2M MODULE27 BANKRUPTCY

1. Consumer debts to a single debtor under specified conditions for luxury goods or services made'
within 60 days of filing
2. Certain cash advances based on consumer credit taken within 60 days of filing
3. Any debt from violation of securities laws including those under Sarbanes-Oxley Act
4. Sarbanes-Oxley Act makes it criminal for any person to intentionally falsify, destroy, or cover up
records intending to influence proper investigation or administration of matters involving bankruptcy
cases
a. Violation punishable by imprisonment or fine or both
5. Revocation of Discharge
6. Discharge may be revoked if
7. Bankrupt committed fraud during bankruptcy proceedings unknown to creditors seeking revoca-
tion
EXAMPLE: A bankrupt conceals assets in order to defraud creditors.
(1) Must be applied for within one year of discharge
8. Bankrupt acquired rights or title to property of estate and fraudulently failed to report this
9. Bankrupt refused to obey lawful court order or refused to testify when not in violation of his/her
constitutional right against self incrimination
10. Reaffirmation
11. Debtor promises to pay a debt that will be discharged. The Code makes it difficult to reaffirm
dis-
chargeable debt.
12. To be enforceable, reaffirmation of dischargeable debt must satisfy the following conditions:
(1) Reaffirmation must take place before discharge granted
(2) Must be approved by bankruptcy court
(3) Debtor is allowed sixty days to rescind reaffirmation once agreed to
(a) Debtor must have received appropriate warnings from the court or attorney on effects of
reaffirmation, and
(b) If also involves consumer debt not secured by real property, court must approve new
agreement as being in best interests of debtor and not imposing undue
hardship on debtor
13. Business Reorganization-Chapter 11
14. Goal is to keep financially troubled firm in business
15. It is an alternative to liquidation under Chapter 7 (straight bankruptcy)
16. In general, allows debtor to keep assets of business
17. Can be initiated by debtor '(voluntary) or creditors (involuntary)
18. Available to individuals, partnerships, or-corporations including railroads. Other entities ineligible
to be debtors under Chapter 7 are ineligible under Chapter 11.
19. If involuntary, same requirements must be met as needed to initiate a Chapter 7 involuntary pro-
ceeding
20. Each class of similar creditors and shareholders creates separate committees to make master
re-
organization plan
21. Investigation of debtor's financial affairs is conducted
22. Committees meet together and negotiate reorganization plan if possible
23. If debtor's management capable of continuing business, no trustee is appointed
24. If debtor's management is not considered capable of running business, then trustee is appointed to
conduct business
25. Approval of reorganization plan needs
(1) Over 112 of creditors in each committee owed at least 2/3 of the total debt in that class, and
.
(2) Acceptance of stockholders' holding at least 2/3 in amount of the stock
,