5 THINGS EVERY LAWYER SHOULD KNOW ABOUT BANKRUPTCY Laura A. Deeter, Esq.

5 THINGS EVERY LAWYER SHOULD KNOW ABOUT

BANKRUPTCYLaura A. Deeter, Esq.

5 Things Every Lawyer Should

Know About Bankruptcy

Five Things1. What do the different BK chapters

mean?2. Do I need to file a Proof of Claim?3. What does the BK Trustee do?4. What is the Automatic Stay?5. What is a 341 Meeting – and should

I go?



1. BK ChaptersThree main types:

Chapter 7Chapter 13Chapter 11

(“Chapter” => particular chapter under Title 11 of the U.S. Code)



Chapter 7Governing rules are set forth at

11 U.S.C. §§ 701-784.• Liquidation• Individuals or Businesses• Liquidate all non-exempt assets




11 U.S.C. §§ 1301-1330.• Reorganization• Individuals only (income-based)• Reorganize via structured payment

Plan




11 U.S.C. §§ 1101-1174.• Reorganization (or Liquidation)• Individuals or Businesses• Reorganize via a Confirmed Plan;

stringent requirements



2. File Proof of Claim?• POC can be filed in the BK case by a

Creditor of the Debtor• Timing important; deadlines

provided in Notice• POC Forms online; can attach

supporting documentation



2. File Proof of Claim?Chapter 7:

“No Asset” vs. “Non-exempt Assets”

No Asset Case:• No Proof of Claims filed• No recovery against Debtor



2. File Proof of Claim?Chapter 7: Non-exempt Assets Case: • File POC• Recovery only against assets Debtor

did not claim under an exemption



Ch. 7 Exemptions• Some equity in

house• Household

goods, clothing• Some unpaid

earned wages• Pension

• Autos, jewelry, tools of trade (to max)

• Public benefits• PI Damages• “Wildcard”



Ch. 7 Exemptions• How to elect Exemptions?• Federal vs. State Exemptions• States have residency requirements• Some states opt out of the Federal

Exemptions



3. Bankruptcy Trustee• Administers the BK estate on behalf

of creditors• Appointed by Court• Preserve and/or liquidate assets of

estate• Ensure Debtor complies with BK law



3. Bankruptcy TrusteeChapter 7, Chapter 13: • appointed TrusteeChapter 11:• Debtor-in-Possession acts as Trustee,

unless a Trustee is appointed



3. Bankruptcy TrusteeAuthority of Trustee:

• Account for property• Object to claims• Employ professionals• Use, sell, lease estate property• Obtain credit• Assume/reject contracts/leases• Move to dismiss, object to discharge



3. Bankruptcy TrusteeTrustee’s “Avoidance Powers”:

§ 547: Preferences • Can avoid certain payments to creditors

made within certain time before filing• 90 days vs. One year for Insiders• Exceptions: New Value

Ordinary Course of Business




§ 548: Fraudulent Transfers• Can avoid transfers made with intent

to hinder, delay, or defraud, or for less than reasonably equivalent value

• 2 years before filing• Self-settled trust: 10 years




§ 549: Post-petition Transfers• Can avoid these transfers if not

authorized by Court or by Title 11• Cut off: 2 years after transfer or upon

closing/dismissal, whichever is earlier



4. Automatic Stay?11 U.S.C. § 362

• Effective as soon as petition filed• Prohibits debt collection efforts

against Debtor • Attempts to collect are sanctionable



4. Automatic Stay?Exceptions:• 11 U.S.C. § 362(b) has 28 subsections

of exceptions.• Does not stop criminal proceedings• Does not stop proceedings for child

support, alimony, custody, domestic violence



4. Automatic Stay?Exceptions:• Taxing authorities can maintain some

actions, such as audits, notice of deficiency

• Stay affected if prior BK case(s) dismissed within certain time(s)



4. Automatic Stay?Relief from Stay / Lifting the Stay: • Creditor can ask court to “lift the

stay,” so that it can proceed with collection efforts against the Debtor

• By Motion and Hearing• 11 U.S.C. § 362(d)



4. Automatic Stay?Relief from Stay / Lifting the Stay: Secured Creditor: • Debtor not making payments• Lack of adequate protection• No equity & not necessary to

reorganization



4. Automatic Stay?Relief from Stay / Lifting the Stay: Unsecured Creditor: • Debt non-dischargeable• Eviction, if post-petition rent not paid



5. 341 Meeting?11 U.S.C. § 341

Chapter 7• Mandatory meeting of Creditors• Trustee questions the Debtor to

ensure compliance with bankruptcy requirements

• Creditors can question the Debtor



5. 341 Meeting?• Attend if you are a Creditor with

questions about the assets, the petition, whether filed in good faith, whether Debtor intends to repay your debt

• Typical case:



Attorneys’ FeesTypical Payment:• Chapter 7: Pay up front• Chapter 13: Pay through Plan, over

several years• Chapter 11: Retainer up front; Fee

Application to Court; paid as Administrative (high priority) claim

Thank YouLaura Deeter – [email protected] -- (702) 878-1115

mailto:[email protected]

5 THINGS EVERY LAWYER SHOULD KNOW ABOUT BANKRUPTCY Laura A. Deeter, Esq.

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