Welcome to Seminar #3Welcome to Seminar #3

► The first two weeks flew by and you guys are doing The first two weeks flew by and you guys are doing great so PLEASE keep up the excellent work with great so PLEASE keep up the excellent work with the Discussion board and on your assignments!!the Discussion board and on your assignments!!

You guys are Winning!!!!You guys are Winning!!!!

Like I said – keep up the good work!!Like I said – keep up the good work!!

You guys did so well this past You guys did so well this past week….week….

►That I did not have as many phone That I did not have as many phone calls to make this past Sunday….and calls to make this past Sunday….and that makes for a happy Adam!!that makes for a happy Adam!!

Now let’s focus on this week’s Now let’s focus on this week’s assignments:assignments:

►We have our usual discussion board We have our usual discussion board workwork

►We have our usual quizWe have our usual quiz►Another short paperAnother short paper

Short Paper for Week #3….Short Paper for Week #3….

► This week's short paper deals with the This week's short paper deals with the Advantages and Disadvantages of Advantages and Disadvantages of Bankruptcy. The good news is that there are Bankruptcy. The good news is that there are no more short papers or writing no more short papers or writing assignments for that matter until Week #7.assignments for that matter until Week #7.

►What is gained or lost by filing for What is gained or lost by filing for bankruptcy?bankruptcy?

► Create a fictional example to illustrate your Create a fictional example to illustrate your comparison AND then explain how filing for comparison AND then explain how filing for Bankruptcy would be BOTH good and bad.Bankruptcy would be BOTH good and bad.

►Ok? Not too bad, right? Ok? Not too bad, right?

How did the Demand Letters How did the Demand Letters go?go?

► I thought that was a pretty straight-I thought that was a pretty straight-forward assignment and I think you forward assignment and I think you guys probably did well on it!guys probably did well on it!

► I will have the Demand Letters graded I will have the Demand Letters graded on Saturday of this week.on Saturday of this week.

► If you have not submitted it yet for this If you have not submitted it yet for this week – get it to me by Saturday.week – get it to me by Saturday.

I cannot get enough of this class. Adam is the best!I cannot get enough of this class. Adam is the best!

► Tonight’s seminar was the first seminar that Tonight’s seminar was the first seminar that required a real lot of reading from our required a real lot of reading from our textbook. I know it was a lot of reading and textbook. I know it was a lot of reading and it is more than normal….so if you weren't it is more than normal….so if you weren't able to read all of the chapters yet - then able to read all of the chapters yet - then don't sweat it BECAUSE I will start out by don't sweat it BECAUSE I will start out by giving a very quick synopsis of what each giving a very quick synopsis of what each Chapter covered before we cover tonight’s Chapter covered before we cover tonight’s material….material….

Here we go with the recap of Here we go with the recap of the Reading for this week….the Reading for this week….

► Chapter 1 in Basic Bankruptcy Law for Chapter 1 in Basic Bankruptcy Law for Paralegals introduces the history of Paralegals introduces the history of debt and bankruptcy, including the debt and bankruptcy, including the evolution of bankruptcy systems evolution of bankruptcy systems around the world. The chapter also around the world. The chapter also explores the history and evolution of explores the history and evolution of bankruptcy law in the Unites States. bankruptcy law in the Unites States.

Chapter 2….Chapter 2….

►Chapter 2 focuses on the Bankruptcy Chapter 2 focuses on the Bankruptcy Code, which is largely a self-contained Code, which is largely a self-contained system designed to settle the financial system designed to settle the financial affairs of debtors. The Code is divided affairs of debtors. The Code is divided into chapters. Chapter 7 is primarily a into chapters. Chapter 7 is primarily a liquidation proceeding, while Chapters liquidation proceeding, while Chapters 11 and 13 are reorganization 11 and 13 are reorganization proceedings that apply to specific proceedings that apply to specific kinds of debtors. kinds of debtors.

Chapter 4….Chapter 4….

►Chapter 4 explains the filing of a Chapter 4 explains the filing of a bankruptcy petition, both voluntarily bankruptcy petition, both voluntarily and involuntarily. The petition is vital and involuntarily. The petition is vital because a debtor is not legally because a debtor is not legally bankrupt until the court enters an bankrupt until the court enters an order for relief from creditors and order for relief from creditors and debt. debt.

Chapter 5….Chapter 5….

►Chapter 5 details the general rules of Chapter 5 details the general rules of construction and definitions that apply construction and definitions that apply across the entire Code. across the entire Code.

And last but not least…. Chapter And last but not least…. Chapter 6:6:

► It outlines Section 101 of the Code. It outlines Section 101 of the Code. Specifically, Section 101 defines the many Specifically, Section 101 defines the many terms that are regularly used in other Code terms that are regularly used in other Code sections. sections. (Hint: this may be on this week’s (Hint: this may be on this week’s quiz) ;)quiz) ;)

►Here is a link to Section 101:Here is a link to Section 101:

http://www.law.cornell.edu/uscode/http://www.law.cornell.edu/uscode/usc_sec_11_00000101----000-.htmlusc_sec_11_00000101----000-.html

► In today's economy, it is not difficult for a person or In today's economy, it is not difficult for a person or a company to become overwhelmed with bills that a company to become overwhelmed with bills that cannot be paid. When a debtor's outstanding bills cannot be paid. When a debtor's outstanding bills become too great, bankruptcy may be the only become too great, bankruptcy may be the only reasonable solution. reasonable solution.

► In the past, debtors were often considered In the past, debtors were often considered deadbeats or failures. This is no longer the case. deadbeats or failures. This is no longer the case. There are over half a million bankruptcy petitions There are over half a million bankruptcy petitions filed each year, and bankruptcy has become widely filed each year, and bankruptcy has become widely accepted. accepted.

►Doesn’t that seem crazy! Over half a Doesn’t that seem crazy! Over half a million bankruptcy petitions filed each million bankruptcy petitions filed each year! It does to me….year! It does to me….

Present bankruptcy laws accomplish two Present bankruptcy laws accomplish two important objectives….important objectives….

►The first is to protect a debtor from The first is to protect a debtor from any future claims arising from his or any future claims arising from his or her debts.her debts.

►The second is to provide an equitable The second is to provide an equitable distribution of the debtor's assets distribution of the debtor's assets among his or her creditors. among his or her creditors.

Here is a brief history of Here is a brief history of Bankruptcy….Bankruptcy….

►According to the United States According to the United States Constitution, Article I, Section 8, "The Constitution, Article I, Section 8, "The Congress shall have the power to . . . Congress shall have the power to . . . establish. . . uniform laws of the establish. . . uniform laws of the subject of bankruptcies throughout the subject of bankruptcies throughout the United States." As such, all bankruptcy United States." As such, all bankruptcy proceedings are handled in federal proceedings are handled in federal courts. courts.

How long has Bankruptcy been around?How long has Bankruptcy been around?

► The first bankruptcy laws were passed in The first bankruptcy laws were passed in 1898. The Bankruptcy Act of 1898 controls 1898. The Bankruptcy Act of 1898 controls all bankruptcy petitions filed before October all bankruptcy petitions filed before October 1, 1979. 1, 1979.

► In 1978, Congress updated the bankruptcy In 1978, Congress updated the bankruptcy laws with the Bankruptcy Reform Act of laws with the Bankruptcy Reform Act of 1978 into the code we are familiar with 1978 into the code we are familiar with today. The 1978 act regulates bankruptcy today. The 1978 act regulates bankruptcy cases filed after October 1, 1979. cases filed after October 1, 1979.

AND THEN a new bankruptcy law went into effect in October of 2005….AND THEN a new bankruptcy law went into effect in October of 2005….

►A new bankruptcy law went into A new bankruptcy law went into effect in October of 2005, making effect in October of 2005, making it harder for consumers to prove it harder for consumers to prove that they should be allowed to that they should be allowed to clear their debts in what's known clear their debts in what's known as a "fresh start" -- or Chapter 7 -- as a "fresh start" -- or Chapter 7 -- bankruptcy.bankruptcy.

What is BAPCPA?What is BAPCPA?

► The Bankruptcy Abuse Prevention and The Bankruptcy Abuse Prevention and Consumer Protection Act, or BAPCPA, is a law Consumer Protection Act, or BAPCPA, is a law that was passed in 2005. This law made that was passed in 2005. This law made significant changes in the process of significant changes in the process of bankruptcy and the way it works in the United bankruptcy and the way it works in the United States. The basic purpose of this law is to States. The basic purpose of this law is to make it more difficult for consumers to make it more difficult for consumers to bankrupt under Chapter 7. However, some of bankrupt under Chapter 7. However, some of those consumers who do not qualify for those consumers who do not qualify for bankruptcy under Chapter 7 can still use bankruptcy under Chapter 7 can still use Chapter 13.Chapter 13.

►Prior to the 1970s, "referees" heard all Prior to the 1970s, "referees" heard all bankruptcy matters. These referees bankruptcy matters. These referees are now called bankruptcy judges. are now called bankruptcy judges.

►Title 28 of the U.S. Code contains Title 28 of the U.S. Code contains information about all legislation information about all legislation pertaining to U.S. Bankruptcy Court and pertaining to U.S. Bankruptcy Court and judges.judges.

►Title 11 of the United States Code Title 11 of the United States Code regulates the substantive bankruptcy regulates the substantive bankruptcy laws. laws.

►Title 11 is often referred to as the Title 11 is often referred to as the Bankruptcy Code.Bankruptcy Code.

► The United States Bankruptcy Code is primarily a The United States Bankruptcy Code is primarily a self-contained system designed to resolve the self-contained system designed to resolve the financial affairs of a debtor. The Bankruptcy Code is financial affairs of a debtor. The Bankruptcy Code is organized into chapters. There are 8 chapters at the organized into chapters. There are 8 chapters at the present time. present time.

► Three chapters (1, 3, and 5) contain rules that Three chapters (1, 3, and 5) contain rules that apply in all of the various Chapter proceedings. The apply in all of the various Chapter proceedings. The rules in those 3 chapters include the basic features rules in those 3 chapters include the basic features of debtor relief, discharge, exemptions, and the of debtor relief, discharge, exemptions, and the automatic stay, as well as the basic features of debt automatic stay, as well as the basic features of debt collection, claims, and their priority of distribution.collection, claims, and their priority of distribution.

►The remaining 5 chapters of the The remaining 5 chapters of the Bankruptcy Code (7, 9, 11, 12 and 13) Bankruptcy Code (7, 9, 11, 12 and 13) comprise the various types of comprise the various types of bankruptcy proceedings available to bankruptcy proceedings available to debtors. The different proceedings debtors. The different proceedings may be categorized as either may be categorized as either “liquidation” or “reorganization”“liquidation” or “reorganization” proceedings.proceedings.

What is a Liquidation?What is a Liquidation?

► In a liquidation, a debtor’s non-exempt In a liquidation, a debtor’s non-exempt assets are sold by a trustee and the assets are sold by a trustee and the proceeds are distributed to the proceeds are distributed to the creditors. creditors.

What is a Reorganization?What is a Reorganization?

► In a reorganization, the debtor will In a reorganization, the debtor will seek approval of a seek approval of a repayment planrepayment plan that will avoid liquidation.that will avoid liquidation.

►Chapter 7 is a liquidation proceeding.Chapter 7 is a liquidation proceeding.► Chapters 11 and 13 are the most Chapters 11 and 13 are the most

common reorganization proceedings.common reorganization proceedings.►A Chapter 11 is a business A Chapter 11 is a business

reorganization. reorganization. ►A Chapter 13 is a individual (aka A Chapter 13 is a individual (aka

consumer) reorganiztion.consumer) reorganiztion.

ALSO, here are some quick Key Terms….they will be kind of obvious, but I just wanted to go over them real ALSO, here are some quick Key Terms….they will be kind of obvious, but I just wanted to go over them real quick.quick.

►Debtor – is the entity that is bankrupt Debtor – is the entity that is bankrupt and owes the debt.and owes the debt.

►Creditor – the entities to whom the Creditor – the entities to whom the debts are owed.debts are owed.

►Trustee – is an independent third party Trustee – is an independent third party who liquidates the estate’s assets and who liquidates the estate’s assets and distributes dividends to the creditors. distributes dividends to the creditors. We will over Trustees in more depth in We will over Trustees in more depth in a few weeks….a few weeks….

Now let’s talk about the Bankruptcy Now let’s talk about the Bankruptcy

Courts….Courts…. ► The primary concern of the bankruptcy courts is to The primary concern of the bankruptcy courts is to

hear core matters, that is, matters that relate hear core matters, that is, matters that relate specifically to the Bankruptcy Code.specifically to the Bankruptcy Code.

► However, bankruptcy courts have also been given However, bankruptcy courts have also been given the authority to hear matters that, while not the authority to hear matters that, while not regulated by the Bankruptcy Code, may affect the regulated by the Bankruptcy Code, may affect the debtor's bankruptcy estate. These secondary debtor's bankruptcy estate. These secondary matters are often referred to as non-core matters. matters are often referred to as non-core matters. Some examples include personal injury, wrongful Some examples include personal injury, wrongful death, and civil contract claims that may affect the death, and civil contract claims that may affect the

debtor's financial position.debtor's financial position.

Who can tell me the two types of Bankruptcy Who can tell me the two types of Bankruptcy Petitions??Petitions??

► Voluntary and Involuntary?Voluntary and Involuntary?

There are voluntary petitions and There are voluntary petitions and involuntary petitions.involuntary petitions.

► If the petition is filed by the Debtor, If the petition is filed by the Debtor, then it is a Voluntary Petition. then it is a Voluntary Petition. However, if it is filed by the Creditors it However, if it is filed by the Creditors it is an Involuntary Petition. Makes is an Involuntary Petition. Makes sense, right? :-)sense, right? :-)

►A bankruptcy petition should be filed in A bankruptcy petition should be filed in the district court in which the petitioner the district court in which the petitioner had (1) a domicile, residence, principal had (1) a domicile, residence, principal place of business in the United States or place of business in the United States or (2) principal assets in the United States for (2) principal assets in the United States for the 180 days immediately preceding such the 180 days immediately preceding such filing. filing.

►The Voluntary Petition is the most The Voluntary Petition is the most common way of initiating a Bankruptcy common way of initiating a Bankruptcy proceeding. proceeding.

Not so fast….Not so fast….

► A Debtor is not legally bankrupt until the court A Debtor is not legally bankrupt until the court enters an order for relief. This order is automatic enters an order for relief. This order is automatic when a voluntary petition is filed and is the when a voluntary petition is filed and is the judgment that the petitioning creditors seek in an judgment that the petitioning creditors seek in an involuntary petition.involuntary petition.

► The procedure of an involuntary petition can be The procedure of an involuntary petition can be compared to a non-bankruptcy lawsuit. The compared to a non-bankruptcy lawsuit. The petitioning creditors are essentially plaintiffs who petitioning creditors are essentially plaintiffs who seek the entry of an order for relief against an seek the entry of an order for relief against an alleged debtor who is essentially a defendant.alleged debtor who is essentially a defendant.

What exactly do they do?What exactly do they do?

►So who can tell me what the role of So who can tell me what the role of the Bankruptcy Court is, in general, in the Bankruptcy Court is, in general, in Bankruptcy proceedings…. Bankruptcy proceedings….

Well, here is what they do….Well, here is what they do….

► In many bankruptcy proceedings, the In many bankruptcy proceedings, the bankruptcy court is responsible for bankruptcy court is responsible for gathering up the debtor's assets, gathering up the debtor's assets, known as the estate, and dividing known as the estate, and dividing them among the creditors. As many of them among the creditors. As many of you know, the amount paid to each you know, the amount paid to each creditor may be only a fraction of the creditor may be only a fraction of the amount owed to them. amount owed to them.

What exactly makes up the assets that are What exactly makes up the assets that are found in a Bankruptcy Estate??found in a Bankruptcy Estate??

►The assets in the bankruptcy estate The assets in the bankruptcy estate consist of most of the property owned by consist of most of the property owned by the debtor at the time the bankruptcy the debtor at the time the bankruptcy petition is filed. The bankruptcy estate petition is filed. The bankruptcy estate includes both real property and personal includes both real property and personal property. It also includes any property in property. It also includes any property in which the debtor has an interest, even which the debtor has an interest, even though the title may be held in someone though the title may be held in someone else's name. else's name.

Who can tell me what exempt property is? Who can tell me what exempt property is? This should be an easy one!! :-)This should be an easy one!! :-)

► In order to give the debtor enough resources In order to give the debtor enough resources to make a fresh financial start, there are to make a fresh financial start, there are certain assets that will be exempt from the certain assets that will be exempt from the bankruptcy proceedings. bankruptcy proceedings.

► Exempt property cannot be touched or Exempt property cannot be touched or affected by most creditors. The bankruptcy affected by most creditors. The bankruptcy law provides such a list (11 U.S.C. §522(b)law provides such a list (11 U.S.C. §522(b)(1). however, it also allows each state to (1). however, it also allows each state to substitute its own list of exemptions. substitute its own list of exemptions.

Now let’s talk more about Trustees….Now let’s talk more about Trustees….

► Depending on the type of bankruptcy proceeding, a Depending on the type of bankruptcy proceeding, a

trustee may be appointed. The trustee is responsible trustee may be appointed. The trustee is responsible for the safekeeping of the property of the estate. He for the safekeeping of the property of the estate. He or she must make sure that the bankruptcy estate is or she must make sure that the bankruptcy estate is not unnecessarily depleted during the bankruptcy not unnecessarily depleted during the bankruptcy proceedings. proceedings.

► The powers of the trustee may include (1) collecting The powers of the trustee may include (1) collecting the property of the debtor, (2) examining and the property of the debtor, (2) examining and determining the validity of any transfers made by the determining the validity of any transfers made by the debtor immediately before the bankruptcy was filed, debtor immediately before the bankruptcy was filed, (3) checking into the validity of any sales the debtor (3) checking into the validity of any sales the debtor may have made to ensure that no fraudulent may have made to ensure that no fraudulent conveyances were made, (4) checking the validity of conveyances were made, (4) checking the validity of the creditors' claims, and (5) making sure that all the creditors' claims, and (5) making sure that all assets have been accounted for and that all claims assets have been accounted for and that all claims have been identified. have been identified.

Who can tell me what Solutions are provided by Who can tell me what Solutions are provided by Bankruptcy?? Bankruptcy?? (this is what your paper is about this week!!)(this is what your paper is about this week!!)

► There are two basic solutions provided to debtors who file for There are two basic solutions provided to debtors who file for bankruptcy. One is to liquidate the debtor's assets and pay bankruptcy. One is to liquidate the debtor's assets and pay the creditors. This usually occurs when the debtor is having the creditors. This usually occurs when the debtor is having drastic financial problems and will never be able to fully pay drastic financial problems and will never be able to fully pay all outstanding debts. This is commonly referred to as all outstanding debts. This is commonly referred to as liquidation or a Chapter 7 proceeding. liquidation or a Chapter 7 proceeding.

► The other solution offered by bankruptcy is to delay and/or The other solution offered by bankruptcy is to delay and/or reduce the amount of the debtor's debt. This approach does reduce the amount of the debtor's debt. This approach does not require the debtor to liquidate all assets. Instead, the not require the debtor to liquidate all assets. Instead, the debtor is permitted to retain the assets under an approved debtor is permitted to retain the assets under an approved reorganization plan. This type of bankruptcy proceeding is reorganization plan. This type of bankruptcy proceeding is often referred to as reorganization, a Chapter 11, or a Chapter often referred to as reorganization, a Chapter 11, or a Chapter 13 proceeding. 13 proceeding.