David Ford Avon Ct explains here about all useful bankruptcy laws. These laws are useful and also important to know for everyone.

1. Basic Bankruptcy Law
for Paralegals
David Ford Avon CT

2. A Short History of Bankruptcy
 After reading this chapter, you will be able to:
 Define bankruptcy
 Understand why the United States Bankruptcy
Code emphasizes notions of both debtor relief
and debt collection
 Understand the foundational terms and
concepts necessary to approach a study of
the bankruptcy system

3. Bankruptcy Systems
 Methods developed by societies to resolve
the effects of financial crisis.

4. Common Reasons for Individual
Bankruptcy Filings
 Death in the family
 Divorce
 Catastrophic illness
 Unanticipated unemployment
 Excessive credit card debt

5. Common Reasons for Business
Bankruptcy Filings
 Obsolete products
 Failure to compete in the industry
 Mismanagement
 Sudden catastrophe
 Insider disputes
 Fraud
 A poor general economy

6. Debt Collection
 The primary focus of the debt collection
features of bankruptcy systems has always
been to formulated a body of rules to provide
for the collection of assets of a debtor and the
equitable distribution of the proceeds of those
assets among multiple creditors.

7. Debtor Relief
 The primary focus of the debtor relief features
of bankruptcy systems has vacillated
throughout history from the extremes of
punishment to forgiveness.

8. Discharge
 Legal relief from debt

9. Exemption
 Statutorily defined property that an individual
debtor may protect from administration by a
bankruptcy estate.
 Exempt property is not available for
liquidation to pay a dividend to creditors.
 Exemptions are a primary element of debtor
relief.

10. Liquidation
 The sale of an estates assets to repay
creditors.

11. Composition Agreement
 An agreement between a debtor and multiple
creditors for the repayment of debt.

12. Introduction to the Bankruptcy Code
 After reading this chapter, you will be able to:
 Provide an organizational overview of the
Bankruptcy Code
 Define basic bankruptcy terms, including
creditor, debtor, and trustee
 Understand the two basic types of bankruptcy
proceedings: liquidations and reorganizations
 List alternatives to bankruptcy

13. Bankruptcy Code
 The name of the bankruptcy laws in effect in
the United States since October 1, 1979.
 This code has been significantly amended
four times, in 1984, 1986, 1994, and 2005.

14. Creditors and Debtors
 Creditor: An entity with a claim arising before
the filing of a bankruptcy petition.
 Claim: A right to payment of any kind or a
right to performance that may be
compensated by damages.
 Debtor: An entity that owes a debt (a liability
upon a claim). The entity filing a voluntary
bankruptcy proceeding or against whom an
order for relief is entered in an involuntary
bankruptcy is known as the debtor.

15. Trustee
 An independent third party who liquidates the
estate’s assets and distributes dividends to
the creditors.

16. Liquidation Proceeding
 In a liquidation proceeding, all the non-
exempt assets of a debtor are sold. The
proceeds are distributed to creditors
according to their ranking.

17. Reorganization Proceeding
 In a reorganization proceeding, a debtor
seeks to avoid liquidation by proposing a
viable plan of reorganization to the creditors
that is successfully confirmed and performed.

18. Bankruptcy Code Flow Chart
Introduction
1
Administration
3
Debtor, Creditor
5
Estate
Liquidate
7
Muni Corp
9
Reorganize
11
Family
Farmer
12
Consumer
13
Liquidation Reorganization Proceedings

19. Bankruptcy Alternatives
 Bankruptcy alternatives primarily seek a
marshaling of assets for equitable distribution to the
creditors and a full or partial release from the
remaining debts of the debtor.
 These alternatives are composition agreements and
assignments for the benefit of creditors.
 Sometimes, the effective use of these alternatives
can accomplish the same results as a bankruptcy
without ever having to file one.

20. Composition Agreement
 Any transaction in which a debtor and creditor
agree to a revision of their legal obligations to
one another is a form of composition.
 Examples:
 Picking up the telephone and getting an extra
month to pay a bill
 Debt consolidation
 A formal composition agreement comes into
being when a debtor and multiple creditors
agree to a revision of existing obligations.

21. Assignment for the Benefit of
Creditors
 Takes place when a debtor, which may or
may not be in financial distress, assigns its
assets to a third party in trust to sell the
assets and apply the proceeds to the
payment of the creditors’ claims.
 The third party is known as the assignee.

22. Filing a Petition
 After reading this chapter, you will be able to:
 Describe the “gatekeeper” provisions in
individual bankruptcy cases
 Understand how a bankruptcy is initiated, by
filing of a voluntary or involuntary petition
 Define prepetition credit counseling
 Describe how a voluntary bankruptcy petition
is filed by a debtor
 Describe how an involuntary petition is filed by
creditors
 Define an “order of relief”

23. Prepetition Credit Counseling
 Prerequisite to an individual debtor seeking
bankruptcy relief.
 An individual seeking bankruptcy relief may
not be a debtor and must participate in an
individual or group credit counseling session
from an approved credit counseling agency
within 180 days prior to the filing of a petition.

24. Exceptions to Prepetition Credit
Counseling
 First, the United States Trustee may exempt a district from the
requirement if the Trustee determines that approved credit
counseling services in a district are not reasonably able to
provide counseling services to individuals.
 Second, a debtor may file a certification with the court at the
time of filing stating that ‘‘exigent circumstances’’ merit a waiver
of the rule, provided that the debtor has made a request for
counseling services and could not obtain them within five days
of making a request from a counseling agency.
 The third exception to the prepetition credit counseling
requirement arises if, after notice and a hearing, the court finds
that a debtor is not able to comply with the requirement due to
mental incapacity, physical disability, or active military service in
a military combat zone.

25. Practice Pointer
 It is important to check the local rules for your
jurisdiction. Some courts will dismiss the case
automatically without a hearing if the
certification seeking a waiver is not filed with
the petition.

26. Debt Relief Agency
 A debt relief agency is any person, including
a bankruptcy attorney or bankruptcy petition
preparer, providing bankruptcy assistance to
assisted persons for money or other valuable
consideration pursuant to 11 U.S.C.
§101(12A).
 Debt relief agencies are subject to written
retainer and disclosure requirements of 11
U.S.C. §§527 and 528

27. Voluntary Bankruptcy
 A bankruptcy proceeding initiated by a debtor
filing a petition for relief.
 Also known as a voluntary petition.
 Most bankruptcy proceedings are voluntary.

28. Venue
 A proceeding may be commenced in any district
meeting one of the following qualifications:
 (1) the district in which the petitioner is domiciled,
resides, or has its principal place of business
 (2) the district in which the debtor’s principal
United States assets are located
 (3) the district in which the debtor has complied
with either of the above for the greatest portion of
the 180 days preceding the petition’s filing

29. Involuntary Bankruptcy
 A bankruptcy proceeding initiated by one or
more creditors by filing a petition seeking the
entry of an order of relief, a judgment that the
debtor is bankrupt.
 Also known as an involuntary petition.

30. Practice Pointer
 Under the Code, ‘‘insolvent’’ means a
financial situation in which the debtor’s debts
are greater than the fair valuation of all of
his/her assets, exclusive of any exempt
property or property improperly transferred or
concealed. See 11 U.S.C. §101(32).

31. General Provisions
 After reading this chapter, you will be able to:
 Describe the basic motion procedures used in
Bankruptcy Courts
 List the essential qualifications to qualify as a
debtor under a particular Chapter of the Code
 Identify the remaining provisions of Code
Chapter 1.

32. Notice and Hearing
 Signifies that due process must be given to
various parties involved in the proceeding
before a court order authorizing the action is
sought to be performed can be obtained.
 In the context of a bankruptcy proceeding,
due process often means that the affected
parties must merely be given notice and an
opportunity to be heard.

33. Get the Procedure Right
the First Time!
Errors can be costly.

34. Ex Parte
 An application made to the court without
notice or with limited notice to limited parties.
 Ex parte applications are specifically
permitted for various ministerial functions.
 In other circumstances, a legitimate
extraordinary circumstance must exist for the
court to consider ex parte relief.

35. Evidentiary Hearing
 A hearing held to take sworn testimony to
permit a Bankruptcy Court to make a decision
in a contested matter that is not a separate
adversary proceeding.
 An evidentiary hearing is similar to a trial in a
nonbankruptcy environment.
 A “trial” on a contested motion for relief from
the automatic stay is properly called an
evidentiary hearing.

36. Who May be a Debtor?
 Only persons may be debtors
 An individual is a person
 A corporation can be a person
 A partnership can also be a person
 A person has to reside or be domiciled in the
United States or have a place of business or
property in the United States.

37. Needs Based Bankruptcy or
“Means Testing”
 After reading this chapter, you will be able to:
 Discuss means testing in detail
 Understand why means testing is the centerpiece of the
BAPCPA legislation.
 Describe how paralegals play a significant role in the means
testing process, by compiling and organizing data and
assisting in performing the required calculations.
 Describe the various formulas used in making the means
testing calculation by discussion of the statute, form, and
text examples.
 Understand the need to maintain and organize the data
used to perform the means testing calculations for a
particular debtor.

38. Needs Based Bankruptcy
 The essence of means testing is that if an
individual debtor can repay at least 25% of
general unsecured debt over a 60-month
period with minimum monthly payments of
$109.58 ($6,575), or if a debtor can pay
$10,950 or more over 60 months without
regard to the percentage repaid, then a
Chapter 7 petition is subject to dismissal for
abuse unless the debtor consents to or
voluntarily converts the case to a Chapter 13

39. Practice Pointer
 Information important to means testing that
changes on a regular basis, such as
household median income and allowable
expenses as calculated by various IRS
collection standards, can be found on the
United States Trustee Program website:
www.ustp.gov

40. Deductions
 The second step in the formula is to deduct three
groups of expenses from the current monthly income.
 The first group of deductions is the debtor’s
monthly expenses as calculated according to
Internal Revenue Service collection guidelines,
excluding payments for debts.
 The second group of deductions is the debtor’s
average monthly payments contractually due to
secured creditors during the 60-month period
following the petition.
 The third group of deductions is the debtor’s
expenses for payment of priority claims.

41. Special Circumstances
 A debtor may rebut the presumption that a
case is an abuse of Chapter 7 only by
demonstrating the existence of ‘‘special
circumstances’’ requiring an adjustment to
current monthly income.
 To establish ‘‘special circumstances,’’ a
debtor must itemize each additional expense,
provide documentation for each expense, and
provide a detailed explanation of the special
circumstances making the expense
reasonable.

42. Useful Definitions—Section 101
 After reading this chapter, you will be able to:
 List what is included in Section 101 of the
Bankruptcy Code
 Define of a number of important terms as they
are used throughout the Bankruptcy Code
 Identify the different usages of the term lien as
it is used in the Bankruptcy Code

43. What is Section 101?
 Section 101 of the Bankruptcy Code is critical
because it contains definitions of many terms
that are used frequently throughout the Code.
 Reference to a Section 101 definition will
sometimes save substantial research time
and will help to explicitly resolve questions
only answered implicitly by other Code
provisions.

44. Terms Defined by Section 101
 Affiliates
 Claim
 Community Claim
 Corporation
 Creditor
 Current Monthly Income
 Custodian
 Debt
 Debt Relief Agency
 Domestic Support
Obligations
 Equity Security Holder
 Individual with Regular
Income
 Insiders
 Insolvency
 Judicial Lien
 Lien
 Median Family Income
 Person
 Security
 Security Agreement
 Single Asset Real Estate
 Statutory Lien
 Transfer

45. What is a Lien?
 A lien is a right to property to secure
repayment of a debt or the performance of an
obligation.
 A lien may be
 Judicial
 Consensual
 or Statutory

46. What is a Security?
 Securities are commercial documents used to
evidence an ownership interest in an entity,
among other things.

47. Insider
 An insider is an entity in control of a debtor or
a debtor’s relatives.
 The definition of an insider will vary
depending upon the debtor’s identity as an
individual, partnership, or corporation.

48. Thank You