BANKRUPTCY LAW 2013 FOR COLLECTION PROFESSIONALS. Know Your Rights as a Creditor

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1 BANKRUPTCY LAW 2013 FOR COLLECTION PROFESSIONALS Know Your Rights as a Creditor DISCLAIMER: The principles and suggestions in this handout and the BANKRUPTCY LAW 2013 FOR COLLECTION PROFESSIONALS webinar are presented to apply to diverse personal and company situations. These materials and the overall seminar are for general informational and educational purposes only. The materials and the seminar, in general, are presented with the understanding that CareerTrack is not engaged in rendering legal advice. You should always consult an attorney with any legal issues CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from PARK

2 ONE Bankruptcy Defined The Basics Bankruptcy: A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a filed by the debtor or on behalf of creditors (less common). All of the debtor s are measured and evaluated. The are used to repay a portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy. The in bankruptcy has a chance to obtain some measure of repayment based on what assets are available CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

3 ONE Bankruptcy Vocabulary: A Creditor s Must Know: Creditor Debtor Trustee Discharge Secured Creditor Meeting of Creditors Automatic Stay Rule 2004 Examination Chapters 7, 11 and 13 Bankruptcy Rules Quick Link: BankruptcyRules.aspx This site is the federal court website link for federal bankruptcy rules and includes the essential forms. Other Best Practices Resources: CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

4 ONE Bankruptcy Trustee A person appointed by the United States Trustee, an officer of the Department of Justice, to represent the debtor s estate in a bankruptcy proceeding. Although a bankruptcy judge has the ultimate authority on the distribution of assets, the trustee is charged with and making about various debtor demands in accordance with the U.S. Bankruptcy Code. Adequate Protection The right of a party with an interest in the debtor s property (such as a secured creditor) to assurance that its interest will not be diminished during the bankruptcy proceedings. Preference A payment by a debtor made during a specified period (90 days or one year) prior to the filing that favors one creditor over others. Preference payments can usually be recovered and returned to the debtor s estate. Power The power of the court to invalidate certain obligations or transactions undertaken by a debtor prior to filing bankruptcy. It is generally intended to reverse transfers of property that favor one creditor over another CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

5 TWO The Types of Bankruptcy Chapter 7 Often called the, Chapter 7 is used by individuals, partnerships, or corporations who have no hope for repairing their financial situation. In Chapter 7, the debtor s estate is liquidated under the rules of the Bankruptcy Code. Liquidation is the process through which the debtor s non-exempt property is sold for cash by a trustee and the cash is distributed to creditors. Creditor Hot Tips for Chapter 7: Chapter 11 Often called the, Chapter 11 allows corporations, partnerships, and individuals to reorganize their debts, without having to liquidate all their assets. In a Chapter 11 case, the debtor presents a plan to creditors which, if accepted by the creditors and approved by the Court, will allow the debtor to reorganize personal, financial or business affairs and again become financially productive. Creditor Hot Tips for Chapter 11: Chapter 13 An individual with regular income who is overcome by debts, but believes such debts can be repaid within a reasonable period of time, may file under Chapter 13 of the Bankruptcy Code. Chapter 13 permits the debtor to file a in which the debtor agrees to pay a certain percentage of to the Bankruptcy Court for payment to creditors. If the Court approves the plan, the debtor will be under the Court s protection while repaying such debts. Creditor Hot Tips for Chapter 13: CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

6 THREE Bankruptcy Discharge A bankruptcy discharge releases the debtor from for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a order prohibiting the creditors of the debtor from taking any form of action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. Application of the General Rule to Specific Facts: Can a secured creditor enforce a lien to recover property secured by the lien? Is the debt owed to you non-dischargeable? Which debts can still be collected even after bankruptcy has been filed? Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. There are 19 categories of debt excepted from discharge under Chapters 7, 11, and 12. A more limited list of exceptions applies to cases under Chapter CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

7 THREE Bankruptcy Discharge Most Common Types of Non-Dischargeable Debts: Debts described in sections 523(a)(2), (4), and (6) (obligations affected by fraud or maliciousness) are not automatically excepted from discharge. Creditors must ask the court to determine that these debts are excepted from discharge. Note: If the creditor fails to affirmatively request the obligations be excepted from discharge, the types of debts set out in sections 523(a)(2), (4), and (6) will be discharged CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

8 THREE What is Different About Chapter 13? A slightly broader discharge of debts is available to a debtor in a Chapter 13 case than in a Chapter 7 case. Types of dischargeable debts under Chapter 13: The following are dischargeable in Chapter 13, but not in Chapter 7: What is a Hardship Discharge? Note: such a discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor s control CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

9 FOUR Steps to Take When Your Debtor Files Bankruptcy CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

10 FOUR Steps to Take When Your Debtor Files Bankruptcy Other Actions You Can Take: Additional Hot Tips: CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book

11 FIVE Current Updates & Tips Rule 3001 Proof of Claim What is it? A proof of claim is a written statement setting forth a creditor s claim. A proof of claim shall conform substantially to the Official Form on the site if you choose to submit your own tailored form. A proof of claim SHALL be executed by the creditor or the creditor s authorized agent except as provided in Rules 3004 and The DETAILS matter If the creditor filing a claim fails to provide any information required by Rule 3001, in an individual debtor case, the court, after notice and hearing, may: Preclude the creditor from presenting the omitted information Award other appropriate relief, including reasonable expenses and attorney s fees caused by the failure Putting It All Together Read 20 minutes per day to develop expertise; Organize debtor information and written documents necessary to submit the creditor s proof of claim; In the next 30-days, make a trip to your local District Court to observe bankruptcy proceedings there is not substitute for action and observation! What additional goals can you set and track? Continue training CareerTrack, a division of PARK Registered U.S. Patent & Trademark Office and Canadian Trade-Marks office. Except for the inclusion of brief quotations in a review, no part of this book