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?
5 Things Every Lawyer Should
Know About Bankruptcy
1. BK ChaptersThree main types:
Chapter 7Chapter 13Chapter 11
(“Chapter” => particular chapter under Title 11 of the U.S. Code)
5 Things Every Lawyer Should
Know About Bankruptcy
Chapter 7Governing rules are set forth at
11 U.S.C. §§ 701-784.• Liquidation• Individuals or Businesses• Liquidate all non-exempt assets
5 Things Every Lawyer Should
Know About Bankruptcy
Chapter 13Governing rules are set forth at
11 U.S.C. §§ 1301-1330.• Reorganization• Individuals only (income-based)• Reorganize via structured payment
Plan
5 Things Every Lawyer Should
Know About Bankruptcy
Chapter 11Governing rules are set forth at
11 U.S.C. §§ 1101-1174.• Reorganization (or Liquidation)• Individuals or Businesses• Reorganize via a Confirmed Plan;
stringent requirements
5 Things Every Lawyer Should
Know About Bankruptcy
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
5 Things Every Lawyer Should
Know About Bankruptcy
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
5 Things Every Lawyer Should
Know About Bankruptcy
2. File Proof of Claim?Chapter 7: Non-exempt Assets Case: • File POC• Recovery only against assets Debtor
did not claim under an exemption
5 Things Every Lawyer Should
Know About Bankruptcy
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”
5 Things Every Lawyer Should
Know About Bankruptcy
Ch. 7 Exemptions• How to elect Exemptions?• Federal vs. State Exemptions• States have residency requirements• Some states opt out of the Federal
Exemptions
5 Things Every Lawyer Should
Know About Bankruptcy
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
5 Things Every Lawyer Should
Know About Bankruptcy
3. Bankruptcy TrusteeChapter 7, Chapter 13: • appointed TrusteeChapter 11:• Debtor-in-Possession acts as Trustee,
unless a Trustee is appointed
5 Things Every Lawyer Should
Know About Bankruptcy
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
5 Things Every Lawyer Should
Know About Bankruptcy
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
5 Things Every Lawyer Should
Know About Bankruptcy
3. Bankruptcy TrusteeTrustee’s “Avoidance Powers”:
§ 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
5 Things Every Lawyer Should
Know About Bankruptcy
3. Bankruptcy TrusteeTrustee’s “Avoidance Powers”:
§ 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
5 Things Every Lawyer Should
Know About Bankruptcy
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
5 Things Every Lawyer Should
Know About Bankruptcy
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
5 Things Every Lawyer Should
Know About Bankruptcy
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)
5 Things Every Lawyer Should
Know About Bankruptcy
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)
5 Things Every Lawyer Should
Know About Bankruptcy
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
5 Things Every Lawyer Should
Know About Bankruptcy
4. Automatic Stay?Relief from Stay / Lifting the Stay: Unsecured Creditor: • Debt non-dischargeable• Eviction, if post-petition rent not paid
5 Things Every Lawyer Should
Know About Bankruptcy
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 Things Every Lawyer Should
Know About Bankruptcy
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:
5 Things Every Lawyer Should
Know About Bankruptcy
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
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