5 THINGS EVERY LAWYER SHOULD KNOW ABOUT BANKRUPTCY Laura A. Deeter, Esq.

5 Things Every Lawyer Should Know About Bankruptcy Five Things 1.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 Chapters Three main types: Chapter 7 Chapter 13 Chapter 11 (“Chapter” => particular chapter under Title 11 of the U.S. Code)

5 Things Every Lawyer Should Know About Bankruptcy Chapter 7 Governing rules are set forth at 11 U.S.C. §§ Liquidation Individuals or Businesses Liquidate all non-exempt assets

5 Things Every Lawyer Should Know About Bankruptcy Chapter 13 Governing rules are set forth at 11 U.S.C. §§ Reorganization Individuals only (income-based) Reorganize via structured payment Plan

5 Things Every Lawyer Should Know About Bankruptcy Chapter 11 Governing rules are set forth at 11 U.S.C. §§ 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 Trustee Chapter 7, Chapter 13: appointed Trustee Chapter 11: Debtor-in-Possession acts as Trustee, unless a Trustee is appointed

5 Things Every Lawyer Should Know About Bankruptcy 3. Bankruptcy Trustee Authority 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 Trustee Trustee’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 Trustee Trustee’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 Trustee Trustee’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 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 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’ Fees Typical 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

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