UNDERSTANDING BANKRUPTCY

Transcription

1 UNDERSTANDING BANKRUPTCY

2 LexisNexis Law School Publishing Advisory Board William Araiza Professor of Law Brooklyn Law School Ruth Colker Distinguished University Professor & Heck-Faust Memorial Chair in Constitutional Law Ohio State University Moritz College of Law Olympia Duhart Associate Professor of Law Nova Southeastern University Shepard Broad Law School Samuel Estreicher Dwight D. Opperman Professor of Law Director, Center for Labor and Employment Law NYU School of Law David Gamage Assistant Professor of Law UC Berkeley School of Law Joan Heminway College of Law Distinguished Professor of Law University of Tennessee College of Law Edward Imwinkelried Edward L. Barrett, Jr. Professor of Law UC Davis School of Law Paul Marcus Haynes Professor of Law William and Mary Law School Melissa Weresh Director of Legal Writing and Professor of Law Drake University Law School

3 UNDERSTANDING BANKRUPTCY Third Edition Jeff Ferriell Professor of Law Capital University Law School Edward J. Janger David M. Barse Professor of Law Brooklyn Law School

4 ISBN: ISBN: (ebook) Library of Congress Cataloging-in-Publication Data Ferriell, Jeffrey Thomas, Understanding bankruptcy / Jeff Ferriell, Professor of Law, Capital University Law School ; Edward J. Janger, Professor of Law, Brooklyn Law School. -- Third edition. pages cm. Includes index. ISBN Bankruptcy--United States. I. Janger, Edward J. II. Title. KF1524.F dc This publication is designed to provide authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender and the Matthew Bender Flame Design are registered trademarks of Matthew Bender Properties Inc. Copyright 2012 Matthew Bender & Company, Inc., a member of LexisNexis. All Rights Reserved. No copyright is claimed by LexisNexis or Matthew Bender & Company, Inc., in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to copy material may be licensed for a fee from the Copyright Clearance Center, 222 Rosewood Drive, Danvers, Mass , telephone (978) NOTE TO USERS To ensure that you are using the latest materials available in this area, please be sure to periodically check the LexisNexis Law School web site for downloadable updates and supplements at Editorial Offices 121 Chanlon Rd., New Providence, NJ (908) Mission St., San Francisco, CA (415) (2013 Pub.064)

5 PREFACE This book is designed to provide a basic introduction to bankruptcy and related state debtor-creditor law. It will be useful for students taking an introductory course in Creditors Rights that emphasizes bankruptcy, a course in Basic Bankruptcy, or an advanced course in Chapter 11 Reorganization. It attempts to provide students with a reasonably detailed discussion of the issues most likely to arise in these courses. It is as up-to-date as possible, given the fast-changing nature of the law it examines. This edition incorporates reported decisions interpreting the Bankruptcy Code through the end of June, The primary goal of this book is to bring order and clarity to a body of law for those who are newcomers to bankruptcy law. In addition, it provides a basic explanation of much of the commercial and debtor-creditor law that operates in the background of bankruptcy cases. We hope it provides a useful supplement to primary materials: the Bankruptcy Code, the Bankruptcy Rules, and cases decided under them. Students using this book will still need to study these fundamental materials in detail. In many situations they will find it useful to put this book down, pick up the Bankruptcy Code, and read the relevant statutory provision carefully. A full understanding requires facility with the Code, the Rules, and the cases. In the last three and a half decades, bankruptcy has evolved from a somewhat obscure specialty to one of the dominant bodies of American law. Traditionally, the bankruptcy bar was divided into two groups the rather small group that did consumer and small business bankruptcy, and the tiny group that worked on larger business reorganizations. Many bankruptcy practitioners retain a degree of nostalgia for the days when insolvency lawyers, if somewhat isolated from the profession as a whole, enjoyed (in much of the country at least) the kind of camaraderie that is usually associated with lawyers in a small town. Much of this has changed. Bankruptcy has become a boom area of practice, one of interest to a growing number of large firms. The annual rate of bankruptcy filings grew rapidly in the late 1990s and early 2000s, reaching a peak of over 1.5 million. That number declined after the Code was substantially amended in 2005, but rebounded to well over one million in the wake of the financial crisis of The administrative and judicial structure of bankruptcy has become elaborate and formalized; the scope of bankruptcy has grown in unexpected directions. Bankruptcy is now a serious matter not only for commercial and insolvency lawyers, but also for tax lawyers, domestic relations lawyers, environmental lawyers, intellectual property lawyers, and labor lawyers, as well as those involved in business and personal injury litigation generally. There are many reasons for this transformation. On the consumer side some say the change is attributable to the fact that bankruptcy no longer carries with it a stigma of failure and dishonesty. Others attribute this shift to changes in the consumer credit industry, especially the advent of subprime lending and lenders who can lend profitably to much riskier borrowers. On the business side, some alternatives to bankruptcy, especially state insolvency proceedings, have withered away or are ineffective in the face of national and multinational business enterprises. The Bankruptcy Code itself is in part iii

6 PREFACE responsible; it contains a number of legal devices that permit people and companies to achieve or at least to try to achieve goals that are simply not achievable under any other body of law. For example, bankruptcy is practically the only method of dealing with mass torts in a single consolidated proceeding. Along with the explosion of bankruptcy litigation has come a parallel explosion of academic interest in bankruptcy. Not long ago, most law schools had little more in their curriculum than a single course in Creditor s Rights, only part of which was taken up by bankruptcy law. Today, many schools have several courses, covering not only basic bankruptcy but reorganization bankruptcy, bankruptcy tax, partnership bankruptcy, bankruptcy environmental law, and the like. Similarly, for many years there was only one important secondary source Collier on Bankruptcy a venerable treatise first published in 1898 (the 16th edition of which is still the leading authority). 1 Now there are many sources. Of special interest to the law school community are the multiple law reviews that specialize in bankruptcy law, and the many articles on bankruptcy published in non-specialist law journals. We have tried to include a fair sampling of these other sources, to which students should turn for further discussion when they find themselves excited by a particular topic. 2 Bankruptcy has also become a hot topic among legal theorists. Nothing that touches so large a part of the American economy and American society can exist for long without triggering efforts to fit it within larger structures of economic and political thinking. While this book is primarily aimed at giving a basic overview of bankruptcy, it also introduces the reader to the most important theoretical perspectives. Bankruptcy is an area in which there is often little separation between theory and practice, not least because Congress is constantly returning to basic principles as it writes and rewrites the Bankruptcy Code. Bankruptcy law in this country is federal law. The substantive parts are found almost entirely in the Bankruptcy Code (Title 11 of the United States Code). Procedural rules are found mainly in the Federal Rules of Bankruptcy Procedure and in various parts of Title 28 of the United States Code (the judicial code ). A few provisions are in Title 18 of the United States Code (the federal criminal code ). Although some state law is directly incorporated into the Code, and other state law indirectly affects rights in bankruptcy, most of the conflicts between state law and bankruptcy law is resolved in favor of the latter. One of the features of federal law is the wealth of legislative history that underlies it. Insofar as the Bankruptcy Code is concerned, the primary sources of that history are the House and Senate Reports that accompanied its original enactment. There was also extensive floor debate on some provisions; and most of the subsequent amendments to the Code are supported by similar reports and debates. The weight to be given these sources is today controversial. Several members of the Supreme Court, most noticeably Justice Antonin Scalia, largely reject the use of legislative history in statutory 1 Not coincidentally, Collier s is a Matthew Bender publication. 2 The suggestion that one might find bankruptcy law interesting and exciting brings to mind the teenage daughter of one of your author s friends. She found her father s amateur radio hobby both interesting and exciting, but when she passed her FCC amateur radio licensing exam, and thus became a ham radio operator, she made her father (W8HI) and his law professor friend (K8ZDA), promise not to tell any of her peers. iv

7 PREFACE interpretation and sometimes seems to use the bankruptcy code as a laboratory to test out his theories of statutory interpretation. We end by suggesting one final reason why we think you will find this one of the most exciting courses you will take in law school. In a practical, if not technical legal sense, bankruptcy is the court of last resort. In virtually every bankruptcy, there are far more claims than there are assets. Not only is there no free lunch; there is not enough lunch to feed everybody. In bankruptcy there is only so much to go around; it is not sufficient; yet it is all there is or will ever be. This means that bankruptcy law must make choices that are both unsatisfactory and final. How should the limited pool be divided up? How do we and how should we decide between the claim of the mortgage holder to whom the debtor owes money on a loan and the maimed victim of the debtor s intentional tort? How do we also fit in the tax collector, the utility company, the credit card company, the debtor s doctor and the debtor s unpaid housekeeper? Bankruptcy law again and again forces us to make the hard disagreeable choices that are otherwise too often ignored. You may agree or disagree with the choices that have been made, but you should understand them; you should also understand that a choice is unavoidable. With all this said, we hope you will find your study of bankruptcy exciting and intriguing. We hope as well you will find this book a helpful guide. Good luck! Jeff Ferriell, Columbus, Ohio & Oak Bluffs, Massachusetts Ted Janger, Brooklyn, New York & West Tisbury, Massachusetts v

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9 ACKNOWLEDGEMENTS Our first debt of gratitude must be to Rev. Michael J. Herbert of the Roman Catholic Diocese of Richmond, Virginia. Father Herbert provided the authors with no direct spiritual assistance, at least none that we know of. Instead, he provided us with the benefit of the considerable expertise in bankruptcy and related commercial law he acquired, prior to his ordination, while he was a member of the University of Richmond Law School faculty, and as the sole author of the first edition of this book. Although his ecclesiastical duties made it necessary for him to decline to be named as a third co-author of subsequent editions of Understanding Bankruptcy, its basic structure, format, and indeed many of its passages reflect work he did in the early 1990 s. Without the benefit of his earlier work, our task would have been much harder. Any mistakes, of course, are ours alone. Thanks are also owed to Deans Joan Wexler, Michael Gerber, and Nick Allard, the Dean s research fund at Brooklyn Law School, as well as to Capital University Law School Deans Jack Guttenberg and Rich Simpson, and Capital University Law School research funds. Our able research assistants on the second edition Mary Daugherty and Carla Cheung, and Eric Coss, Erin Porta, Noam Weiss and Colleen Connelly, as well as Keith Moore at Lexis-Nexis and Matthew Bender have provided necessary encouragement and patient research and editorial work. We also owe a debt of gratitude to those who first introduced us to bankruptcy law, Profs. Gary Neustadter and former Prof. Sheridan Downey of Santa Clara University, former University of Illinois Prof. Jonathan Landers, and Prof. Douglas Baird of the University of Chicago. This work also benefitted considerably from our past students who suffered through many of our early efforts to explain bankruptcy law, and whose puzzled looks and thoughtful questions are responsible for inducing us to develop many of the better explanations that appear in this book. Finally, thanks are also owed, in connection with both this work and every aspect of our lives, to our parents, Merlin and Frances Ferriell and Inez and Allen Janger, as well to our wives, Cheryl Hacker and Victoria Eastus. vii

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11 Chapter 1 GENERAL PRINCIPLES UNDERLYING INSOLVENCY LAW THE NATURE OF INSOLVENCY LAW [A] Introduction: Fresh Start for Individual Debtors & Fair Treatment of Creditors [B] Bankruptcy as a Debtor s Remedy: Fresh Start for Honest Debtors [C] Business Bankruptcy Breathing Room and Maximizing Value [D] Bankruptcy as a Creditor s Remedy [1] Maximizing Value [2] Equal Treatment of Creditors MODERN THEORIES OF INSOLVENCY LAW [A] Proceduralist Theories of Bankruptcy [B] Traditionalist Theories of Bankruptcy INTERPRETATION OF THE BANKRUPTCY CODE CONSTITUTIONAL LIMITS ON BANKRUPTCY LAW Chapter 2 CREDITORS COLLECTION RIGHTS SOURCE OF CREDITORS COLLECTION RIGHTS CONSENSUAL LIENS; LEASES [A] Real Estate Mortgages and Deeds of Trust [1] Basic Operation of Mortgages and Deeds of Trust [a] Mortgages [b] Deeds of Trust [c] Installment Land Contracts [2] Two Step Process: Agreement and Recordation [3] Priority of Mortgages and Deeds of Trust [B] Security Interests in Personal Property [1] Article 9 of the Uniform Commercial Code [a] Scope of Article [b] Attachment of Security Interests [c] Perfection of Security Interests [d] Priority Rules under U.C.C. Article [e] Enforcement of Security Interests [2] Superseding Federal Law [C] Leases [1] Real Estate Leases [2] Personal Property Leases JUDGMENTS ix

12 [A] Obtaining a Judgment [1] Default Judgments [2] Summary Judgment [3] Consent Judgments [4] Judgment by Confession (Cognovit Judgments) [5] Judgment after Trial [B] Dormancy, Renewal, and Revival of Judgments [C] Enforcing Judgments from Other Jurisdictions [1] Judgments from Sister States [2] Foreign Judgments JUDICIAL LIENS [A] Judgment Liens on Real Estate [B] Judicial Liens on Tangible Personal Property [C] Garnishment of Property Under the Control of Third Parties STATUTORY, COMMON LAW, AND EQUITABLE LIENS [A] Construction or Mechanic s Liens [B] Repair or Artisan s Liens [C] Common Law Liens [D] Equitable Liens [E] Seller s Right of Reclamation [1] Reclamation in Credit Sales [2] Reclamation in Cash Sales [3] Priority of Right of Reclamation [4] Bankruptcy Code Limits on Seller s Right of Reclamation [5] Seller s Administrative Priority in Bankruptcy [F] Tax Liens [1] Federal Tax Liens [2] State and Local Tax Liens SETOFF OF MUTUAL DEBTS [A] Creditors Right of Setoff [1] Setoff Limited to Mutual Debts [2] Setoff of Matured Debts [3] Statutory Restrictions on Setoff [B] Priority of Right of Setoff FORECLOSURE PROCEEDINGS [A] Real Estate Foreclosure [1] Judicial Foreclosure [2] Private Foreclosure Under a Power of Sale [3] Strict Foreclosure [B] Self-Help Repossession of Goods [C] Replevin x

13 [D] Sales of Collateral under U.C.C. Article PRE-JUDGMENT SEIZURE [A] Pre-Judgment Seizure Procedures [1] Attachment [a] Grounds for Attachment [b] Seizure of the Defendant s Property [c] Release of the Property from Attachment [d] Liability for Wrongful Attachment [2] Lis Pendens [B] Constitutional Limits on Pre-Judgment Seizure STATE INSOLVENCY PROCEEDINGS [A] Assignments for Benefit of Creditors [B] Equitable and Statutory Receiverships [C] Regulatory Receiverships COMPOSITIONS AND WORKOUTS PROPERTY BEYOND THE REACH OF CREDITORS [A] Exemptions [1] Limitations on Exemptions [a] Exemption in Debtor s Equity [b] Limited Categories [c] Value Limits [2] Homestead Exemptions on Residential Real Estate [3] Personal Property Exemptions [4] Exemptions for Sources of Income [a] Federal Restrictions on Wage Garnishment [b] State Restrictions on Wage Garnishment [c] Exemptions for Other Sources of Income [5] Tracing Exemptions [B] Other Property Immune from Creditors Claims [1] Spendthrift Trusts [2] Tenancies by the Entirety SURETYSHIP [A] Basic Suretyship Principles [B] Suretyship Defenses [1] Surety s Use of Principal s Defenses [2] Creditor s Impairment of the Collateral [3] Release of the Principal Debtor [4] Time Extension [5] Other Modifications [C] Suretyship Issues in Bankruptcy SUPPLEMENTAL COLLECTION PROCEEDINGS xi

14 [A] Discovery: Examination of a Judgment Debtor [B] Contempt Sanctions COMMON LAW AND STATUTORY RESTRICTIONS ON CREDITORS COLLECTION EFFORTS [A] Common Law Tort Liability [1] Invasion of Privacy [2] Intentional Infliction of Emotional Distress [3] Fraud [4] Intentional Interference with Contractual Relations [5] Abuse of Process [6] Defamation [B] Lender Liability [C] Federal Fair Debt Collection Practices Act [1] Scope of the FDCPA: Debt Collectors [2] Debt Collectors Communications with Debtor and Others [3] Harassment or Abuse [4] False or Misleading Representations [5] Unfair Practices [6] Debt Validation [7] Bona Fide Error Defense [8] FDCPA Remedies [D] Federal Fair Credit Reporting Act [E] State Consumer Protection Statutes Chapter 3 A BRIEF HISTORY OF BANKRUPTCY THE BANKRUPTCY CLAUSE BANKRUPTCY LAW PRIOR TO THE BANKRUPTCY ACT OF THE BANKRUPTCY CODE Chapter 4 PARTIES AND OTHER PARTICIPANTS IN BANKRUPTCY CASES PARTIES AND OTHER PARTICIPANTS IN THE BANKRUPTCY PROCESS DEBTORS AND DEBTORS-IN-POSSESSION [A] Debtor [B] Debtor-in-Possession THE ESTATE CREDITORS AND CREDITORS COMMITTEES [A] Role of Creditors in Bankruptcy Cases [B] Creditors Committees xii

15 4.05 TRUSTEES AND EXAMINERS [A] Case Trustees [1] Case Trustee in Chapter 7 Cases [2] Trustee in Chapter 11 Cases [3] Standing Trustees in Chapter 12 and 13 Cases [4] Eligibility, Qualification, and Role of Standing and Case Trustees [B] Examiners [C] The United States Trustee BANKRUPTCY COURTS AND BANKRUPTCY JUDGES LAWYERS AND OTHER PROFESSIONALS Chapter 5 BANKRUPTCY PROCEDURE, JURISDICTION, AND VENUE PROCEDURE IN BANKRUPTCY CASES [A] Rules of Bankruptcy Procedure [B] Trial Process in Bankruptcy Litigation [C] Appellate Process in Bankruptcy Litigation BANKRUPTCY JURISDICTION OF FEDERAL COURTS [A] Article I Status of Bankruptcy Judges [B] History of Bankruptcy Jurisdiction [C] Bankruptcy Jurisdiction [1] Bankruptcy Jurisdiction of the District Court [2] Referral of Jurisdiction to the Bankruptcy Court [3] Bankruptcy Court Authority Over Bankruptcy Cases and Core Proceedings [a] Personal Injury & Wrongful Death Claims Excluded [b] Counterclaims Against Creditors [4] Non-Core Proceedings Civil Proceedings Related to a Bankruptcy Case [5] Disputes Beyond the Court s Statutory Jurisdiction [a] Disputes Not Related To a Bankruptcy Case [b] Probate Exception [6] Jurisdiction over Jurisdictional Determinations [D] Abstention [1] Permissive Abstention [2] Mandatory Abstention [3] Appeal of Abstention Determinations [E] Jury Trials in Bankruptcy Court BANKRUPTCY VENUE [A] Venue of Bankruptcy Cases [B] Venue of Civil Proceedings xiii

16 5.04 NATIONWIDE SERVICE OF PROCESS IN BANKRUPTCY SOVEREIGN IMMUNITY ARBITRATION CLAUSES IN BANKRUPTCY Chapter 6 COMMENCEMENT COMMENCEMENT OF BANKRUPTCY CASES [A] Voluntary Cases [B] Involuntary Cases COMMENCEMENT OF A VOLUNTARY CASE [A] Filing a Voluntary Petition [B] Debtors Eligibility for Voluntary Bankruptcy [1] General Restrictions on Eligibility for Bankruptcy Relief [a] Connection to the United States [b] Abusive Repetitive Filings [c] Mandatory Credit Counseling Briefing [d] Abstention [2] Eligibility for Relief Under Chapter 7 Liquidation [3] Eligibility for Relief under Chapter 9 Municipalities [4] Eligibility for Relief Under Chapter 11 Reorganization [5] Eligibility for Relief Under Chapter 12 Family Farmers and Family Fishermen [a] Stable and Regular Income [b] Family Farmer [i] Farming Operation [ii] Debt Limit for Family Farmers [iii] Source of Family Farmers Debts [iv] Source of Family Farmers Income [v] Corporate Family Farmers [c] Family Fisherman [i] Commercial Fishing Operation [ii] Debt Limit for Family Fishermen [iii] Source of Family Fishermens Debts [iv] Source of Family Fishermens Income [v] Corporate Family Fishermen [6] Eligibility for Relief Under Chapter 13 Individuals with Regular Income [a] Individual or Individual and Spouse [b] Regular Income [c] Chapter 13 Debt Limits [i] Non-Contingent Debts [ii] Liquidated Debts xiv

17 [iii] Secured Debts [C] Petition, Lists, Schedules, Statements, Certificates and Disclosures [1] Petition [2] Schedules of Debts and Assets; Statement of Affairs [3] Additional Documents for Individual Consumer Debtors [D] Joint Petitions [E] Filing Fees [F] Attorneys Obligations Regarding Debtor s Schedules COMMENCEMENT OF INVOLUNTARY CASES [A] Purpose of Involuntary Petitions [B] Chapters Under Which Involuntary Petition are Permitted [C] Persons Against Whom an Involuntary Petition May Be Filed [D] Petitioning Creditors [1] Three Creditors [2] Determining Whether the Debtor Has Twelve Creditors [3] Aggregate Minimum of Unsecured Claims [4] Special Involuntary Petition Rules for Certain Debtors [E] Grounds for Entering an Order for Relief [1] Petition Not Controverted [2] Debtor Generally Not Paying Debts as They Become Due [3] Appointment of a Custodian of the Debtor s Property [F] Dismissal of an Involuntary Petition [G] Penalties for Unsubstantiated Petitions [H] Transactions During the Gap Period [1] Control of the Debtor During the Involuntary Gap [2] Effect of the Automatic Stay [3] Transfers of Estate Property During the Involuntary Gap [4] Priority for Involuntary Gap Creditors CLOSING BANKRUPTCY CASES [A] Closing a Case [B] Reopening a Case Chapter 7 PROPERTY OF THE ESTATE CREATION OF THE DEBTOR S ESTATE PROPERTY INCLUDED IN THE ESTATE [A] Debtor s Interests in Property at Commencement of the Case [1] Debtor s Property Included in the Estate [2] Relationship Between Bankruptcy Law and State Property Law [B] Community Property [C] Property Recovered under Avoiding Powers [D] Property Preserved for the Benefit of the Estate xv

18 [E] Certain Post-Petition Property Acquired Within 180 Days of the Petition [F] Post-Petition Earnings [1] Proceeds, Products, Offspring, Rents and Profits from Property of the Estate Included [2] Earnings from Individual Debtor s Post-Petition Services Excluded. 207 [G] Post-Petition Property Acquired by the Estate EFFECT OF RESTRICTIONS ON TRANSFER OF DEBTOR S PROPERTY [A] Ipso-Facto Clauses Ineffective [B] Transfer Restrictions Ineffective [C] Restrictions on Transferability of Governmental Licenses Ineffective PROPERTY EXCLUDED FROM THE DEBTOR S ESTATE [A] Property Held by Debtor for the Benefit of a Third Person [B] Expired Leases of Non-Residential Real Estate [C] Debtor s Right to Participate in Educational Program; Accreditation [D] Specific Oil Industry Rights [E] Proceeds of Money Orders [F] Spendthrift Trusts [1] Meaning of Spendthrift Trust [2] Enforceability of Spendthrift Trusts in Bankruptcy [3] Offshore Asset Protection Trusts [4] Employee Pension Plans [G] Debtor s Right as Trustee [H] Education IRAs and Tuition Credits [I] Pawned Goods [J] Social Security Benefits SECURITIZATION EXPANDED ESTATE IN REORGANIZATION CASES UNDER CHAPTERS 11, 12, AND [A] Expanded Estate in Chapter 11 Cases [B] Expanded Estate in Chapter 12 Cases [C] Expanded Estate in Chapter 13 Cases Chapter 8 THE AUTOMATIC STAY PURPOSE OF THE AUTOMATIC STAY SCOPE OF THE AUTOMATIC STAY [A] Judicial and Administrative Proceedings [B] Enforcement of Judgments [C] Acts to Obtain Possession or Control of Estate Property [D] Acts to Create, Perfect, or Enforce Liens xvi

19 [E] Acts to Collect [F] Setoff [G] Tax Court Proceedings EXCEPTIONS TO THE AUTOMATIC STAY [A] Private Rights Exceptions to the Stay [1] Family and Domestic Obligations [2] Perfection of Certain Pre-Petition Property Interests [3] Commercial Real Estate Leases [4] Presentment of Negotiable Instruments [5] Other Private Rights Exceptions to the Automatic Stay [B] Public Rights Exceptions to the Stay Governmental Action Permitted [1] Criminal Prosecutions [2] Regulatory Enforcement [3] Specific Governmental Pecuniary Interests CO-DEBTOR STAYS IN CHAPTERS 12 AND DISCRETIONARY STAYS RELIEF FROM THE AUTOMATIC STAY; DURATION AND TERMINATION [A] Automatic Termination of the Stay [1] Property No Longer in the Estate [2] Conclusion of the Bankruptcy Case [3] Automatic Termination Prior Petition Within One Year [4] Automatic Termination Multiple Prior Petitions Within One Year [5] Individual Debtor s Failure to File Statement of Intention [B] Relief from Stay Upon Request of a Party [1] For Cause: Lack of Adequate Protection [2] For Cause: Other Than for Lack of Adequate Protection [3] No Equity and Property Not Necessary for Reorganization [a] No Equity in the Property [b] Property Not Necessary for Effective Reorganization [4] Single-Asset Real Estate Cases [5] Foreclosure in Cases Filed to Delay, Hinder or Defraud Creditors [6] Enforceability of Pre-Petition Waivers [7] Creditor Standing [C] Form of Relief from the Stay [D] Procedure for Obtaining Relief from the Stay ENFORCEMENT OF THE STAY [A] Actions in Violation of the Stay are Void [B] Damages for Violating the Stay [C] Sovereign Immunity xvii

20 Chapter 9 OPERATING THE DEBTOR RESPONSIBILITY FOR OPERATION OF THE DEBTOR SUPERVISION OF THE DEBTOR S BUSINESS USE, SALE, OR LEASE OF ESTATE PROPERTY [A] Use, Sale, or Lease In the Ordinary Course [B] Use of Cash Collateral [C] Use, Sale, or Lease Outside the Ordinary Course [D] Adequate Protection [E] Continuation of Liens and Other Interests; Sales Free and Clear [1] Interests that May be Removed by a Sale Free and Clear [2] Circumstances Permitting Sale Free and Clear [a] Nonbankruptcy Law Permits Property to be Sold Free and Clear [b] Creditor Consents to Sale Free and Clear [c] Price Exceeds Aggregate Value of All Liens [d] Lien Subject to a Bona Fide Dispute [e] Legal or Equitable Right to Compel Acceptance of Money Substitute [3] Right to Adequate Protection [4] Additional Special Protections for Joint Owners [a] Protection of Dower and Curtesy Interests [b] Protection of Joint Tenants, Tenants in Common and Tenants by the Entirety [5] Effect of Sale Free and Clear [F] Ipso Facto Clauses Ineffective [G] Rigged Sales [H] Burdens of Proof Regarding Sales [I] Appeals from Orders Approving Sales of Estate Property [J] Transfer of Customers Personal Identifiable Information UTILITY SERVICE OBTAINING CREDIT [A] Unsecured Credit In the Ordinary Course [B] Unsecured Credit Outside the Ordinary Course [1] Administrative Expense Priority [2] Super-Priority [C] Secured Credit [1] Granting a Lien on Unencumbered Equity [2] Granting an Equal or Priority Lien [3] Cross-Collateralization [4] Emergency Loans [5] Compliance with Securities Laws [D] Appeals of Orders Authorizing Post-Petition Credit xviii

21 9.06 ABANDONMENT OF ESTATE PROPERTY HEALTH CARE PROVIDERS Chapter 10 CLAIMS AND INTERESTS MEANING OF CLAIMS AND INTERESTS; PRIORITY CLAIMS [A] Definition of Claim [B] Proof of Claim [C] Allowance of Claims [1] Contingent and Unliquidated Claims [2] Future Claims [3] Debtor s Defenses [4] Interest on Claims [5] Fees and Expenses [a] Pre-Petition Costs and Attorneys Fees [b] Post-Petition Costs and Attorneys Fees for Fully Secured Claims. 322 [c] Post-Petition Costs and Attorneys Fees for Unsecured and Partially Secured Claims [6] Disallowance of Claims of Recipients of Avoidable Transfers [D] Limits on Allowance of Claims [1] Limits on Claims for Rent [2] Limit on Claims for Salaries [3] Limits on Property Tax Claims [4] Limits on Claims of Insiders [5] Unmatured Support Claims [6] Disallowance of Late Claims [7] Unsecured Consumer Debts [E] Estimation of Claims SECURED CLAIMS [A] Creditors with Secured Claims [B] Effect of Bankruptcy on Secured Claims [1] Foreclosure Delayed or Restrained [2] Acceleration [3] Post-Petition Interest [4] After-Acquired Collateral and Proceeds [C] Allowance of Secured Claims [1] Valuation of Collateral [2] Enforceability of Lien or Setoff [3] Post-Petition Interest on Secured Claims [D] Surcharge of Secured Claims UNSECURED CLAIMS xix

22 [A] Priority Claims [1] Support Claims [2] Administrative Expenses [3] Involuntary Gap Creditors [4] Wage Claims [5] Employee Benefit Plan Claims [6] Certain Claims of Farmers and Fisherman [7] Consumer Deposits [8] Tax Claims [9] Claims of Insured Depositary Institutions [10] Civil Liability for Driving While Intoxicated [B] Super-Priority Claims [1] Claims for Inadequate Adequate Protection [2] Post-Petition Credit Claims [3] Post-Conversion Liquidation Expenses [C] General Unsecured Claims SUBORDINATED CLAIMS [A] Contractual Subordination [B] Equitable Subordination and Recharacterization [1] Equitable Subordination and Recharacterization Compared [2] Equitable Subordination [3] Recharacterization [C] Statutory Subordination INTERESTS [A] Meaning of Interests [B] Allowance of Owners Interests [C] Priority of Interests [D] Subordinated Interests CO-OWNERSHIP OF ESTATE PROPERTY [A] Joint Property [B] Leases ANOMALOUS RIGHTS SETOFF [A] Setoff Under Non-Bankruptcy Law [B] Setoff Limited to Pre-Petition Claims [C] No Setoff of Disallowed Claims [1] Transfer of Claim [2] Intent to Create a Right of Setoff [3] Setoff Resulting in Improvement in Position xx

23 Chapter 11 EXECUTORY CONTRACTS AND UNEXPIRED LEASES RIGHT TO ASSUME OR REJECT; ASSIGNMENT MEANING OF EXECUTORY CONTRACT AND UNEXPIRED LEASE [A] Executory Contract Defined [B] Unexpired Lease or Security Interest PROCEDURE FOR ASSUMPTION OR REJECTION [A] Timing of Assumption or Rejection [B] Court Approval of Assumption or Rejection [C] Performance Before Assumption or Rejection [1] Debtor s Duties to Perform [a] Commercial Real Estate Leases [b] Equipment Leases [c] Other Executory Contracts [2] Non-Debtor s Duties Before Assumption or Rejection REJECTION OF EXECUTORY CONTRACTS [A] Effect of Rejection [1] Pre-Petition Claim [2] Effect of Rejection on Non-Debtor s Rights [a] Land Sale Contracts and Timeshares [b] Real Estate Leases [c] Intellectual Property Licenses [d] Personal Property Leases [e] Covenants Not To Compete [3] Rejection (Breach) after Assumption [B] Employees Rights ASSUMPTION OF EXECUTORY CONTRACTS [A] Effect of Assumption [B] Cure of Defaults Required for Assumption [1] Nonmonetary Defaults [2] Ipso Facto Clauses [3] Penalty Rates & Penalty Provisions [C] Restrictions on Assumption [1] Pre-Petition Termination [2] Termination Under an Ipso Facto Clause [3] Anti-Assignment Clauses Ineffective [4] Non-Delegable Duties [5] Contracts to Extend Credit or Issue Securities [D] Executory Contract Ride-Through xxi

24 11.06 ASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES [A] Effect of Assignment [B] Restrictions on Assignment [1] Assumption Required for Assignment [2] Assurance of Future Performance by the Assignee [3] Legal and Contractual Restrictions on Assignment [C] Appeals of Orders Permitting Assignment SHOPPING CENTER LEASES Chapter 12 PRESERVING ASSETS: EXEMPTIONS & REDEMPTION DEBTOR S RETENTION OF ESTATE PROPERTY EXEMPTIONS IN BANKRUPTCY [A] Exemption Policy [B] State or Federal Exemptions; Opt-Out [C] Debtor s Domicile Controls Exemptions [D] Joint Debtors Exemption Rights [E] Exemption Planning [1] Conversion of Assets to Exempt Status [2] Federal Limits on Certain Exemptions [a] Limit on IRA Exemptions [b] Limit on Homestead Exemptions [F] Effect of Debtor s Misconduct on Exemptions TYPES OF EXEMPTIONS [A] Residential Property Homestead Exemptions [B] Wildcard Exemptions [C] Exemptions for Personal Property [1] Categories of Exempt Property [2] Categorization Issues [3] Regional Exemption Patterns [4] Dollar Limits [D] Earnings and Other Financial Assets [1] Wage Exemptions [2] Wages Substitutes [3] Retirement Funds [E] Tracing Exemptions into Non-Exempt Property [F] Exemption Protections for a Debtor s Dependents [G] Valuation of Exempt Property TENANCY BY THE ENTIRETY LOSS OF EXEMPTIONS xxii