The US Bankruptcy Litigation

Bankruptcy Litigation in the US Presented by: Sadanand Naik Team Lead Bankruptcy Process Bangalore

What is Bankruptcy ?
No specific meaning under Bankruptcy Code
Special kind of Civil Suit involving people and corporations.
The legal process in which a person or firm declares inability to pay debt.
State of being bankrupt
Debtors inability to meet his financial obligations

Bankruptcy statistics and Jurisdiction
70% of the cases filed before the federal courts are related to bankruptcy.
90% Bankruptcy Cases initiated by debtors only
During the 12 month period ending September 30, 2010, 1,146,51 petitions were filed under Ch.7, 14,191 under chapter 11, 707 under chapter 12 and 434,839 under chapter 13.
Federal Courts have exclusive Jurisdiction over Bankruptcy cases

Bankruptcy Judges
Bankruptcy Judges are appointed by majority members of Circuit Court of appeals for a term of 14 years.
A lawyers who are having good standing at bar are eligible to become the bankruptcy Judge.
There are about 352bankruptcy judgeships in US.

Hierarchy of Bankruptcy courts
US Supreme Court
The Circuit Court of Appeals
The district courts or Bankruptcy Appellate Tribunal (BAP )
The bankruptcy courts

What are the governing laws?
Title 11 Federal Rules of Bankruptcy Procedure
Title 18 Crimes
Title 26 IRC Implication of Tax Avoidance
Title 28 Judiciary and Judicial Process
Federal rules of appellate procedure (Title 28 Appendix)
Federal Rules of Evidence (Title 28 App)

Kinds of bankruptcies
Mainly three kinds of bankruptcy
Chapter 7 : Liquidation
Chapter 11 :Reorganization
Chapter 13 :Adjustment of debt regular income

Chapter 7 requirements/ eligibility:
A debt must be primarily a consumer debt. 11 U.S.C. § 101(8)4 defines the Consumer Debt as the debt incurred by an individual primarily for a personal, family, or household purpose.
A debtor must have undergone Credit Counseling under Credit Counseling Agencies approved by the United States Trustee, within 180 days before filing Bankruptcy.
If the debtor already filed a bankruptcy under chapter 7 and got discharged. 8 years must have been elapsed from the date of discharge before filing bankruptcy under Ch.7.
Debtor income should be below the state median income.

Chapter 7:Liquidation
Petition
Automatic stay
Trustee Selection
Creditors meeting
Liquidation of assets
Collection of bankruptcy estate
Distribution
Conversion
Dispute resolution
Discharge
Appeal

Petition
A formal written application requesting a court for a specific judicial action
Two kinds
Voluntary petition
Involuntary petition

Automatic stay
Every suits, claims
will be stayed
It applies to all proceeding including
government unit

Trustee selection
US trustees are appointed by Attorney General of the US
US trustees appoint interim trustees and case trustees

Duties and responsibilities of Bankruptcy trustees
Accounting for the property received
Investigation of financial affairs and assets
Examining and objecting to proof of claim
Notices
Reporting
Collecting the property and converting it to cash
Meeting and questions
Other duties and responsiilities

Creditors meeting(sec.341 Meeting )
Creditors and debtors meet
Debtors oath
Goal is find hidden assets and get more money as much possible to the bankruptcy estate

Liquidation of Assets
Process of selling the property to raise the amount for creditors
Exempt and non exempt property
Case trustee sells the Assets of the debtor
Properties sold at auction or at private transaction

Collection of the bankruptcy estate
Case trustee deposits the amount
Exemptions varies
from state to state
e.g. food, cloth shelter, car etc.

Distribution
Money is distributed among creditors
Majority of cases are no asset cases

Conversion
Debtor option to convert case into chapter 11 or 13.
Court can convert a case.

Dispute resolution
Adversary proceedings, motions , complaints, objection to discharge of debt, objection to sale of debtors property
ADR

Discharge
When a bankrupt person or company is legally free and clear of any obligation to repay certain debts
Person debts discharged
There are other types of debts which cannot be discharged e.g.tax, alimony etc.

Appeal
Appeal to BAP or District court from Bankruptcy court

Chapter 13 :Adjustment of debt regular income
Petition
Automatic stay
Creditors meeting
Confirmation
Paying of Creditors
Dispute resolution
Discharge
Appeal

Eligibility under chapter 13:
A debtor must be an individual (spouse if filing jointly) and not the corporations, partnerships, Stock brokers or Commodity Brokers.
An individual (spouse if filing jointly) should have a regular income greater than reasonable living and other expenses; ( An individual having disposable income )
Unsecured debt must be less than $360,475 and Secured debts must be less than $1,081,400.
An individual cannot file bankruptcy under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.

Contd
Credit counseling 180 days prior to filing Bankruptcy.
Although the debtor can file bankruptcy under Chapter.13 soon after discharge from Chapter 7, debtor will not get discharge under Chapter 13 if he is filing bankruptcy within
a)2 years from the discharge under chapter 13. or
b) 4 years from the discharge under chapter 7

Petition
A formal written appli
cation requesting a co
urt for a specific judi
cial action:
Two kinds
Voluntary petition
Involuntary petition

Automatic stay
Every suits, claims
will be stayed
It applies to all proceeding
including Government unit

Creditors meeting(sec.341 Meeting )
Creditors and debtors
Meet
Debtor takes oath
Goal is to get more money as possible to the bankruptcy estate

Confirmation of plan
Standing trustee review the plan and advice the court
Recommendation by standing trustee
Creditors have no right to propose a new plan
But they can object the plan

Paying of Creditors
Starts within 30 days of filing the plan
Paid through trustees

Dispute resolution
Adversary proceedings, motions , complaints, objection to discharge of debt, objection to sale of debtors property
ADR

Discharge
When a bankrupt person or company is legally free and clear of any obligation to repay certain debts
If a debtor is a business ceases to exist
If a person debts discharged
There are 10 kinds of debts which cannot be discharged e.g.tax, alimony, child support obligations, and certain education loans.

Appeal
Appeal to BAP or District court from Bankruptcy court
Appeal to Circuit courts from District court or BAP
Appeals from above to Supreme Court.

Bankruptcy Process and LPO
Only few LPOs in India provides services on Bankruptcy process
India is facing shortage of bankruptcy petition preparers

BK Softwares used in Law Firm and LPOs
Best Case( Wolters Kluwer) http://www.bestcase.com/index.htm
EZ-filing (EZ-Filing, Inc) www.ezfiling.com
Bankruptcy 2010 ( New Hope Software Inc) http://www.bankruptcysoftware.com
BankruptcyPRO (legalPRO Systems, Inc) http://www.legal-pro.com/
Collier TopForm (lexisnexis a division of reed elsevier inc) http://law.lexisnexis.com/collier-topform
West Chap 7..13 Bankruptcy Filing Software (Thomson Reuters) ( http://west.thomson.com/productdetail/5093/17598617/productdetail.aspx )
BK Case Master (Technovation Software ) http://www.technovation.com/bk1.html
Blankrupter ( Blumberg Excelsior, Inc) http://www.blumberg.com/invoice.cgi?rm=view_cluster;cluster_id=154900
bankruptcy plus ( Cornerstone Computer Group Inc)
Bankruptcy Disk (law Disks) http://lawdisks.com/bcydisk.htm
FreshStart (Seaview Software, Inc) http://www.freshstart.com/
Verrant bankruptcy software http://verantbk.com/verrant/index.asp
Bankruptcy Claim-Pro ( creditor Software) ( Collection Software Solutions Inc. ) http://www.collection-pro.com/

BK presentation source:
http://www.fjc.gov/federal/courts.nsf/autoframe?OpenForm&nav=menu4c&page=/federal/courts.nsf/page/C134F62E6BEA0B9D85256827006DF655?opendocument
http://www.fjc.gov The Federal Judicial Center
http://www.gpoaccess.gov/fr/ The Federal Register (FR)
http://www.law.cornell.edu/uscode/usc_sup_01_11.html Cornell University Law School
http://www.uscourts.gov/Statistics/BankruptcyStatistics.aspx United States Courts
http://www.legalconsumer.com/bankruptcy/means-test/ etc.
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The US Bankruptcy Litigation

by sadanand naik

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