The US Bankruptcy Litigation


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The US Bankruptcy Litigation

  1. 1. Bankruptcy Litigation in the US Presented by: Sadanand Naik Team Lead Bankruptcy Process Bangalore
  2. 2. What is Bankruptcy ? <ul><li>No specific meaning under Bankruptcy Code </li></ul><ul><li>Special kind of Civil Suit involving people and corporations. </li></ul><ul><li>The legal process in which a person or firm declares inability to pay debt. </li></ul><ul><li>State of being bankrupt </li></ul><ul><li>Debtors inability to meet his financial obligations </li></ul>
  3. 3. Bankruptcy statistics and Jurisdiction <ul><li>70% of the cases filed before the federal courts are related to bankruptcy. </li></ul><ul><li>90% Bankruptcy Cases initiated by debtors only </li></ul><ul><li>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. </li></ul><ul><li>Federal Courts have exclusive Jurisdiction over Bankruptcy cases </li></ul>
  4. 4. Bankruptcy Judges <ul><li>Bankruptcy Judges are appointed by majority members of Circuit Court of appeals for a term of 14 years. </li></ul><ul><li>A lawyers who are having good standing at bar are eligible to become the bankruptcy Judge. </li></ul><ul><li>There are about 352bankruptcy judgeships in US. </li></ul>
  5. 5. Hierarchy of Bankruptcy courts <ul><li>US Supreme Court </li></ul><ul><li>The Circuit Court of Appeals </li></ul><ul><li>The district courts or Bankruptcy Appellate Tribunal (BAP ) </li></ul><ul><li>The bankruptcy courts </li></ul>
  6. 6. What are the governing laws? <ul><li>Title 11 Federal Rules of Bankruptcy Procedure </li></ul><ul><li>Title 18 Crimes </li></ul><ul><li>Title 26 IRC Implication of Tax Avoidance </li></ul><ul><li>Title 28 Judiciary and Judicial Process </li></ul><ul><li>Federal rules of appellate procedure (Title 28 Appendix) </li></ul><ul><li>Federal Rules of Evidence (Title 28 App) </li></ul>
  7. 7. Kinds of bankruptcies <ul><li>Mainly three kinds of bankruptcy </li></ul><ul><li>Chapter 7 : Liquidation </li></ul><ul><li>Chapter 11 :Reorganization </li></ul><ul><li>Chapter 13 :Adjustment of debt regular income </li></ul>
  8. 8. Chapter 7 requirements/ eligibility: <ul><li>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. </li></ul><ul><li>A debtor must have undergone Credit Counseling under Credit Counseling Agencies approved by the United States Trustee, within 180 days before filing Bankruptcy. </li></ul><ul><li>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. </li></ul><ul><li>Debtor income should be below the state median income. </li></ul>
  9. 9. Chapter 7:Liquidation <ul><li>Petition </li></ul><ul><li>Automatic stay </li></ul><ul><li>Trustee Selection </li></ul><ul><li>Creditors meeting </li></ul><ul><li>Liquidation of assets </li></ul><ul><li>Collection of bankruptcy estate </li></ul><ul><li>Distribution </li></ul><ul><li>Conversion </li></ul><ul><li>Dispute resolution </li></ul><ul><li>Discharge </li></ul><ul><li>Appeal </li></ul>
  10. 10. Petition <ul><li>A formal written application requesting a court for a specific judicial action </li></ul><ul><li>Two kinds </li></ul><ul><li>Voluntary petition </li></ul><ul><li>Involuntary petition </li></ul>
  11. 11. Automatic stay <ul><li>Every suits, claims </li></ul><ul><li>will be stayed </li></ul><ul><li>It applies to all proceeding including </li></ul><ul><li>government unit </li></ul>
  12. 12. Trustee selection <ul><li>US trustees are appointed by Attorney General of the US </li></ul><ul><li>US trustees appoint interim trustees and case trustees </li></ul>
  13. 13. Duties and responsibilities of Bankruptcy trustees <ul><li>Accounting for the property received </li></ul><ul><li>Investigation of financial affairs and assets </li></ul><ul><li>Examining and objecting to proof of claim </li></ul><ul><li>Notices </li></ul><ul><li>Reporting </li></ul><ul><li>Collecting the property and converting it to cash </li></ul><ul><li>Meeting and questions </li></ul><ul><li>Other duties and responsiilities </li></ul>
  14. 14. Creditors meeting(sec.341 Meeting ) <ul><li>Creditors and debtors meet </li></ul><ul><li>Debtors oath </li></ul><ul><li>Goal is find hidden assets and get more money as much possible to the bankruptcy estate </li></ul>
  15. 15. Liquidation of Assets <ul><li>Process of selling the property to raise the amount for creditors </li></ul><ul><li>Exempt and non exempt property </li></ul><ul><li>Case trustee sells the Assets of the debtor </li></ul><ul><li>Properties sold at auction or at private transaction </li></ul>
  16. 16. Collection of the bankruptcy estate <ul><li>Case trustee deposits the amount </li></ul><ul><li>Exemptions varies </li></ul><ul><li>from state to state </li></ul><ul><li>e.g. food, cloth shelter, car etc. </li></ul>
  17. 17. Distribution <ul><li>Money is distributed among creditors </li></ul><ul><li>Majority of cases are no asset cases </li></ul>
  18. 18. Conversion <ul><li>Debtor option to convert case into chapter 11 or 13. </li></ul><ul><li>Court can convert a case. </li></ul>
  19. 19. Dispute resolution <ul><li>Adversary proceedings, motions , complaints, objection to discharge of debt, objection to sale of debtors property </li></ul><ul><li>ADR </li></ul>
  20. 20. Discharge <ul><li>When a bankrupt person or company is legally free and clear of any obligation to repay certain debts </li></ul><ul><li>Person debts discharged </li></ul><ul><li>There are other types of debts which cannot be discharged, alimony etc. </li></ul>
  21. 21. Appeal <ul><li>Appeal to BAP or District court from Bankruptcy court </li></ul>
  22. 22. Chapter 13 :Adjustment of debt regular income <ul><li>Petition </li></ul><ul><li>Automatic stay </li></ul><ul><li>Creditors meeting </li></ul><ul><li>Confirmation </li></ul><ul><li>Paying of Creditors </li></ul><ul><li>Dispute resolution </li></ul><ul><li>Discharge </li></ul><ul><li>Appeal </li></ul>
  23. 23. Eligibility under chapter 13: <ul><li>A debtor must be an individual (spouse if filing jointly) and not the corporations, partnerships, Stock brokers or Commodity Brokers. </li></ul><ul><li>An individual (spouse if filing jointly) should have a regular income greater than reasonable living and other expenses; ( An individual having disposable income ) </li></ul><ul><li>Unsecured debt must be less than $360,475 and Secured debts must be less than $1,081,400. </li></ul><ul><li>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. </li></ul>
  24. 24. Contd <ul><li>Credit counseling 180 days prior to filing Bankruptcy. </li></ul><ul><li>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 </li></ul><ul><li>a)2 years from the discharge under chapter 13. or </li></ul><ul><li>b) 4 years from the discharge under chapter 7 </li></ul>
  25. 25. Petition <ul><li>A formal written appli </li></ul><ul><li>cation requesting a co </li></ul><ul><li>urt for a specific judi </li></ul><ul><li>cial action: </li></ul><ul><li>Two kinds </li></ul><ul><li>Voluntary petition </li></ul><ul><li>Involuntary petition </li></ul>
  26. 26. Automatic stay <ul><li>Every suits, claims </li></ul><ul><li>will be stayed </li></ul><ul><li>It applies to all proceeding </li></ul><ul><li>including Government unit </li></ul>
  27. 27. Creditors meeting(sec.341 Meeting ) <ul><li>Creditors and debtors </li></ul><ul><li>Meet </li></ul><ul><li>Debtor takes oath </li></ul><ul><li>Goal is to get more money as possible to the bankruptcy estate </li></ul>
  28. 28. Confirmation of plan <ul><li>Standing trustee review the plan and advice the court </li></ul><ul><li>Recommendation by standing trustee </li></ul><ul><li>Creditors have no right to propose a new plan </li></ul><ul><li>But they can object the plan </li></ul>
  29. 29. Paying of Creditors <ul><li>Starts within 30 days of filing the plan </li></ul><ul><li>Paid through trustees </li></ul>
  30. 30. Dispute resolution <ul><li>Adversary proceedings, motions , complaints, objection to discharge of debt, objection to sale of debtors property </li></ul><ul><li>ADR </li></ul>
  31. 31. Discharge <ul><li>When a bankrupt person or company is legally free and clear of any obligation to repay certain debts </li></ul><ul><li>If a debtor is a business ceases to exist </li></ul><ul><li>If a person debts discharged </li></ul><ul><li>There are 10 kinds of debts which cannot be discharged, alimony, child support obligations, and certain education loans. </li></ul>
  32. 32. Appeal <ul><li>Appeal to BAP or District court from Bankruptcy court </li></ul><ul><li>Appeal to Circuit courts from District court or BAP </li></ul><ul><li>Appeals from above to Supreme Court. </li></ul>
  33. 33. Bankruptcy Process and LPO <ul><li>Only few LPOs in India provides services on Bankruptcy process </li></ul><ul><li>India is facing shortage of bankruptcy petition preparers </li></ul>
  34. 34. BK Softwares used in Law Firm and LPOs <ul><li>Best Case( Wolters Kluwer) </li></ul><ul><li>EZ-filing (EZ-Filing, Inc) </li></ul><ul><li>Bankruptcy 2010 ( New Hope Software Inc) </li></ul><ul><li>BankruptcyPRO (legalPRO Systems, Inc) </li></ul><ul><li>Collier TopForm (lexisnexis a division of reed elsevier inc) </li></ul><ul><li>West Chap 7..13 Bankruptcy Filing Software (Thomson Reuters) ( ) </li></ul><ul><li>BK Case Master (Technovation Software ) </li></ul><ul><li>Blankrupter ( Blumberg Excelsior, Inc);cluster_id=154900 </li></ul><ul><li>bankruptcy plus ( Cornerstone Computer Group Inc) </li></ul><ul><li>Bankruptcy Disk (law Disks) </li></ul><ul><li>FreshStart (Seaview Software, Inc) </li></ul><ul><li>Verrant bankruptcy software </li></ul><ul><li>Bankruptcy Claim-Pro ( creditor Software)   ( Collection Software Solutions Inc. ) </li></ul>
  35. 35. <ul><li>BK presentation source: </li></ul><ul><li> </li></ul><ul><li> The Federal Judicial Center </li></ul><ul><li> The Federal Register (FR) </li></ul><ul><li> Cornell University Law School </li></ul><ul><li> United States Courts </li></ul><ul><li> etc. </li></ul><ul><li>Disclaimer:  All images belong to their respective owners. No copyright infringement intended. This ppt is made for educational purpose only. If you would like something to be removed please send an e-mail to  [email_address] </li></ul>
  36. 36. <ul><li>Thank You </li></ul>