chap 12-17 - De Anza College

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Nov 14, 2013 (3 years and 8 months ago)

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Chapter Twelve. The Automatic
Stay

11 U.S.C 362


After reading this chapter, you will be able to:


Describe litigation that occurs in the bankruptcy
system


Understand the concept of the automatic stay as
an element of debtor relief


List creditor activities subject to the automatic stay


List creditor activities not subject to the automatic
stay


Understand the procedures utilized by creditors to
obtain relief from the stay

Adversary Proceedings


When an issue is brought before the court in
the form of a motion and is opposed, it is
considered a contested matter.


A contested matter is treated as an
adversary
proceeding
pursuant to Federal Rule of
Bankruptcy Procedure 9014.

Automatic Stay


Automatic stay

is a statutory bar to the
conducting of any collection activity by
creditors after a bankruptcy petition has been
filed.

Activity Subject to the Automatic Stay


Section 362(a)(1) prohibits the
commencement or continuation of any
judicial, administrative, or other proceeding
against the debtor that was or could have
been commenced before the filing of the
petition to recover a prepetition claim.

Actions Subject to Automatic Stay


Civil actions or administrative legal proceedings.


Enforcement of judgments


Acts to obtain possession or control of property of the
estate


Acts to perfect liens upon property of the estate.


Acts to perfect liens upon property of the debtor


Any act to collect a prepetition claim


The making of setoffs (the common law right of a
creditor to balance mutual debts with a debtor)


Proceedings before the United States Tax Court

Slide 1 of 2

Common Actions Excepted from the
Automatic Stay


Criminal prosecutions


Collection of alimony, maintenance or support from
other than property of the estate


Lien perfection within statutory grace period


Governmental proceedings to enforce police or
regulatory powers other than enforcement of money
judgments


Limited setoffs in commodity broker or stockbroker
proceedings


HUD foreclosures subject to National Housing Act

Slide 2 of 2

Common Actions Excepted from the
Automatic Stay


Issuance of notice of tax deficiency, audit, demand
for returns or assessment


Expired nonresidential real property lease


Retirement loan repayments


Residential evictions

Motion for Relief from Automatic
Stay


Moving Party


Notice of motion


Motion


Declaration of provable value


Exhibits


Promissory note


Document evidencing security interest (UCC
-
1,
mortgage, or trust deed


appraisal


Any other document required by local rule

Motion for Relief from Automatic
Stay


Opposing Party


Request for hearing


Declaration or affidavits in opposition


Points and authorities


Exhibit: appraisals


Any other document required by local rule

Motion for Relief from Automatic
Stay


Motion to Impose Stay for Cause Shown


1. Serial filings 11 U.S.C.
§
362(c)(3), (4)


2. Statement of Intention 11 U.S.C.
§
362(h)


3. Small Business Cases 11 U.S.C.
§
362 (n)


4. Residential evictions 11 U.S.C.
§
362(b)(22), (l)

30/30/30 Rule


30 days after a request for relief the stay will
terminate


a preliminary hearing must be held within 30
days of the motion



a final hearing, if necessary, must be held
within 30 days of the preliminary hearing.

Chapter Thirteen. Objections to
Discharge and Dischargeability of Debts


After reading this chapter, you will be able to:


Understand that a discharge may not relieve a debtor
from all debts and that, in certain circumstances, a
debtor may be denied a discharge altogether.


Describe which debts are automatically not
dischargeable


Describe which debts are not dischargeable only if a
creditor obtains a judgment that the affected debt is not
dischargeable


List those acts which can prevent a debtor’s discharge
altogether


Understand the procedure for filing a complaint to
determine the dischargeability of a debt or the debtor’s
discharge.

Practice Pointer


Even if the creditor takes no action, the
debtor will normally not be discharged of
most debts relating to taxes, domestic
support obligations, governmental fines or
penalties, and death or personal injury
caused by drunk driving.

Nondischargeable Debts


A debt not subject to a debtor’s discharge.


A debtor is not relieved from legal liability for
the affected debt.


Some types of nondischargeable debts
require the filing of a Complaint to Determine
Dischargeability of Debt for the debt to
become nondischargeable.


Nondischargeable debts are described in
Bankruptcy Code Section 523(a).

Nondischargeable Debts


The following debts are nondischargeable without an
affected creditor being required to take any affirmative
action:



Priority tax claims

Unlisted debts

Domestic support obligations

Certain fines and penalties

Guaranteed student loans

Damages from DWI conviction

Debt nondischarged in prior
bankruptcy

Financial institution fraud

Restitution award

Loans obtained to pay
nondischargeable taxes

Postpetition homeowner’s
assessments

Prisoner court costs

Pension plan loans

Debts arising from federal or state
securities law violations

A Creditor May Object to Discharge of
the Following Debts


Fraud


Intentional fraud


False written financial statement


Limited prepetition credit transactions


Defalcation, larceny, embezzlement


Willful and malicious injury

Fresh Cash Rule


The
fresh cash rule
covers the portion of a
debt incurred by use of a false written
financial statement.

Chapter Fourteen. Property of the
Estate and Turnover Complaints


After reading this chapter, you will be able to:


Define “property of the estate”


Identify those assets which are not property of
the estate and therefore not subject to the
trustee’s administration


Describe the trustee’s various rights to recover
estate property, the turnover rights and the
avoiding powers


Property of the Estate


All property in which the debtor has a legal or
equitable interest at the commencement of a
case is property of the estate.


During the course of the case, the trustee
must “administer” all the property.


The figure (next slide) illustrates a typical
consumer no
-
asset Chapter 7 where all
property is either collateral for one or more
secured creditors, exempt, or abandoned by
the trustee as burdensome or of
inconsequential value to the estate.

Property of the Estate

Exempt
abandoned
secured
Avoiding Powers


The ability of a trustee to set aside certain
pre
-

or postfiling transactions that might
otherwise be valid under nonbankruptcy law.


Preferences, fraudulent transfers, and the
ability to set aside unauthorized postpetition
transfers are the most common of the
trustee’s avoiding powers.

Included as Property of the Estate


Community property


Property recovered by the trustee


Property acquired within 180 days of filing by
bequest, inheritance, or devise, domestic
property settlement, life insurance proceeds


Proceeds, product, or offspring from property
of the estate


Property subject to an ipso facto clause

Excluded as Property of the Estate


Personal postfiling earnings of an individual
Chapter 7 or 11 debtor


Powers exercisable for the benefit of another
(e.g. power or attorney)


Interest in an expired nonresidential lease


Principal assets of a spendthrift trust


Property in which the debtor holds bare legal
title

Turnover


The concept of turnover is simple.


Someone has property of the estate: It may
be the debtor, it may be a third party, it could
be anyone.


If the third party refuses to voluntarily turn the
property over to the trustee, the court can
order the third party to turn it over.

Chapter Fifteen. Avoiding Powers
--
Introduction


After reading this chapter, you will be able to:


Describe the concept and purpose of the
trustee’s avoiding powers


List the general limitations upon the trustee’s
avoiding powers

Avoiding Powers


The abilities given a trustee to avoid certain
pre
-

or postfiling transactions that would
otherwise be valid under nonbankruptcy law
are known as the
avoiding powers
.


Preferences, fraudulent transfers, and the
ability to set aside unauthorized postpetition
transfers are the most common avoiding
powers.

Strong Arm Clause


Section 544 gives the trustee various powers
collectively and commonly known as the
strong arm powers, or the
strong arm clause
.


The strong arm rights collectively place the
trustee in full command of all a debtor’s
assets affected by the bankruptcy
proceeding.

Chapter Sixteen. Avoidable
Preferences

11 U.S.C.
§
547


After reading this chapter you will be able to:


Describe the avoidable preferences under the
Bankruptcy Code


List he elements of an avoidable preference


Understand the affirmative defenses which a
creditor may assert to defeat a trustee’s claim
of an avoidable preference


Describe the basic procedures of a preference
complaint

Preferences


A
preference

is a transfer of property or an
interest in property to a creditor, on the eve of
bankruptcy, in full or partial satisfaction of
debt to the exclusion of other creditors.


A preference meeting certain defined
conditions will be avoidable by a bankruptcy
trustee.

Practice Pointers


The Code defines a ‘‘transfer’’ to mean:


(1) the creation of a lien


(2) retention of title


(3) foreclosure of the debtor’s equity of
redemption


(4) any mode, ‘‘direct or indirect, absolute or
conditional, voluntary or involuntary, of
disposing of or parting with property or an
interest in property.’’

Elements of a Preference


Transfer of property or an interest in property


To or for the benefit of a creditor


On or for account of an antecedent or
preexisting debt


Made while the debtor is insolvent


Made within 90 days of filing or within one
year if the transferee is an insider


That enables the creditor to receive a greater
Chapter 7 dividend than it would otherwise
receive

Preference Defenses


A contemporaneous exchange for new value


A debt incurred and paid in the ordinary course of
business


Within any nonbankruptcy perfection periods or within
30 days of debtor receiving possession


Unsecured debt incurred for new value


Floating liens, except for improvement of position


Unavoidable statutory liens


Domestic support obligations


A consumer debtor’s consumer debts of up to $600
(permits preferential payment of nominal debts)


Business transfers less than $5,475


Consumer approved repayment plan


Noninsider security interests for the benefit of insider

Plaintiff/Trustee Pleadings


Summons and Complaint


Cover Sheet, as required by local rule


Evidence Proving Preference:


Checks


Contracts


Recorded documents


Documents of title


Defendant/Transferee Pleadings


Answer


Evidence Proving Defense


Checks


Contracts


Recorded documents


Documents of title

Chapter Seventeen. Fraudulent and
Postpetition Transfers


After reading this chapter, you will be able to:


Understand fraudulent transfers as they exist in
the bankruptcy code


Describe the avoidability of unauthorized
postbankruptcy filing (postpetition) transactions


List the damages recoverable by a trustee who
successfully exercises the avoiding powers


Describe the bankruptcy code’s treatment of a
creditor’s common law right of setoff.

Fraudulent Transfer


A
fraudulent transfer

is a transfer made by a
debtor with an intent to hinder, delay, or
defraud creditors.


A transfer without reasonable or fair
consideration made while a debtor is
insolvent or that renders a debtor insolvent
will also be fraudulent.


Fraudulent transfers are the subject of
Bankruptcy Code Section 548.


Fraudulent transfers are one of the trustee’s
avoiding powers.

Postpetition Transfers


A transfer of estate property after a
bankruptcy filing that is made without court
approval or is not otherwise authorized by the
Bankruptcy Code.


An unauthorized postpetition transaction may
be avoided by a bankruptcy trustee.


Postpetition transactions are the subject of
Bankruptcy Code Section 549.

Setoffs


A
setoff

is the common law right of a creditor
to balance mutual debts with a debtor.