Basic Debtor-Creditor Terminologynationalparalegal.edu › uploads › 19LDP class 9 slides.pdf ·...

Legal Document Preparation Class 9 Slide 1

Basic Debtor-Creditor Terminology

• Debtor: person who owes the money

• Creditor: person to whom the money is owed

• To qualify as a “debt,” it must be:

– Certain (i.e., not contingent on some future event)

– Liquidated (a sum certain)

– Enforceable under the law

• Judgment creditor:

– This is a creditor who has obtained a judgment in court

against the debtor


Major Bankruptcy Types• Chapter 7 (Liquidation)

– This is where the debtor gives up all of his assets (except exempt assets)

– If it’s a business, it gives up all its assets and inventory and ceases to operate unless a creditor takes it over

• Chapter 11

– Mainly applicable to businesses

– The business “reorganizes” its debts through renegotiation with the creditors

• Chapter 13

– This is for a working individual

– The individual “reorganizes” its debts through renegotiation with his or her creditors

– Must be voluntary


Involuntary Bankruptcy

• If a debtor simply refuses to pay his/her debts and

doesn’t file a petition for bankruptcy, a creditor can

“force” the debtor into Chapter 7 bankruptcy.

• The Procedure after this happens is basically the same

as with a voluntary proceeding.

• Automatic Stay

– This applies in voluntary and involuntary proceedings

– After the petition is filed, the creditors must stop all

collections actions (even on secured loans!) pending the

hearing on the petition


Bankruptcy Documents- the Proof of Claim

• Each creditor must prepare and submit to the court a

“proof of claim,” which gives notice of:

– The nature and amount of the debt owed by the debtor

– Basis for the claim

– Whether and to what extent the claim is secured

– Whether a judgment has been obtained that relates to the

claim

– Whether there are any applicable priorities relevant to the

claim

– Any setoffs that have been taken against the debt

– Supporting documents that proves the debt


Bankruptcy Procedure

• First, the Petition is filed

• First meeting of the creditors

– The creditors can get all kinds of info from debtor

– Proof of claims must be filed within 90 days of this

• Trustee is designated by the court

– This person is in charge of administering the debtor’s assets until it is distributed

– Sometimes the Debtor can remain in possession of the assets, especially in a non-liquidation bankruptcy

• Then, the negotiation process takes place

• Finally, the discharge is issued or the petition isdismissed


Fraudulent Transfers

• One much be careful to look back in time before the filing of the petition to make sure there are no transactions that can be undone by the court. These include:

– Voidable transfers

• Any transfer made up to a year before the petition was filed with the intent to defraud creditors

– Preferential transfer

• Given to one creditor shortly before the petition, which gives the creditor more than s/he would have received through the bankruptcy process

– Constructive Fraudulent Transfer

• Any gift made by an insolvent debtor shortly before the petition


Information to collect for a Bankruptcy Client

• Personal info

– Name, address, Soc. Sec. #, etc.

• Information about any prior bankruptcy filings

• Property with secured debts

• Other property owned

• Secured Debts

• Unsecured Debts

• Property that may be exempt

• Income sources

QUIZ TIME!



Preparing the Petition

• First, determine the proper venue!

• Fill out all info requested on the Petition

• Also, the following information must also often be included:

• Tax returns

• Statements from financial accounts

• Business books and records

• Property held by the debtor for others or held by others for the

debtor

• Prior bankruptcies

• Ways debts have been collected, such as setoffs

• Recent transfers (watch for fraudulent transfers)

• Repossessions, losses, etc.

• Expenses of preparing petition, including attorney’s fees, etc.


Bankruptcy Petition- Schedules

• Schedule A- Debtor’s real property

• Schedule B- Debtor’s personal property

• Schedule C- Property claimed as exempt

• Schedule D-Secured creditors and security interests

• Schedule E- Creditors with priority, but no security

• Schedule F- List of unsecured creditors

• Schedule G- Debtor’s standing contractual obligations and contracts

under which the debtor is owed money

• Schedule H- Any debts on which the debtor is a co-obligor

• Schedule I- Income information of the debtor and spouse

• Schedule J- List of debtor’s monthly expenses

• Summary of schedules


Bankruptcy Petition- Statement of Financial Affairs

• This must be submitted by a business petitioner. Includes:

– Information about the business

– Books and records or business

– Financial Statements

– Inventories

– Other income (e.g., investments by the business)

– Tax returns

– Financial Accounts

– Involvement in lawsuits

– Profits and losses statements

– Recent transfers

– Withdrawals by business members, etc.


Other Important Bankruptcy Documents

• Order confirming plan

– After the negotiation to alter the payments in a Chapter 11

or 13 proceeding, the court has to approve the plan for it to

go into effect.

– The petitioner’s attorney has to prepare the complete

documentation of the plan to be signed by the court

• Discharge

– This is the point of the proceeding- it absolves the debtor

of all debts unless they are included in the approved plan

– Often, the petitioner’s attorney has to prepare the

discharge to be signed by the court

Date post:	11-Feb-2021
Category:	Documents
Upload:	others
View:	3 times
Download:	0 times