Laws 2325

Kim Huggins

Module 1

                                                                                                                                      12-11-21

 

Under Title 11 of the U.S. Bankruptcy Code, the six types of bankruptcy proceedings, also known as the operative chapters, include the following:

Chapter 7

11 USC Chapter 7: LIQUIDATION – this is the only operative bankruptcy chapter, which deals exclusively with liquidation - “the of the nonexempt, nonburdensome assets of a bankruptcy estate". Chapter 7 (liquidation) is available to all those who may be debtors, including individuals, partnerships and/or corporations. “Liquidation under Chapter 7 is available to all persons who may be debtors under this chapter, whether they are individuals, partnerships, or corporations.” - [USC02] 11 USC Ch. 7: LIQUIDATION (house.gov)

 

Chapter 9

11 USC Chapter 9: ADJUSTMENTS OF DEBTS OF A MUNICIPALITY – this is the least used chapter since the debtor must be a municipality (a political subdivision or a public agency or instrumentality of the state). “Chapter 9 of the House amendment represents a compromise between chapter 9 of the House bill and 9 of the Senate amendment.” - [USC02] 11 USC Ch. 9: ADJUSTMENT OF DEBTS OF A MUNICIPALITY (house.gov)

 

Chapter 11

11 USC Chapter 11: REORGANIZATION  - as noted in the book, this is the only chapter that includes the work “reorganization”, while other chapters do use the word “restructuring”. Chapter 11 does not always involve liquidation of assets, rather the “debtor in possession” produces a plan as to how and to what extent the creditors will be repaid; however, this plan must be approved by the bankruptcy court. “Chapter 11 of the House amendment is derived in large part from chapter 11 as contained in the House bill. Unlike chapter 11 of the Senate amendment, chapter 11 of the House amendment does not represent an extension of chapter X of current law [chapter 10 of former title 11] or any other chapter of the Bankruptcy Act [former title 11]. Rather, chapter 11 of the House amendment takes a new approach consolidating subjects dealt with under chapters VIII, X, XI, and XII of the Bankruptcy Act [chapters 8, 10, 11, and 12 of former title 11]. The new consolidated chapter 11 contains no special procedure for companies with public debt or equity security holders. Instead, factors such as the standard to be applied to solicitation of acceptances of a plan of reorganization are left to be determined by the court on a case-by-case basis.” - [USC02] 11 USC Ch. 11: REORGANIZATION (house.gov)

 

 

 

Chapter 12

11 USC Chapter 12: ADJUSTMENT OF DEBTS OF A FAMILY FARMER OR FISHERMAN WITH REGULAR ANNUAL INCOME – this chapter only applies to those individuals whose annual income is derived from the profits of their farm or commercial fishing business. The annual income must be stable and regular, and the individual farmer or individual farmer & spouse; or fisherman or individual fisherman & spouse) must be able to make payments under the Chapter 12 plan. The debts of the farmer or fisherman must not exceed. The definitions of both individuals (farmer and fisherman) are complicated and fall under 11 U.S.C.A. § 101(18) – farmer and 11 U.S.C.A. § 101(19A) (fisherman). Chapter 12 bankruptcy works similar to Chapter 11, as the debtor is also called a “debtor in possession.” wih

 

Chapter 13

11 USC Ch. 13: ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH REGULAR INCOME -  This chapter only applies to individuals with regular income thus, corporations or partnerships are not protected under Chapter 13. Plus, like Chapter 12, only the debtor can file for Chapter 13 bankruptcy; a creditor cannot force the individual into Chapter 13 bankruptcy. As opposed to Chapter 7 Liquidation, the debtor in Chapter 13 will retain possession of his/her property and/or estate. However, “The debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable.” [USC02] 11 USC Ch. 13: ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH REGULAR INCOME (house.gov)

 

 

Chapter 15

11 USC Ch. 15: ANCILLARY AND OTHER CROSS-BORDER CASES – Chapter 15 involves cases dealing with the “Model Law on Cross-Border Insolvency”. This entails the cooperation for bankruptcy cases which involves all courts of the United States and “the courts and other competent authorities of foreign countries involved in cross-border insolvency cases.” Types of bankruptcy includes “legal certainty for trades and investment” and “a foreign proceeding and a case under this title with respect to the same debtor are pending concurrently.” (USC02] 11 USC Ch. 15: ANCILLARY AND OTHER CROSS-BORDER CASES (house.gov)

 

 

 

 

Topic Questions:

1. In a bankruptcy case involving a railroad, the railroad company could only file for bankruptcy relief under Chapter 11 of the Code. In Chapter 7 of the Code the book notes “Liquidation under Chapter 7 is available to all persons who may be debtors under this chapter, whether they are individuals, partnerships, or corporations.” However, Railroads, insurance companies, and  certain  banking  institutions  may  not  be  debtors  under Chapter 7 because  they are “engaged in business… and are excluded from liquidation under the bankruptcy laws because they are covered for insolvency and receivership purposes under other state and federal legislation.”

A railroad could file for Reorganization bankruptcy relief under Chapter 11 of the Code. This would be “under special provisions in Chapter 11. U.S.C.A. §§  1161–1174  (railroad  reorganization).” (Introduction To Bankruptcy Law).

           

2. It is within Subchapter 1 (Commencement of a Case) of Chapter 3 of the Code that information on an involuntary bankruptcy case is found. An involuntary case may be commenced only under Chapter 7 and Chapter 11 of the Code, and only against “a person, except a farmer, family farmer, or a corporation that is not a moneyed, business, or commercial corporation, that may be a debtor under the chapter under which such case is commenced.” 11 U.S.C.A. §§ 301, 303.( Introduction To Bankruptcy Law). A petition under Chapter 7 or 11 of this title must be filed within the bankruptcy court against a person to commence filing an involuntary case. (https://www.law.cornell.edu/uscode/text/11/303).

 

3. In Chapter 5 of the Code, it is under 11 U.S.C. § 543 - U.S. Code - Unannotated Title 11. Bankruptcy § 543, that information is found on authorizing a bankruptcy trustee to avoid a prepetition fraudulent transfer of property by the debtor, along with designating the prepetition time period during which transfers are subject to such an avoidance claim by the trustee. As noted under the following web site (https://codes.findlaw.com/us/title-11-bankruptcy/11-usc-sect-543.html), “a custodian with knowledge of the commencement of a case under this title concerning the debtor may not make any disbursement from, or take any action in the administration of, property of the debtor, proceeds, product, offspring, rents, or profits of such property, or property of the estate, in the possession, custody, or control of such custodian, except such action as is necessary to preserve such property.”

 

Furthermore under Chapter 5 of the Code , a custodian needs to do the following:

• deliver to the trustee any property of the debtor held by or transferred to such custodian, or proceeds, product, offspring, rents, or profits of such property, which is in such custodian's possession, custody, or control on the date that such custodian acquires knowledge of the commencement of the case;  and
• file an accounting of any property of the debtor, or proceeds, product, offspring, rents, or profits of such property, that, at any time, came into the possession, custody, or control of such custodian.

Reflection Questions:

1. The primary information which was discussed in this week’s module was the differences between the various chapters of Title 11 Bankruptcy. I had always known there were differences, but after reading this week’s material, it helped me to see how the various chapters worked and how each one applied. Bankruptcy is a topic I have no previous experience with (thank goodness), so this was beneficial to my education of the topic. I do hope that personally this is a topic I will have to deal with; however, now that I have a better understanding of how it works, I do know how it would apply to my individual situation.
2. As far as social and ethical issues involved in this subject matter, bankruptcy seems like it is a straightforward topic, even though it is unbelievably detailed. I cannot say I see a lot of social or ethical issues. If there were any that I would point out, I would refer to cases with Chapter 7 Liquidation, when individuals have all their assets and property completely liquidated. That seems like a case where this is a situation when it could be an ethical situation; having the individuals’ complete estate liquidated.
3. Bankruptcy is a complicated topic. There is a lot of details involved with this topic; thus, that is why probably taken too long to complete this assignment. I did not want to rush through this assignment, since I wanted to try and have a clearer understanding of how the process works. I will admit there are parts of this topic that are confusing, especially trying to read through the Bankruptcy Codes. However, I have taken time to read and reread through the information. If I do have questions, I will be sure to reach out and ask questions.