arise during the
                                     pendency of the BK)
                                b. the expense must be beneficial to the DIP in the operation of the
                                          i. actual and necessary to the administration of the BK
              ii. What does “actual and necessary” to the administration of the BK include?
                       1. Midlantic – debtor polluted a piece of land pre-petition, and the trustee
                            was not allowed to abandon the property based on public policy (protect
                            public from eminent harm). Under §541, trustee succeeds ∆ to all
                            interests ∆ had, in this case ∆ was required to clean up the property so
                            trustee had obligation to clean up property.
                                a. The clean up cost less than the cleaned up property was worth,
                                     so the estate and the unsecured creditors benefited from the clean
                                     up – treated as administrative expense
                                          i. Also, some value in preventing a threat to public safety
                       2. third parties claims that allow ∆ to continue business post petition
                            (through the extension of credit post-petition, or the making of a loan
                       3. Post-Petition costs ordinarily incident to the operation of a business, but
                            do not benefit the estate
                                a. post-petition tort claims – a policy of fairness to persons injured
                                     by the estate.
                                          i. creditors benefit from having a business continue to
                                              operate, and thus should also assume risks involved with
                                              the potential benefit
                                b. abiding by state laws – §959(b)
                                          i. Alabama Surface Mining pg 228 – any fines for
                                              violating a state law that are incurred post-petition are
                                              given administrative expense status
                                                  1. encourage ∆ to abide by law, and prevent a ∆
                                                       from gaining an unfair advantage over
                                                       competition via bankruptcy
                                                  2. However, cannot continue to fine ∆ for
                                                       violations of the law if the company has been
                                                       shut down – these fines will be given general
                                                       unsecured status
                                                  3. Also, any fines on top of those ∆ has already
                                                       been fined for pre-petition will be treated as
                                                       unsecured claims (but only if fine is a
                                                       continuation of the pre-petition fine)
                                                           a. punitive in nature, and BK doesn’t like
                                                                punitive damages (only hurts creditors,
                                                                and doesn’t teach the individual ∆ a
10. Secured Claims
       a. General
               i. secured claims have priority over unsecured creditors, and are entitled to be paid
                  in full, up to the value of the collateral securing their claim §506(a)
        ii. lien – interest in ∆’s property that secures a debt or obligation
                 1. liens come into bankruptcy intact
b. 7 things that can happen to a property w/ a lien in bankruptcy
         i. the trustee can sell the property and payoff the secured creditor §363
        ii. the trustee can abandon the property under §554
                 1. fairly common occurrence if the ∆ has no equity in the property, or the
                     property is of little value/consequence to the estate
                 2. if the property is abandoned, it leaves the bankruptcy estate and is
                     returned to ∆.
                         a. Yet, any lien that existed on the property before BK stays with
                              the property through BK, and stay valid after the property is
                              abandoned by the trustee
                                   i. creditor is free to pursue all state law collection actions
                                            1. known a “lien pass through”
       iii. ∆ can claim an exemption in the property and remove it from the BK estate
            (almost the same thing as abandonment)
                 1. the property leaves the BK estates and is returned to ∆, but the lien on the
                     property is still valid
       iv. ∆ keeps the property, subject to all liens, and pays off the creditor through a plan
            of reorganization (ch. 11 or ch. 13)
        v. Creditor can ask for relief from automatic stay, and if granted, the property is
            removed from the BK estate §362(d)
                 1. creditor must show there is no equity in the property, and defeat ∆s
                     argument that the property is necessary for reorganization
                 2. creditor could also argue that it lacks adequate protection
       vi. ∆ could redeem the property under §722
                 1. payoff the debt owed in one lump sum (extremely rare)
                         a. creditor consent is not needed
                 2. only available in a chapter 7 case, and only available on personal, family,
                     or household property (NOT business property)
                 3. Also, redemption is only available for personal, tangible property
                         a. CANNOT be used on real property
      vii. ∆ could re-affirm the debt under §524(c)
                 1. ∆ would enter into a new agreement w/ the creditor post-petition
                 2. only available in a chapter 7 case, and only available with the creditor’s
c. Statement of Intentions in a Chapter 7 (prob 6.3, page 53 of supp)
         i. §521(a)(2)(A) – ∆ must file a statement of intentions within 30 days of the
            petition date
                 1. the petition must identify all the property that ∆ intends to surrender to
                     the creditor, and all the property ∆ plans on retaining
                         a. if retaining the property, ∆ must identify whether he plans on
                              redeeming the property, reaffirming the debt, or claiming the
                              property as exempt
                 2. §362(h)(1)(A) – if ∆ fails to file his statement of intentions within the 30
                     day window, or fails to properly identify his intentions toward all of the
                     secured assets, the automatic stay will automatically be terminated
                     regarding such property
        ii. §521(a)(2)(B) – within 30 days of the date set for the first 341 hearing, the debtor
            must execute all of his stated intentions
                1. §362(h)(1)(B) – if ∆ fails to execute his intentions within the 30 day
                    window, the automatic stay will automatically be terminated regarding
                    such property
                         a. Unless, the only reason execution did not occur was that the
                             creditor refused to consent to a reaffirmation
      iii. §521(a)(6) – within 45 days ∆ is to execute all of his intentions regarding all
           personal property serving as a collateral for a purchase money debt.
                1. If ∆ fails to execute such intentions, the automatic stay is lifted as to such
                    property, and the property is removed from the BK estate.
      iv. However, the trustee can negate the relief of automatic stay provisions found in
           §362(h) and §521(a)(6) by filing a motion showing that the property is valuable
           to the bankruptcy estate
d. Valuing Secured Claims
        i. valuation of a secured claim is important for 3 reasons
                1. trustee need to know how much equity is available for unsecured
                2. ∆ need to know how much he would need to pay to redeem the property
                    under §722
                3. Bankruptcy estate needs to know so that it can arrange to pay the secured
                    creditors in a reorganization plan
       ii. Ways to value a secured claim where ∆ is not planning on keeping the property
           inside the BK estate
                1. if the property is sold by the trustee, the price the trustee gets for the
                    property is the value of the property
                2. if the trustee abandons the property, then the court will estimate the value
                    of the property
                         a. it is important to remember that if the property is abandoned, the
                             lien on the property will still survive, even if the creditor
                             receives some distributions from the BK estate
                                   i. if the creditor does receive distributions from the BK
                                      estate it only lowers the overall debt owed to him, it does
                                      not discharge the debt (unless the debt is paid in full
                                      through the BK estate)
      iii. Ways to value a secured claim where ∆ is attempting to keep the property (see pg
           261 in text, and prob 6.4 on pg 69 of supp)
                1. 506(a)(1)
                         a. value will be set at the replacement value of the property
                                   i. replacement value = price a willing buyer would pay a
                                      seller for an item the same age and in the same condition
                                      as the collateral securing the claim
                2. 506(a)(2)
                         a. only applies to personal property of ∆’s in a chapter 7 or
                             chapter 13
                         b. value will be set at the replacement value of the property
                                   i. replacement value = the price a retail merchant would
                                      charge considering the age and condition of the
                                           1. cannot deduct the cost of the sale or marketing
                                                when determining the value (might be able to
                                                deduct the cost of warranties)
      iv. Bifurcating secured claims into secured and unsecured components §506(a)(1)
         1. a secured creditor has a secured claim to the extent of the value of the
              property, and
         2. an unsecured claim to the extent the value of the claim exceeds the value
              of the property
                   a. non recourse debts are not allowed unsecured status if their clam
                       exceeds the value of the collateral, because such a claim would
                       be unenforceable under applicable state law §502(b)(1)
  v. The trustee is allowed to charge secured claim holders for expenses the trustee
     incurs in preserving or disposing of the property
 vi. Lien Pass Through – §506(d)
         1. general rule – In Rem rights survive bankruptcy
                   a. a lien is not voided by a discharge if the failure on the part of the
                       creditor to file a proof of claim was the only reason the lien was
                       not allowed as a secured claim in the bankruptcy proceeding
         2. What about lien stripping?
                   a. lien stripping – occurs when the trustee proceeds in valuing the
                       secured portion of a creditors claim, bifurcates the secured
                       portion and unsecured portion from each other, but then
                       abandons the collateral
                             i. any amount that creditor receives in from distributions to
                                unsecured creditors thru the bankruptcy is subtracted
                                from the original full claim amount
                            ii. the full amount of the lien passes through the BK and
                                continues to be enforceable under state law collection
                                remedies (minus any amount the creditor received in a
                                bankruptcy distribution) §506(d)
                                     1. Thus, Creditor can foreclose on the property,
                                          realize an amount on the sale that was greater
                                          than his secured claim was valued at by the BK
                                          court (up to the total amount originally due the
                                          creditor) and be ok.
                                              a. However, the creditor does not have a
                                                   right to sue ∆ for any deficiency
                                                   between the amount the collateral sold
                                                   for, and the original amount that was
                                                   due to creditor (that deficiency is the
                                                   equivalent of u/s debt and is discharged
                                                   via the BK)
                   b. Ex. A has a $120k mortgage on C’s property. C files BK, where
                       the property is valued at $30K – creating a secured claim for A
                       of $30k and an unsecured claim for $90k. Trustee abandons the
                       property, but A receives $10k distribution from the BK estate for
                       his $90k unsecured claim. A forecloses on C’s property, and sell
                       it for $60k
                             i. A gets to keep the full $60k from the sale, but cannot sue
                                ∆ for the remaining $50k of the original debt
vii. Undersecured vs. Oversecured (see problem 6.2, page 245)
         1. undersecured creditors
                   a. the debt owed is greater than the value of the collateral securing
                       the debt
                                b. creditor will have both a secured claim and a general unsecured
                                          i. the secured claim = the full value of the collateral
                                              securing the debt
                                         ii. the unsecured claim = any deficiency left over
                                                   1. here the creditor will have to receive
                                                       distributions on a pro-rata basis, along with all
                                                       the other general unsecured creditors
                                c. if the original debt was a non recourse debt, then the creditor will
                                     only get paid for his secured claim portion, and will not be
                                     allowed a unsecured claim
                        2. oversecured creditor
                                a. the collateral securing the debt is worth more than the debt
                                          i. creditor will be allowed to have his entire claim be
                                              treated as secured, and will be paid in full
              viii. Special Rules regarding post-petition interest on pre-petition debt
                        1. secured creditors
                                a. secured creditors are only allowed post-petition interest if the
                                     collateral securing the debt has a greater value than the secured
                                     claim itself (over secured) §506(b)
                                          i. under these circumstances, interest is only allowed up to
                                              the value of the surplus value of the collateral
                        2. unsecured creditors
                                a. if there is not enough equity in the estate to pay all claims in full,
                                     no unsecured creditor is allowed post-petition interest §502(b)(2)
                                b. if there is more equity in the estate than is required to pay all
                                     unsecured claims in full, then unsecured creditors are allowed to
                                     recover post-petition interest at the state judgment interest rate
               ix. Rules on interest when ∆ proposes to keep the property in a plan of
                    reorganization (after the value of the claim is set)
                        1. creditors are allowed interest to the extent that the time value of their f/c
                            rights today are not diminished by allowing ∆ to make monthly payments
                                a. formula method – creditors are allowed to charge the prime
                                     interest rate (determined by the petition date) plus a small risk
                                     premium (usually 1% to 3%). Till pg 56 of supplement.
11. Stay Relief §362(d) problems 7.1-7.4 on page 284, problem 7.5 pg 299
       a. a creditor who is seeking stay relief in order to proceed with a an act against the property
           in state court
       b. Two main grounds that a creditor can request stay relief
                 i. “For Cause” – §362(d)(1)
                        1. lack of adequate protection is main reason
                                a. this occurs where there is a risk that the value of the property
                                     will be less over time than what the creditor could get if it
                                     liquidated the property right now
                                          i. if this is the case, the creditor must be given some form
                                              of adequate protection
                                                   1. creditor can be given cash payments from trustee
                                                   2. creditor can be given additional secured liens in
                                                       other property/collateral that the ∆ holds §362(2)
                        3. any other agreement that will give the creditor
                            the equivalent of the current lien (catch-all
                                 a. exception
                                           i. cannot agree to give the creditor
                                              administrative expense status
      b. if there is lack of adequate protection, the court will grant relief
           even if ∆ shows that the property is necessary to a successful
           reorganization, and there is a reasonable chance of a successful
      c. How often a creditor can claim inadequate protection
                i. no limit, the creditor can repeatedly raise an inadequate
                   protection claim
                        1. most of the time this will result in nothing
                        2. but could result in stay lift, or additional
                            protections being granted
      d. if the adequate protection turned out to be inadequate
                i. the court will grant whatever deficiency the creditor
                   incurred a super administrative expense status under
                        1. creditor will be paid before any other
                            administrative expense claim
2. Equity Cushions and Adequate Protection
      a. Equity cushions can be a form of adequate protection, as long as
           the value of the collateral is reasonably stable
      b. Equity cushions are not required to be maintained in order to
           provide adequate protection, as long as the decrease in the
           cushion is due to interest payments being given to the creditor
                i. the increase in the secured claim via interest payments is
                   capped at the total value of the collateral
               ii. the only thing that adequate protection is meant to
                   protect is the value of the base lien, not the creditors
                   right to unlimited interest payments
                        1. however, an over-secured creditor is entitled to
                            adequate protection regarding interest payments
                            that it expected to receive at the beginning of a
                            case, but was unable to collect due to the
                            unexpected depreciation in value of the
      c. Example
                i. ∆ owes $1,000,000, and collateral is valued at
                   $1,100,000, but is depreciating at the rate of
                        1. here, creditor expects $100,000 worth of interest
                        2. so, creditor will be given $10,000/month for ten
                            months to secure the interest payments, then will
                            receive $10,000/month to protect against
                                 a. if the creditor was under-secured, he
                                      would still be allowed the
                                                       $10,000/month payment to combat the
                                                       depreciation of the collateral
       ii. creditor is entitled to relief – §362(d)
                1. Two Part Test
                        a. ∆ has no equity in the property (creditor must prove)
                        b. the property is not necessary to an effective reorganization (∆
                             must prove that the property in necessary)
                                   i. ∆ needs the property in order to reorganize
                                  ii. there is a reasonable probability of a successful
                                       reorganization occurring in a reasonable time period
c. Ownership of Post-Petition Collateral
        i. generally, any proceeds, product, or offspring from a collateralized property in
           the BK estate becomes the property of the BK estate §552(a)
                1. Unless § 551(b)(1) or (b)(2) apply
                        a. §551(b)(1)
                                   i. post-petition proceeds, product, offspring, and profits of
                                       the collateral are given to the creditor if the security
                                       agreement expressly provides that such proceeds should
                                       be turned over to the creditor AND the security
                                       agreement and interest in the proceeds are perfected
                                       under non-bankruptcy law
                        b. §552(b)(2)
                                   i. a lien holder on commercial real property is given the
                                       right to rents received from the property, if the mortgage
                                       agreement provided for such payments
                                           1. but this is true only to the extent that the trustee
                                                did not expend funds to generate the rent (the
                                                trustee is allowed to deduct any expenses
                                                incurred from the creditors distribution)
d. Automatic Stay and Abusive Filling
        i. Main tool against abusive filing – §109(g)
                1. any debtor that had a bankruptcy case dismissed within the preceding
                    180 days for willful failure of the debtor to abide by orders of the court is
                    ineligible to file BK
                        a. a new BK filed in violation of §109(g) is not eligible for the
                             automatic stay provision §362(b)(21)
                2. however, the ∆ can get around this provision by voluntarily dismissing a
                    chapter 13 case before the case is dismissed
                        a. but §109(g) also imposes a 180 day filing ban if ∆ voluntarily
                             dismisses the case after a motion for relief is filed
       ii. §362(b)(22) → filing a bankruptcy does not stay the residential-tenant eviction of
           ∆, if the landlord obtained a “judgment for possession of the property against ∆”
           (eviction judgment) before the BK filing
                1. Really was an act to allow creditor evict without having to get an MFR
                    from the court
                        a. however, most creditors still go to court and ask court to verify
                             that they are eligible for this provision
      iii. §362(c)(3) → if an individual ∆’s chapter 7, 11, or 13 case is commenced with in
           one year of the dismissal of an earlier case, the automatic stay will in the current
                    case will expire 30 days after filing unless ∆ makes an affirmative showing that
                    the current case was filed in good faith
                         1. does not apply if the previous case was a chapter 7 dismissed because
                             they failed the means test of §707(b)
               iv. §521(i) → individual ∆’s must file all required financial schedules, statements,
                    and certificates w/in 45 days of the petition date, or the case will automatically be
                    dismissed (anti- “face sheet” filing provision”)
12. Executory Contracts – §365
       a. Executory K → a K under which the obligation of both parties as so far unperformed that
           the failure to complete performance would constitute a material breach – an asset coupled
           with a liability
                 i. i.e. a K to which neither party has finished performing its material obligations
                         1. if ∆ has already performed substantially, ∆ has an asset (right to
                         2. if 3d party has already performed, all that exists is a liability
       b. Trustee generally has three options in regards to executory K’s (first 3 require court
                 i. assume
                         1. must assume with all the burdens in the original K intact
                         2. the 3d party is given administrative expense status for its claim
                ii. assume and assign
               iii. reject
                         1. if the agreement is rejected, then all claims the 3d party has are treated as
                             general unsecured claims
               iv. do nothing
       c. How long trustee has to make a decision
                 i. if case is a Ch. 7, then trustee must make his decision within 60 days of the filing
                    date, or the K is automatically rejected
                ii. in Ch. 11, the trustee has until the confirmation of a plan of reorganization
               iii. 3d party can petition court to force the trustee to make a decision early
               iv. If the executory K id ∆ leasing commercial R/E from a landlord, trustee only has
                    120 days to assume or reject §365(d)(4)
                         1. after 120 days passes, the K is resumed to be rejected
       d. Assumption – §365(b)
                 i. generally, if the trustee finds a K to be beneficial after weighing the costs and
                    benefits to the estate, the trustee should assume the K.
                         1. the BK estate no becomes a party to the executory K
                                  a. the BK estate becomes entitled to the benefit of 3d party’s
                                      performance, and
                                  b. promises to perform all of ∆’s responsibilities
                         2. BK estate can only assume the K as it existed when it came into the BK
                                  a. no line-item veto
                ii. Once the K is assumed, the BK estate’s future obligations to the non-∆ become
                    entitled to administrative expense status
                         1. if BK estate later breaches the K, the non-∆ is still entitled to full
                             administrative expense status
                                  a. Klein → trustee assumed a store front lease, then breached the K
                                           i. landlord was entitled to full K rent, via administrative
                                               expense status, for the time that the BK estate used the
                                   property, and to full K rent for the remaining months of
                                   the lease, even though ∆ was not using the property (and
                                   not getting benefit)
                                        1. this provision is not capped to one year under
                                        2. the non-∆ might be required to mitigate his
                                            damages, and re-lease the property
                                                a. if the property is re-let, that decrease the
                                                    amount creditor can recover from BK
       iii. Requirements to assume a K
               1. if property was in default before filing of BK
                       a. cure the default
                       b. compensate the non-∆ for any monetary loss incurred from the
                       c. provide adequate assurance that future payment will be made

               2. if party was not in default
                        a. just has to get ct. permission (no requirement to provide
                            adequate assurance of future performance)
      iv. REMEMBER – under §365(c)(1), that if a K is not assignable b/c local law
           would allow a 3d party to not accept or render performance from anyone other
           than ∆
               1. a trustee or DIP cannot ASSUME an executory K if 3d party objects
                   (applies both to assumption and to assignment) (Perlman pg 371, 379)
       v. In a chapter 7, the decision to assume a K is really a decision to assign
e. Assume & Assign – §365(f)
        i. Assignment allows the estate to capture the excess value of a K for the BK estate,
           as well as escape liability
               1. Under §365(k), the assignment relieves the trustee and the estate from
                   any liability for breach of the K occurring after assignment
       ii. §365(f)(2) → In order to assign a K, the trustee must:
               1. assume the K – exactly as it came into the estate
               2. provide adequate assurance of future performance by the assignee
      iii. §365(f) –Anti-Assignment Provisions
               1. Generally the court will strike down anti-assignment clauses
                        a. Sometimes, landlords will try to cloak anti-assignment clauses in
                            “use-clause” provisions
                                 i. “use-clause” → stating that the property can only be
                                     used for a specific use. These provisions will be
                                          1. UNLESS
                                                  a. landlord to show actual and substantial
                                                      detriment would be incurred by him if
                                                      the deviation was permitted; OR
                                                  b. Shopping Center under §365(b)(3)
      iv. Special Rule regarding Shopping Centers
               1. First, strict performance of the lease will be required §365(b)(3)
                        a. even use-clauses will be strictly enforced
               2. Second, adequate assurance takes on a whole new meaning, it now
                           a. the source of the rent
                           b. that the financial condition and operating performance of the
                               assignee be similar to that of the debtor when the debtor was first
                               granted the lease
                           c. that the percentage of rent will not decrease substantially
                           d. that assignee will be held to all provisions of the previous lease,
                               AND the assignee’s presence will not violate any other leases in
                               the shopping center (exclusivity agreements)
                           e. assignment will not disrupt any tenet mix or balance in the
                               shopping center
         v. Exceptions to Assignments – §365(c)
                  1. §365(c)(1) – Personal Services (non-delegable duties)
                           a. if applicable non-bankruptcy law would excuse the 3d party
                               from accepting or rendering performance to an entity which is
                               not the debtor, BK will not force 3d party to perform/accept
                               performance (Consent from 3d party is absent)
                                            1. Ex. Can’t assignment Michael Jordan’s duty to
                                                 play basketball for the Chicago Bulls to Donald
                                    ii. This provision also bars assumption by the trustee or
                                        DIP, if the 3d party doesn’t accept
                                   iii. Also applies to patent cases, and contracts with the US
                                            1. patent cases – can’t force patent holder to allow
                                                 another company access to its patents
                                            2. can’t force US government to contract with
                                                 anyone other than who they chose
                  2. §365(c)(2) – Financial Obligation Contracts
                           a. Can’t force a party to make a loan, extend credit, or extend debt
                               financing to a debtor or assignee after BK is filed
f.   Reject – §365(g)
          i. rejection is treated as a breach, but that breach is dated to the moment before ∆
             filed BK, so claim is treated as a general unsecured debt §502(g)
                  1. rejection = pre-petition breach
         ii. 3d party is no longer obligated to perform its duties under the K, and can file a
             claim for any damages it suffered due to the breach (general u/s)
        iii. if the K is an unexpired lease, the landlord has the equitable right to retake the
        iv. if the K has a non-compete agreement which would give rise to an injunction if
             the K was breached, and the trustee rejects the K, the injunction will go into
                  1. rejection = pre-petition breach, pre-petition breach = injunction to
                      enforce non-compete agreement (after 3d party gets MFR and goes to
                      state court)
                           a. there is no monetary substitute for the non-compete agreement
                               performance, so it is not discharged via BK
         v. Special Cases
                  1. Three types of special cases
                           a. ∆ is landlord, 3d party in tenant §365(h)
                           b. ∆ is a seller of R/E, and 3d party is purchaser §365(i), and (j)
                        c. ∆ is a licensor of intellectual property, and 3d party leases –

               2. in these cases, the 3d party has two choices
                       a. take the rejection as breach, get out of the K, and file a claim for
                           u/s damages
                       b. force ∆ to honor K
                                         1. continue to stay in property
                                         2. force ∆ to sell the property
                                         3. allow 3d party to continue to use IP
                                ii. However, cannot force ∆ to perform his obligations
                                    under the K
                                         1. ∆ doesn’t have to provide heating/air
                                              conditioning, electricity, elevator service
                               iii. Moreover, 3d party must still continue to perform his
                                    obligations under the K (pay rent, royalties, purchase
                                    price, etc.)
                               iv. 3d party waives all collection rights as well
                                         1. 3d party is only allowed to offset whatever
                                              portion of the rent = his damages
g. Do Nothing – Limbo Period
        i. time period in-between filling the BK, and the trustee finally deciding to reject or
           assume the K
       ii. During this time period, the K is unenforceable against the BK estate, but the
           non-debtor 3d party may still have obligations that he must perform
               1. if the K is eventually assumed, this problem is not important, because all
                   money due to the non-∆ will be awarded an administrative claim status
               2. If the K is eventually rejected, things become more difficult
                       a. to the extent the 3d party is forced to perform during the limbo
                           period, the non-∆ is entitled to compensation
                                 i. his compensation will be provided as an administrative
                                    expense, but only for the value of the benefit the estate
                                    actually received
      iii. Special Rule – Commercial R/E and Commercial Personal Property
               1. Commercial R/E Leases – §365(d)(3) (see problem 8.4, page 342)
                       a. the trustee must perform all obligations (include paying rent,
                           taxes, etc.) that are required under the K, until the K is assumed
                           or rejected
                                 i. this obligation starts at the time the petition is filed
                                ii. the full claim is granted administrative expense status,
                                    not just the portion the portion that benefits the estate
                                         1. trustee must pay the full contractual rate of all
                                              the obligations regarding the lease of the
                                              commercial R/E
                               iii. true whether ∆ uses the property or not

                2. Commercial Personal Property Leases – §365(d)(5) (8.5 on 343)
                               a. Goes into affect 60 days after the filing of the petition, if the
                                   trustee has not assumed or rejected the K, the trustee must pay
                                   all of the obligations under the K at the full contractual rate
                                         i. this is true whether ∆ uses the property or not
                                        ii. for the time period between filing and 60 days after
                                             filing, 3d party only gets administrative expense status
                                             for the portion which actually benefited the BK estate
                               b. Generally applies to equipment leases
13. Avoiding Powers of the Trustee
       a. General
               i. Generally, there is a two step process in the avoidance powers of the trustee
                      1. First, the trustee avoids the transfer (via fraud or preference, etc)
                      2. Second, the trustee uses §550 to recover either the transferred property,
                          or its value, for the estate
                               a. REMEMBER, trustee will often just sue to get cash value of the
                                   interest transferred
                                         i. thus if ∆ transferred a list of subscribers to X worth
                                             $150,000, the trustee will sue X for $150,000 – Not for
                                             the list back
              ii. Who can be liable under §550
                      1. the entity to whom the initial transfer was made, or the entity for whose
                          benefit the transfer was made
                               a. initial transferee = First party who has dominion and control over
                                   the property
       b. Fraudulent Transfers – §548
               i. Generally
                      1. the fraud provisions act as a safety net for creditors
              ii. Actual Fraud – §548(a)(1)(A) and UFTA §4(a)(1)
                      1. Under 548, there is a reach back period of 2 years, so trustee can analyze
                          all transfers/obligations incurred for the two years prior to ∆ filing BK
                               a. Remember, the trustee can invoke the UFTA 4 year reach back
                                   provision under §544(b)
                      2. Trustee must demonstrate
                               a. actual intent to hinder, delay, or defraud creditors
                                         i. a transfer is still fraudulent if ∆ did not intend to prevent
                                             his creditors from being paid, but intended only to delay
                                             the moment of payment for a while
                      3. Actual Fraud can be hard to prove, because it requires proving intent,
                          which is subjective
                               a. Use the badges of fraud to see if intent existed
                                         i. transfer made in secret
                                        ii. transfer made to a family member/insider (Dean pg 404)
                                       iii. ∆ retained possession and use of the property after the
                                       iv. there was no consideration for the transfer, or less than
                                             full consideration
                                        v. ∆ was insolvent at the time of transfer
                                       vi. transfer was of substantially all of ∆’s assets
                      4. Defenses to Actual Fraud for 3d parties (problem 9.1 page 397)
                               a. Good Faith Transferee for Value
                                         i. initial transferee – §548(c)
                                   1. the initial transferee took the transfer in good
                                       faith, and gave reasonable value for the transfer
                                       – Must have GF and have paid value
                                            a. GF = could not have known about ∆’s
                                                financial hardships
                                   2. in this case, the trustee could avoid the transfer,
                                       recover the property, and the good faith
                                       purchaser would be allowed a secured claim on
                                       the collateral for the amount that he paid debtor
                          ii. immediate/mediate transferee of initial transferee –
                                   1. this clause protects a subsequent transferee, who
                                       had no involvement with the initial transfer
                                   2. If subsequent transferee takes transfer in Good
                                       Faith, and pays reasonable value to original
                                       transferee, subsequent transferee is protected,
                                       and the transfer is not voidable or recoverable
                                            a. Had to give value
                                            b. Had to have had Good Faith = not
                                                known anything about original transfer
                                   3. in this scenario, the trustee will likely try to
                                       recover the value of the transfer from the
                                       original transferee
iii. Constructive Fraud – §548(a)(1)(B)
        1. Do not have to show any fraudulent intent on the part of the debtor
                 a. just prove objective elements
        2. 2 Elements of constructive Fraud (NEED BOTH)
                 a. ∆ received less than reasonably equivalent value in exchange for
                     the property
                           i. reasonably equivalent is not defined, just a rough test
                 b. When ∆ mad the transfer, it w was unlikely that ∆ could satisfy
                     all of his creditors’ claims
                           i. ∆ was actually insolvent at the time transfer was made
                                   1. liabilities exceeded non-exempt assets)
                          ii. ∆ was engaging in a business with unreasonably small
                              capital at the time of transfer
                                   1. subjective and industry dependant
                         iii. ∆ believed at the time of transfer that he would incur
                              debts beyond his capacity to repay
        3. Most of the litigation that occurs in this area revolves around the
            “reasonably equivalent value”
                 a. some general rules
                           i. the price received in a F/C sale conducted within the
                              state law qualifies for “reasonably equivalent value”
                              BFP pg 408
                          ii. Gambling losses will be treated as “reasonably
                              equivalent value” Allard pg 415
                                   1. at the time the bet is made ∆ has a real
                                       possibility of winning money
                                   2. entertainment value also counts for something in
                                       the analysis
                                iii. Special Rule – Charitable Contributions §548(a)(2)
                                          1. charitable contributions will not be voidable:
                                                   a. if they don’t exceed 15% of ∆’s annual
                                                       income; OR
                                                   b. does not exceed ∆’s historical giving
                                          2. HOWEVER, the above exceptions may still be
                                              voidable as an Actual Fraudulent transfer
c. Trustee as Successor to Actual Creditors/Strong Arm Clause – §544
       i. Under §544, the trustee is using state law to fraudulent void transfers and bring
          transferred property back into the estate
              1. Main advantage to using this provision is that the reach back period is 4
                   years from the date of filing (Not 2 years as is the case in §548)
              2. With both §544 and §548 the trustee must bring his challenge to the
                   transfer within two years after ∆ filed his petition (§546)
      ii. There are two options that the trustee can use under §544
              1. §544(b) → Trustee can act as a successor to an actual creditor
                       a. here, the trustee steps into the shoes of an actual creditor
                                  i. There must be an actual unsecured creditor who is still
                                     existing at the petition date, who has standing to avoid
                                     the transfer
                                          1. standing = claim must have existed on the date
                                              of the transfer
                       b. the entire transfer will be avoided if the above is satisfied, no
                            matter how small the
                                  i. Also, all creditors share in the recovery, not just the
                                     creditor whose standing the trustee assumed
              2. §544(a) → Trustee can use the Strong Arm Clause
                       a. The purpose of this clause is to allow the trustee to avoid secret
                       b. here trustee steps into the shoes of a hypothetical creditor, and
                            commences a priority battle with real priority creditors
                                  i. the critical time frame is date the BK was filed
                       c. 2 situations covered
                                  i. enables the trustee to avoid unperfected security
                                     interests in personal property (9.6 pg 431)
                                          1. if any possible hypothetical creditor would have
                                              a greater priority than the transferee, the transfer
                                              is avoided
                                                   a. IF an unperfected security interest
                                                       would lose to a lien creditor under the
                                                       UCC, the transfer is recaptured
                                                             i. Thus, if the security interest is
                                                                unperfected at the time of filing
                                                                the petition, then the trustee as
                                                                hypothetical lien creditor will
                                                            ii. however, the converse is also
                                                                true, if the interest was
                                                                perfected before filing date,
                                                                trustee cannot prevail under
                                                                544(a), and must use a different

                                  ii. trustee can set aside unrecorded real property
                                      conveyances (9.7, 434)
                                           1. If under applicable state law, the a Bona Fide
                                               Purchaser would take title over an unrecorded
                                               interest in real property, the unrecorded interest
                                               will be wiped out
                                                   a. Only care if the interest was recorded
                                                        before the BK petition was filed
                                                              i. this depends heavily on state
                                                                 law, and their recording statutes
                                                             ii. Also depends heavily on what
                                                                 state law considers notice –
                                                                 some states may say that active
                                                                 possession of the property w/o
                                                                 recording will still trump any
                                                                 BFP b/c possession gives notice
               3. Special Protection for Purchase Money Security Interests
                        a. if a creditor lends money to ∆ specifically to buy the collateral
                             securing the loan, the UCC gives that interest priority over a
                             judgment lien
                                   i. Creditor must still perfect its security though
                                           1. Creditor has 20 days from day ∆ gains
                                               possession of the collateral to file its security
                                                   a. This can be done even if ∆ files BK
                                                        before the 20 days are up – the
                                                        automatic stay does not prevent the
                                                        creditor from perfecting its security
      iii. Constructive Trusts
               1. these are legal fictions that a court creates, stating that debtor was
                    holding the property for the creditor, and thus never had legal title
                        a. Courts are divided on whether they buy this argument
                                   i. Most just say the trust was fictitious, and is nothing
                                      more than a claim that the creditor is exercising with the
                                      hopes that court will grant it special priority
d. Preferences – §547
        i. Almost entirely based on notions of creditor equality, this provision allows the
           trustee to set aside transfers that, while perfectly legal when made, preferred one
           creditor over the others
               1. the trustee has the power to avoid any transfer of any interest in property
                    of any kind
       ii. §547(b) Trustees Prima Facie Case (need all 6 prongs)
               1. transfer of ∆’s property
               2. to or for the benefit of a creditor
               3. the transfer must be on account of an antecedent debt
                        a. i.e. the debt must have been owed prior to the payment/transfer
                           i. pre-payments are not considered preferential, they are
                              securing a future good or service
                          ii. gifts are not preferential payments (they maybe
                              fraudulent conveyances though)
         4. the transfer must have been made within the 90 days prior to ∆’s filing
                 a. however, if the preferential payment was executed to, or for the
                     benefit of an insider, the reach back period extends to one year
                     prior to filing of petition
         5. the transfer was made while ∆ was insolvent (liabilities greater than
                 a. when using the 90 day reach back prong, it is always assumed
                     that ∆ was insolvent, so the creditor must prove ∆ was solvent
                     when the payment was made if they hope to win
         6. improvement in position test
                 a. if the creditor received more than they would have received had
                     the payment never been given, and instead the creditor had to
                     take its pro-rata share of a Ch. 7 liquidation
                           i. Under this requirement, payments to fully secured
                              creditors will not be considered preferential
                                   1. by paying the secured creditor, debtor is simply
                                       decreasing the secured creditors claim on ∆’s
                                       property, there is no decrease in the available
                                       proceeds for the estate, so no preferential
                                       treatment exists (besides, secured creditor would
                                       get paid in full any way
iii. GENERAL RULE – any payment to an unsecured, or under-secured creditor are
     presumed to be preferential (prob. 9.9 on page 449 is helpful)
iv. Remember, the second prong of the analysis is powerful
         1. Example: P guarantees a $5,000 loan for ∆ provided by C. One month
            before ∆ files bankruptcy, ∆ pays C the full $5,000 back.
                 a. This is a preferential transfer, and the trustee can recover from C;
                           i. the trustee can recover from P, because the transfer was
                              made for the benefit of P (P is no longer liable to C for
                              the original loan). Thus, the trustee could sue P for the
                              $5,000, even though P was never given the money
                                   1. P would have to file a claim in ∆’s BK
 v. Earmarking Doctrine
         1. Where a third party loans debtor money on the condition that it be used
            to pay a specific creditor/debt
                 a. This transaction is not considered to be preferential
                           i. No money is leaving the estate, and the obligations of
                              the debtor are not increasing; one creditor is simply
                              replacing an earlier creditor. The distribution scheme for
                              the creditors in the bankruptcy estate is not affected
         2. Requirements
                 a. both creditors must be unsecured
                 b. one of the creditors must be paid with the borrowed money
vi. Defenses to Preferential Transfer (Top three)
       1. §547(c)(4) → subsequent advance of new value (pg 469)
                a. the trustee cannot avoid a transfer to, or for the benefit of, a
                    creditor, to the extent that after the transfer, the creditor gave
                    new value to, or for the benefit of, the debtor
                         i. This new value added cannot be secured debt, and it
                             cannot be paid for afterwards
                b. Example: ∆ owes C $10,000 on May 1. On May 14, ∆ sends C
                    a payment of $8,500. On May 20, C ships new goods to ∆ worth
                    $4,000. On May 30 ∆ files bankruptcy
                         i. under §547(b), the trustee would be able to recover the
                             full $8,500 payment
                                  1. but because of §547(c)(4), the trustee can only
                                      recover $4,500, because C gave ∆ new value
                                      subsequent to the $8,500 payment
                                          a. $8,500 – $4,000 (new value added) =
       2. §547(c)(1) → contemporaneous exchange for value
                a. 2 requirements
                         i. both ∆ and the creditor intended for the transaction to be
                             a contemporaneous exchange for new value given to ∆;
                        ii. there was in fact a substantially contemporaneous
                             exchange for new value
                b. Example: ∆ purchases a car from C. ∆ gives C $5,000 in cash,
                    and C hands ∆ the keys and the title to the car.
                         i. not preferential b/c the exchange was contemporaneous,
                             and involved new value added to ∆’s estate
                c. Special Rule regarding checks
                         i. the date of transfer (exchange) when checks are involved
                             → when the bank honors the check
                                  1. NOT when the debtor hands the check to
                                      creditor, and not when creditor deposits the
                                          a. However, most courts will hold that if
                                               the creditor waited a couple of weeks to
                                               deposit the check, without ∆’s
                                               knowledge, the transaction will still
                                                    i. but if it was common practice
                                                        for the creditor to hold ∆’s
                                                        checks for three weeks before
                                                        depositing them, then the parties
                                                        will not have meant for the
                                                        exchange to be
                                                        contemporaneous, and thus the
                                                        transfer will be preferential
                d. Example 2 → On June 5 ∆ buys 10 crates of bubble gum from J.
                    ∆ gives J a check for $1,000. J tells ∆ that he deposits all checks
                    on the 1st of every month. J deposits the check on July 1, and it
                    clears the bank on July 6.
                                        i. this will be a preferential transfer
                                                1. the parties did not intend for the transfer to be
                        3. §547(c)(2) → ordinary course of business
                              a. If the payment is within the ordinary course of business, then the
                                  trustee will not be able to recapture the payment under
                                  preference liability
                                        i. ordinary course of business can be judged wither form
                                                1. the stand point of the industry norm
                                                2. from the norm between the ∆ and creditor
                              b. 3 requirements
                                        i. payment of a debt
                                       ii. debt must have been accrued in the normal course of
                                           business for both ∆ and creditor
                                      iii. payment should be through the ordinary course of
                                           business for each party
                                                1. either
                                                        a. the structure of the payment was normal
                                                             in the industry (objective)
                                                        b. the structure of the payment was within
                                                             the normal bounds of payments between
                                                             the particular ∆ and creditor
14. Discharge
        a. General
                 i. the rational for providing a discharge
                        1. perceived public good → incentive for ∆ to continue to work and be
                             productive in society
                ii. a ∆ can never waive his right to a discharge, through contractual agreements or
                    other wise -- §524
               iii. ∆’s never have to surrender their human capital (future wages) to creditors in
                    order to get a discharge
        b. The automatic stay in BK is automatically terminated when a discharge is either granted
           or denied
                 i. However, a general injunction against suing the debtor for a discharged debt is
                    put into force
                        1. No court is allowed to hear an action to collect a discharged debt
                                 a. if a court happens to pass judgment anyways, the BK court will
                                      strike down that courts ruling
                        2. if a creditor tries to collect a discharged debt, he will face sanctions
        c. Generally, you cannot be discriminated against for filing BK – §525
                 i. ∆ cannot be discriminated against by
                        1. governmental units (state refuses to grant driver license until debt paid)
                        2. employer (can’t fire ∆ b/c he filed BK)
                ii. However, ∆ must be able to prove that the only reason he was discriminated
                    against was the BK filing (hard to do)
        d. Achieving a Discharge
                 i. a ∆ will be granted a discharge unless the trustee or creditor file a timely
        e. 2 Exceptions to Discharge
 i. §727(a) → a complete denial of discharge of all of ∆’s debts (almost always due
    to debtor’s misconduct)
        1. 727(a)(1) – Corporations cannot receive a discharge of debt, b/c they are
            not individuals
                 a. Corporations cease to exist after ch 7
        2. 727(a)(2) – ∆ cannot hinder, delay, or defraud a creditor by transferring,
            destroying, or concealing property (i.e not listed on schedules)
                 a. ∆ must list all property he owns, even if it is valueless or illegal
        3. 727(a)(3) – ∆ failed to keep adequate records from which the debtor’s
            financial condition or business transactions might be ascertained
                 a. UNLESS
                           i. such act was justified under the circumstances
                                   1. like the husband always took care of such
                                        matters, and ∆ had no warning anything was
                                            a. sophistication of ∆ is very important
        4. 727(a)(4) – ∆ submits a false schedule or renders a false oath
                 a. if knowingly assert a false condition on your BK filings (like
                     failing to list property you have)
                           i. this is true even if the property you own is illegal to
                              posses → still must be listed on schedules (marijuana is
                              a good example)
        5. 727(a)(8) – previous BK discharge
                 a. if a previous chapter 7 case was filed within 8 years of ∆’s
                     current chapter 7
                           i. measured from petition date to petition date
                 b. if previous case was a chapter 11 or 13, and the current case is a
                     chapter 7
                           i. must have 6 years pass between petition dates, and then
                              only if the chapter 13 plan was a 70% or greater pay
                              back plan
                 c. if previous case was a chapter 7, and current case is a chapter 13
                           i. 4 years must pass between petition dates
                 d. if previous case was a chapter 13 and current case is a chapter 13
                           i. waiting period is two years
ii. §523(a) → a list of specific debts that will not be discharged
        1. In order for these debts to not be discharged, creditor must timely object
            to their discharge
                 a. once that is done, and court declares the debt not dischargeable,
                     the creditor can proceed to state court and pursue state court
                     collection remedies
        2. Top 3 debts not allowed a discharge
                 a. fraud, embezzlement, and intentional torts
        3. Fraud
                 a. elements of a fraud
                           i. ∆ made a false representation of fact
                          ii. ∆ knew the representation to be false when made
      iii. ∆ made representation with the intent and purpose of
            deceiving the creditor
       iv. creditor justifiably relied on the representation
        v. representation was the proximate cause of creditors
b. Requires creditor/trustee to prove actual fraudulent intent on the
   part of ∆ – which is pretty hard to do
         i. 523(a)(2)(c) → rebuttable presumption of non-
            dischargability on all credit card transactions which fall
            under the following:
                1. cash advances made with in 70 days of filing (if
                     the aggregate amount was more than $750)
                2. luxury goods items purchased with in 90 days of
                     filing (if aggregate amount of over $500)
        ii. ∆ can rebut the presumption by showing that she didn’t
            have the intent necessary for fraud (i.e. that she intended
            to pay the amount back when it was charged)