Bankruptcy Final Outline PDF

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My final outline used on the exam...

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Bankruptcy Final Outline Chloe Tyler

Table of Contents Collection Outside of Bankruptcy..........................................................................3 Non-Judicial Collection...........................................................................................................3   o

Secured.....................................................................................................................................................3 Unsecured................................................................................................................................................3 “Federal Debt Collection Practices Act”........................................................................................3

Judicial Collection.....................................................................................................................4 Pre-judgement remedies..............................................................................................................................4 Post judgement remedies............................................................................................................................6

General Bankruptcy Info..........................................................................................11 Liquidation Chapters............................................................................................................11 Chapter 7.........................................................................................................................................................11

Rehabilitation Chapters......................................................................................................11 Chapter Chapter Chapter Chapter Chapter

11......................................................................................................................................................11 12......................................................................................................................................................12 13......................................................................................................................................................12 15......................................................................................................................................................12 9.........................................................................................................................................................13

Invoking BK Relief.......................................................................................................13 Generally....................................................................................................................................13 Debtor Eligibility Requirements.....................................................................................13 § 109(a)............................................................................................................................................................13 § 303..................................................................................................................................................................14 § 302..................................................................................................................................................................14

Commencement......................................................................................................................14 Venue................................................................................................................................................................14 Mechanics of Filing.......................................................................................................................................15

Effects of Filing.......................................................................................................................16

Conversion and Dismissal.......................................................................................17 General Rules...................................................................................................................................17 Chapter 7.........................................................................................................................................19 Chapter 11........................................................................................................................................19 Chapter 12........................................................................................................................................19 Chapter 13........................................................................................................................................19

Collection Outside of Bankruptcy Prebankruptcy Collection Flowchart

Non-Judicial Collection 

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Secured o May be personal property subject to a “security interest” (Article 9 of UCC) or real property subject to a mortgage governed by state mortgage law. o Can foreclose on the collateral is the debtor defaults o Even if another creditor tries to seize and sell the collateral, or if the debtor sells or transfers the collateral to a third party, the secured creditor retains its rights in the collateral. Unsecured o Can try to collect the debt but must be careful. o If a creditor or its agent goes too far, they may be subject to liability under:  state tort law  can fill in gaps left by the FDCPA  invasion of privacy  intentional infliction of severe emotional distress  defamation  assault  battery  interference with contractual relations  malicious prosecution of criminal or civil proceedings  conversion  fraud  but these are difficult for debtors because the creditor has a legitimate interest in getting paid and is given considerable leeway to pursue that interest. o That the debtor may suffer some inconvenience, embarrassment, or annoyance is not enough to expose the creditor to tort liability o only if the creditors contact is extreme or outrageous that the specter of tort liability looms  the federal fair debt collection practices act  a state statutory FDCPA modeled after the federal act o “Federal Debt Collection Practices Act”  does not preempt state tort law, so an aggrieved debtor could Sue both under state tort law and this act  scope of coverage

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applies to a “debt collector” which § 803(6) of the act defines as: any person who uses any instrumentality of Interstate Commerce or the mails in any business the principle purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be old or do another. o Does not apply to a creditor who is attempting to collect its own debt o only applies to those who are in the debt collection business, collecting debts owed to others “debt” is defined by § 803(5) as: any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. o first, the debtor must be a consumer, meaning a natural person o second, the nature of the debt must be a consumer debt; for personal, family, or household purposes Heintz v. Jenkins: applies to attorneys who regularly sue on behalf of creditors to collect consumer debts

Judicial Collection Pre-judgement remedies  Generally o Secure any judgment that the creditor might later obtain by preventing the debtor from disposing of property while the case is in progress  Provisional because they ultimately have affect only if the creditor prevails in the lawsuit o Very hard to get because they give the creditor an enormous leverage over a debtor  Almost entirely provided for by state statutes, but the creditor is required to comply strictly with statutory provisions; even the slightest misstep will cause a loss of the remedy and may expose the creditor to liability to the debtor o Several constitutional procedural due process limits on prejudgment remedies  commercial garnishment is unconstitutional

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 sequestration statute upheld  replevin held unconstitutional  wage garnishment law held unconstitutional  real estate attachment held unconstitutional Types of prejudgment remedies o attachment  Sheriff acting pursuant to a writ of attachment, levies upon the debtors not exempt property and retains it as security for judgment o garnishment  debtor’s property is seized from a third party instead of the debtor by the Sheriff acting pursuant to a writ o replevin (sequestration):  creditor alleges property right superior to the debtor and the property is seized  Can be a stand-alone cause of action o Lis Pendens  “a suit pending”, clouds title to the property that is subject to litigation, and thus binds the world to the outcome of that litigation procedure in attachment and garnishment o Most common prejudgment remedy o made on an ex parte basis; Meaning without prior notice to the debtor  raises due process concerns because of this  Debtor suffers at least a temporary deprivation of property without notice or the opportunity for a hearing. Court seeks to require a fair accommodation of the debtor's property interests, judged in light of the creditors reasonably justifiable concerns and needs. o Step one: Filing an affidavit requesting the issuance of a writ of attachment or garnishment. File in conjunction with a pending lawsuit to seek money damages. Must be initiated after complaint is filed in the main suit and before judgment is entered. Must also post a bond with the affidavit. The affidavit must recite facts showing the probable existence of a statutory ground supporting relief such as: a serious risk that the debtor will dispose of property while the case is pending or defendant being a nonresident. o Step two: Writ must be issued by the court . Thus, the court must hold a hearing before it issues the writ. Usually held ex parte. Plaintiff must prove two things: that it is likely to prevail on the merits of the case and that one of the statutory grounds exists to support the attachment or garnishment. o Step three: Writ is delivered to the Sheriff

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o Step four: Sheriff levies enough to ensure that any judgment that the plaintiff might later obtained could be satisfied. This creates an Inchoate lien. if plaintiff wins the rights to the seized property will relate back to in date from the time the lenos created by levy and made “choate” by the entry of judgment and enforcement. Any third party who obtains rights to the levied property well lose to the creditor. If the suit is dismissed or that defendant prevails, then the inchoate attachment or garnishment lien is dissolved. o Step five: debtor can post a bond effectively replacing the seized property as security for any possible future judgment in that action in order to get their property back. o Quashing or vacating the attachment or garnishment:  the court will quash if the debtor proves either that: the plaintiff is not likely to prevail in the main lawsuit on the merits or that the attachment or garnishment is defective either procedurally or Substantively. if quashed debtor will get their property back and probably will be able to recover damages from the creditor for wrongful attachment or garnishment Issuance of an injunction o Directs debtor to not dispose of its assets or imposes restrictions on the debtor’s use of their assets until the lawsuit is concluded. o Grupo Mexicano De DeSarallo v. Alliance Bond Fund  https://www.quimbee.com/cases/grupo-mexicano-dedesarrollo-v-alliance-bond-fund  The US District Courts cannot grant a preliminary injunction in an action for money damages barring defendant from transferring assets where there is no lien or equitable interest claimed.  If this is to be so, Congress needs to enact it; only they have the power to do so  Any fraudulent acts they are worried about can be taken care of by the law of fraudulent conveyances and bankruptcy  Touches on the procedural issue where you must exhaust all remedies available by law first (because that is not done) and the substantive issue of giving creditors an interest they have not earned in the property which equity could then act upon  Would render FRCP 64 useless  Would imbalance the power between creditors and debtors, allowing creditors to abuse debtors by tying up all their assets if their near insolvency

Post judgement remedies  Enforcement of money judgements o First in time first in right

First creditor to go through the courts and obtain a final money judgement “judicial lien” usually wins  Then can enforce through state officials and literally have a sheriff knock on their door and ask for their non-exempt assets to sell off to pay the creditor o Can enforce through a consensual lien (collateral) at the outset, which will be enforced (if perfected via recordation or possession of collateral) against the creditor and 3P; which gives them a greater right than other creditors  Unsecured creditors have to go through the court to satisfy the judgement o Money judgements have 3 characteristics:  Executable: gives creditor right to use the legal process and state officials in order to seize property and pay it  Lienable: may use judicial process to obtain lien – which then makes them a secured creditor  Actionable: can be a civil action itself as the basis of a lawsuit  May then take this judgement to another state, assert it, and collect property in a different state o Execution  Procedure by which a judgment creditor has the state, acting through the sheriff, seize and sell the debtor’s property, with the proceeds applied to pay off the judgement  (1) Final money judgement is rendered or entered  When is the “magic moment”? o Old CL rule: once court renders judgement o (majority) FRCP 58(a) must wait until the clerk of the court formally enters the rendered judgement on the docket  Appeal does not stop the creditor from going forward w/ execution unless a stay of execution is obtained  (2) issuance of writ by clerk of court  Must ask clerk of court for a writ of execution  Cannot obtain if judgement is dormant o Most between 5-10 as per SOL  “revival” of dormant judgement available at common law via a writ of “scire facias”.  “renewal” and extend the limitation period of enforcement by bringing an action on the original judgement and in effect getting a new judgement  But still will lose priority status that you had if you let it go dormant  (3) writ is delivered to the sheriff 

In minority of states, this is significant because upon delivery is when the execution lien arises over the debtor’s nonexempt property o Determines priority date and makes them a secured creditor now o Pending until the literal levy by the return date (4) Levy items and return the writ  Gives sheriff the power to levy enough property to satisfy the judgement, and then it is in the custody of the law  Has time limit, usually 60 to 180 days in which the sheriff can levy  Deadline is the “return date” which means the sheriff must file a report as to exactly what was levied. o If return deadline is missed (nulla bona), must return property and loses power to levy; but creditor can just refile  Creditor can conduct post judgement discovery to figure out what assets are available to take and then specifically tell the sheriff what to get  Once seized, an “execution lien” exists over the property (majority) o Majority: Execution Lien rises after time of levy lasts two years after issuance of writ unless judgement is satisfied sooner o Lien can be lost if no levy or nulla bona return  Exempt items are those things needed for humanity purposes o Sherriff can civilly liable for seizing of such exempts items (5) Sale of assets  Notoriously low prices paid in the auction which screws over the debtor, because they have to give more stuff to satisfy it  Issue faced in 3 ways: o 1) appraisal  an upset price: sale will be disallowed unless final sale price is at least a certain percentage of appraised value  minimum credit: appraised amount must be credited against judgement, even if it is sold for less o 2) allowing debtor to set aside the sale  If required sale procedures were not followed  Or if the sale price is so low so as to be shocking to the conscience o 3) Redemption rights 

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Right of debtor to buy back the property at the purchase price  (6) sale monies are distributed to the creditor  Costs and expenses of the sale are paid first  Then the creditor is paid off, up to the amount of the judgement  Any excess is given back to the debtor  What if other liens: o A senior lien to the judgement creditor’s execution is either:  Not affected by the sale and follows the property  Or in other states, paid off with the sale proceeds o Junior liens are eliminated by the sale, without compensation  Timing is very important to figuring out what happens here o Perfected v. unperfected collateral makes a difference here too Vitale v. Hotel California o https://www.quimbee.com/cases/vitale-v-hotel-california-inc o Sheriff’s have a duty to fulfill the writs delivered to them o Multiple levies can be made under one writ but cannot request inordinately frequent and numerous levies.  But by extrapolating what was collected in one visit, it would have only taken 9 trips, which is not unduly burdensome on the department. o Additionally, it does not matter if it was at a late hour o The threat of violence claim is not substantiated by the record, because the chance of violence does not outweigh the creditors right to be paid. o A sheriff is not liable for amercement until he has disobeyed positive, reasonable, lawful directions  Here the Sheriff has done this, and amercement has been invoked by the court. Illi v. Margolis o The five creditors were denied priority because the writ was returned nulla bona (items returned) which renders the writ functus officio so they can no longer levy, and a new writ is needed. o The two creditors were allowed priority because they made a good faith and speedy effort to issue the writ of fi fa and made the levy and the acceptance of payments is not constructive abandonment or an abuse of the writ. Judgement liens o An encumbrance on some part of the judgment debtor's property which allows the right to sell the property to satisfy the judgment  Majority: real property only 

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 Minority: allows personal property  NEVER includes exempt property advantages over an execution lien:  may attach earlier  attaches automatically to the debtors after acquired property  Reaches all subsequent increases in value of the property bound by the lien, even if it has been passed into the hands of a 3P manner of creation differs depending on whether the debtor's property at issue is located in the same County where the judgment was rendered  if it is:  statutes create the judgment lien when the judgment is docketed (majority), but the creditor isn't needed to do anything  (minority): whenever judgement is rendered  (Another minority) whenever the judgement creditor files a notice recording the judgment in the county’s real estate records {protects 3P’s buying}  If it is not in the same county:  Judgement lien does not arise until the judgement creditor files a notice in the real estate records of that county If it is another state:  If it is a state that has adopted the Uniform Enforcement of Foreign Judgements Act:  May register the original judgement in that state, then the lien can be created there by filing a notice in the county real estate records  If it has not adop...