Bankruptcy
Stetson University College of Law
Prof. Theresa J. Pulley Radwan
Who May be a Debtor – 109 [a, b, d, e, g, h(1)]
(a) – Generally – persons or corps. residing or domiciled in US, or municipalities
(b) – Chap. 7 – persons (including corps.) not railroads, banks, etc.
(d) – Chap. 11 – railroads, persons (under Chap 7, except stock/commodities brokers), uninsured State member banks, and Fed Reserve Act 25A corps pursuant to FDIC Improvement Act 1949
(e) – Chap 13 –
only individuals; or individuals and spouse (excluding stock brokers), with:
noncontingent, liquidated, unsecured debts of less than $383,175
noncontingent, liquidated, secured debts of less than $1,149,525; or
(g) – Farmers precluded from Bankruptcy:
who have been a debtor in a case pending under this title at any time in the preceding 180 days; if
the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or
the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title
(h)(1) – Received approved nonprofit budget and credit counseling agency within 180 day prior to filing
Conversion – 706
(a) Debtor
may convert Chap 7 to Chap 11, 12, or 13 at any time (this is nonwaivable);
except where case has been previously converted under: 1112, 1208, 1307
(b) Party in Interest
may convert to Chap 11, after notice and hearing
(c) The Court
may not convert to Chap 12 or 13
unless debtor requests or consents
(d) conversion may not take place unless debtor is eligible under new chapter
Dismissal or Conversion to Chaps. 11 or 13 707
Dismissal 707(a)
For Debtor Failures:
Court may dismiss, After notice and hearing (with cause only):
A. unreasonable delay by debtor that is prejudicial to creditors
B. nonpayment of required fees or charges
C. in voluntary case, debtor’s failure to file required information (521(a)(1)) within 15 days (or greater time provided by court) of petition (after US trustee’s motion)
Abuse of Bankruptcy – Dismissal or Conversion 707(b)
1. Generally
A. After Notice and Hearing,
B. Court (on its own or by trustee motion), or Party in Interest may
1. Dismiss – Individual debtor with primarily consumer debts; or
2. Convert (to Chap 11 or 13), with debtor’s consent
2. Presumption of Abuse
A. Exists Where Means Test Calculation, multiplied by 60 is not Less than the lesser of
1. The greater of either
a. 25% of debtor’s nonpriority unsecured claims, or
b. $7,475; or
2. $12,475
B. Means Test – See Chart
C. Rebutting Abuse Presumption
1. demonstration of special circumstances requiring adjustments to monthly income (i.e. serious medical condition or a call or order to active duty in the Armed Forces)
2. debtor must itemize additional expenses or income adjustments
3. Where No Presumption of Abuse Exists, court also may consider
A. bad faith of debtor
B. totality of circumstances demonstrating abuse
4. Debtor’s Attorney Liability
A. If court grants motion to dismiss or convert and finds debtor’s attorney violated rule 9011 Federal Rules of Bankruptcy, may be
1. required to pay trustee’s reasonable motion costs
2. assessed appropriate civil penalty (payable to trustee)
B. Signature on Petition certifies
1. performed reasonable investigation and determined the petition, motion, or pleading is
a. well-rounded in fact; and
b. warranted by existing law or good faith argument
2. no knowledge information filed in petition is incorrect
5. Dismissal or Conversion Prohibited –
A. Military
1. disabled veteran, indebtedness occurring
a. on active duty
b. performing homeland defense activity
2. during and for a period of 540 days after the end of
a. active duty (90 days+)
b. homeland defense activity
3. Army or Guard reserve activated after September 11, 2001
a. active duty (90 days+)
b. homeland defense activity
B. Income Limitations
1. If household income less than
a. 1 person – median family income of 1 person
b. 2-4 individuals – the highest median family income of the applicable State for a family of the same number or fewer individuals; or
c. 4+ individuals
terest from sale of money order made after 14 days prepetition
III. 1306(a)(1) – Property of the Estate
A. any property acquired between commencement and closure of bankruptcy case is included
522(b) – Exemptions
Individual Debtors, either:
1. Domicile (State or local) Specific Exemptions
a. Domicile is place where debtor was domiciled either:
1) for the 730 days pre-petition;
2) 180 days immediately before 730-day period; or
3) the place of longest residence in that 180-day period prior to 730-day period
b. certain interests as joint tenants or tenants in entirety; and
c. retirement funds IRS 401, 403, 408, 408A, 414, 457, and 501(a)
2. 522 (d) Exemptions
a. Real or personal property used as a residence – up to $22,975
b. Motor vehicle – up to $3675
c. Clothes, furniture, household goods (personal use) – up to $1550
d. Jewelry (personal use) – up to $1550
e. Miscellaneous (any property)
1) up to $1225, plus
2) any unused exemption [leftover from 522(d)(1)] – up to $11,500
f. Professional tools/equipment, etc. – up to $2300
g. Unmatured life insurance contract
1) generally – (no limit specified)
2) dividend or interest under, or loan value – up to $12,250
h. Professionally prescribed health aids – (no limit specified)
i. Rights to receive benefits – (no limit specified):
1) Social Security benefits
2) veteran’s’ benefit
3) disability, illness, or unemployment benefit
4) alimony, maintenance – (limited to reasonably necessary)
5) payments under
a) stock bonus, pension, profit sharing, annuity, etc.
b) limited to reasonably necessary
c) exception:
i. plan established by an insider
ii. payment is on account of age or length of service, and
iii. does not qualify under IRS 401(a), 403(a),(b), 408
