Chapter 30 - Bankruptcy - West Bus. Law 6th edition
Introduction.
Historically, debtors had few rights. At one time, debtors who
could not pay their debts as they came due faced harsh consequences,
including imprisonment and involuntary servitude. Today, in contrast,
debtors have numerous rights. Some of these rights were discussed
in Chapter 31. In this chapter, we look at another significant
right of debtors: the right to petition for bankruptcy relief.
This right is established by federal law. Article I, Section 8,
of the U.S. Constitution gave Congress the power to establish
uniform Laws on the subject of Bankruptcies throughout the United
States.
Bankruptcy law in the United States has two goalsto protect a
debtor by giving him or her a fresh start, free from creditors'
claims, and to ensure equitable treatment to creditors who are
competing for a debtor's assets. Federal bankruptcy legislation
was first enacted in 1898 and since then has undergone several
modifications. Current bankruptcy law is based on the Bankruptcy
Reform Act of 1978, as amendedhereinafter called the Bankruptcy
Code, or more simply the Code (not to be confused with the Uniform
Commercial Code, which is also sometimes called the Code). Significant
changes to the Code were made by the Bankruptcy Reform Act of
1994. These changes are included in our discussion in this chapter.
Although bankruptcy law is federal law, state laws on secured
transactions, liens, judgments, and exemptions also play a role
in federal bankruptcy proceedings.
Landmark in the Law: The Bankruptcy Reform Act of 1978 and Its
Amendments
Bankruptcy proceedings are held in federal bankruptcy courts,
which are under the authority of U.S. district courts, and rulings
from bankruptcy courts can be appealed to the district courts.
Essentially, a bankruptcy court fulfills the role of an administrative
court for the federal district court concerning matters in bankruptcy.
The bankruptcy court holds proceedings dealing with the procedures
required to administer the estate of the debtor in bankruptcy.
Bankruptcy court judges are federally appointed. A bankruptcy
court can conduct a jury trial if the appropriate district court
has authorized it and the parties to the bankruptcy consent.
Section 1: Types of Bankruptcy Relief.
The Bankruptcy Code is contained in Title 11 of the United States
Code (U.S.C.) and has eight chapters. Chapters 1, 3, and 5 of
the Code include general definitional provisions
and provisions governing case administration, creditors, the debtor,
and the estate. These three chapters apply generally to all kinds
of bankruptcies. The next five chapters of the Code set forth
the different types of relief that debtors may seek. Chapter 7
provides for liquidation proceedings (the selling of all nonexempt
assets and the distribution of the proceeds to the debtors creditors).
Chapter 9 governs the adjustment of debts of a municipality. Chapter
11 governs reorganizations. Chapters 12 and 13 provide for the
adjustment of debts by parties with regular incomes
(family farmers under Chapter 12 and individuals under Chapter
13).(1)
Profile: Adequate Protection Under Chapter 7
Profile: Adequate Protection Under Chapter 12
To fully inform a consumer-debtor of the various types of relief
available, the Code requires that the clerk of the court give
all consumer-debtors (defined as individuals whose debts are primarily
consumer debts) written notice of each chapter under which they
may proceed prior to the commencement of a bankruptcy filing.
In the following sections, we deal first with liquidation proceedings
under Chapter 7 of the Code. We then examine the procedures required
for Chapter 11 reorganizations, and Chapter 12 and 13 plans. The
latter three chapters have been referred to as rehabilitation
chapters.
Section 2: Liquidation Proceedings.
Liquidation under Chapter 7 of the Bankruptcy Code is generally
the most familiar type of bankruptcy proceeding and is often referred
to as an ordinary, or straight, bankruptcy. Put simply, a debtor
in a liquidation bankruptcy turns all assets over to a trustee.
The trustee sells the nonexempt assets and distributes the proceeds
to creditors. With certain exceptions, the remaining debts are
then discharged (extinguished), and the debtors are relieved of
their obligation to pay the debts.
Any persondefined as including individuals, partnerships, and
corporations(2)may be a debtor in a liquidation proceeding. Railroads,
insurance companies, banks, savings and loan associations, investment
companies licensed by the Small Business Administration, and credit
unions cannot be debtors in a liquidation bankruptcy, however.
Rather, other chapters of the Bankruptcy Code or federal or state
statutes apply to them.
FILING THE PETITION
A straight bankruptcy may be commenced by the filing of either
a voluntary or an involuntary petition in bankruptcythe document
that is filed with a bankruptcy court to initiate bankruptcy proceedings.
VOLUNTARY BANKRUPTCY When a voluntary petition in bankruptcy
is brought by the debtor, he or she files official forms designated
for that purpose in the bankruptcy court. The Code requires a
consumer-debtor who has opted for liquidation bankruptcy proceedings
to state in the petition, at the time of filing, that he or she
understands the relief available under other chapters of the Code
and has chosen to proceed under Chapter 7. If the consumer-debtor
is represented by an attorney, the attorney must file an affidavit
stating that he or she has informed the debtor of the relief available
under each chapter. A debtor does not have to be insolvent(3)
to file for bankruptcy relief. Anyone liable to a creditor can
declare bankruptcy.
The voluntary petition contains the following schedules:
1. A list of both secured and unsecured creditors, their
addresses, and the amount of debt owed to each.
2. A statement of the financial affairs of the debtor.
3. A list of all property owned by the debtor, including
property claimed by the debtor to be exempt.
4. A listing of current income and expenses. (This
schedule provides creditors and the court with relevant
information on the debtors ability to pay creditors a
reasonable amount from future income. This
information could permit a court, on its own motion, to
dismiss a debtors Chapter 7 petition after a hearing,
and to encourage the filing of a repayment plan under
Chapter 13, when that would substantially improve the
chances that creditors would be paid.)
The official forms must be completed accurately, sworn to under
oath, and signed by the debtor. To conceal assets or knowingly
supply false information on these schedules is a crime under the
bankruptcy laws. If the voluntary petition for bankruptcy is found
to be proper, the filing of the petition will itself constitute
an order for relief. (An order for relief is a courts grant of
assistance to a complainant. In the context of bankruptcy, relief
consists of discharging a complainants debts.) Once a consumer-debtors
voluntary petition has been filed, the clerk of the court or other
appointee must give the trustee and creditors mailed notice of
the order for relief not more than twenty days after entry of
the order. A husband and wife may file jointly for bankruptcy
under a single petition.
As mentioned above, debtors do not have to be insolvent to file
for voluntary bankruptcy. Debtors do not have unfettered access
to Chapter 7 bankruptcy proceedings, however. Section 707(b) of
the Bankruptcy Code allows a bankruptcy court to dismiss a petition
for relief under Chapter 7 if the granting of relief would constitute
substantial abuse of Chapter 7. In the following case, the court
had to decide whether granting a Chapter 7 discharge to the debtor
would constitute substantial abuse.
¾¾¨¾¾
Case 32.1
MATTER OF BLAIR
United States Bankruptcy Court,
Northern District of Alabama,
Eastern Division, 1995.
180 Bankr. 656.
BACKGROUND AND FACTS James Blair, Jr., owed primarily consumer
debts of less than $7,000, and his income exceeded his living
expenses by more than $200 a month. When he filed a petition for
relief under Chapter 7, the court concluded that if he filed a
repayment plan under Chapter 13, his debts would be paid off in
forty months. The bankruptcy administrator filed a motion to dismiss
Blairs petition.
IN THE LANGUAGE OF THE COURT
JAMES S. SLEDGE, Bankruptcy Judge.
* * * *
* * * [T]he substantial abuse determination must be made on a
case by case basis, in light of the totality of the circumstances.
* * * [F]actors [that] should be
considered * * * [include:] (1) Whether the bankruptcy petition
was filed because of sudden illness, calamity, disability, or
unemployment; (2) Whether the debtor incurred cash advances and
made consumer purchases far in excess of his ability to pay; (3)
Whether the debtors proposed family budget is excessive or unreasonable;
(4) Whether the debtors schedules and statement of current income
and expenses reasonably and accurately reflect the true financial
condition; and (5) Whether the petition was filed in good faith.
* * * *
* * * [T]his Court concludes that granting this debtor relief
under Chapter 7 would be a substantial abuse of the provisions
of the chapter as well as perverting the purpose of the Bankruptcy
Code: to give a fresh start to the honest but unfortunate debtor.
DECISION AND REMEDY The court dismissed Blairs petition.
Full text of case
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INVOLUNTARY BANKRUPTCY An involuntary bankruptcy occurs when
the debtors creditors force the debtor into bankruptcy proceedings.
An involuntary case cannot be commenced against a farmer(4) or
a charitable institution. For an involuntary action to be filed
against other debtors,
the following requirements must be met: If the debtor has twelve
or more creditors, three or more of these creditors having unsecured
claims totaling at least $10,000 must join in the petition. If
a debtor has fewer than twelve creditors, one or more creditors
having a claim of $10,000 may file.
If the debtor challenges the involuntary petition, a hearing will
be held, and the bankruptcy court will enter an order for relief
if it finds either of the following:
1. The debtor is generally not paying debts as they
become due.
2. A general receiver, assignee, or custodian took possession
of, or was appointed to take charge of, substantially all of the
debtors property within 120 days before the filing of the petition.
Image: Involuntary Bankruptcy
If the court grants an order for relief, the debtor will be
required to supply the same information in the bankruptcy schedules
as in a voluntary bankruptcy.
An involuntary petition should not be used as an everyday debt-collection
device, and the Code provides penalties for the filing of frivolous
petitions against debtors. Judgment may be granted against the
petitioning creditors for the costs and attorneys fees incurred
by the debtor in defending against an involuntary petition that
is dismissed by the court. If the petition is filed in bad faith,
damages can be awarded for injury to the debtors reputation. Punitive
damages may also be awarded.
AUTOMATIC STAY
The moment a petition, either voluntary or involuntary, is filed,
there exists an automatic stay, or suspension, of virtually all
litigation and other action by creditors against the debtor or
the debtors property. In other words, once a petition has been
filed, creditors cannot commence or continue most legal actions,
such as foreclosure of liens, execution on judgments, trials,
or any action to repossess property in the hands of the debtor.
A secured creditor, however, may petition the bankruptcy court
for relief from the automatic stay in certain circumstances. Also,
the automatic stay does not apply to paternity, alimony, maintenance,
and support debts. The Code provides that if a creditor knowingly
violates the automatic stay (a willful violation), any party injured,
including the debtor, is entitled to recover actual damages, costs,
and attorneys fees and may be entitled to recover punitive damages
as well.
Underlying the Codes automatic stay provision for a secured creditor
is a concept known as adequate protection. The adequate protection
doctrine, among other things, protects secured creditors from
losing their security as a result of the automatic stay. The bankruptcy
court can provide adequate protection by requiring the debtor
or trustee to make periodic cash payments or a one-time cash payment
(or to provide additional collateral or replacement liens) to
the extent that the stay may actually cause the value of the property
to decrease. Or the court may grant other relief that is the indubitable
equivalent of (that is, equivalent to, without any doubt) the
secured partys interest in the property, such as a guaranty by
a solvent third party to cover losses suffered by the secured
party as a result of the stay.
PROPERTY OF THE ESTATE
Upon the commencement of a liquidation proceeding under Chapter
7, an estate in property is created. The estate consists of all
the debtors legal and equitable interests in property presently
held, wherever located, together with community property, property
transferred in a transaction voidable by the trustee, proceeds
and profits from the property of the estate, and certain after-acquired
property. Interests in certain propertysuch as gifts, inheritances,
property settlements (divorce), and life insurance death proceedsto
which the debtor becomes entitled within 180 days after filing
may also become part of the estate. Thus, the filing of a bankruptcy
petition generally fixes a dividing line: property acquired prior
to the filing of the petition becomes property of the estate,
and property acquired
after the filing of the petition, except as just noted, remains
the debtors.
The issue in the following case is whether payments made under
a covenant not to compete should be included in a debtors estate.
The covenant was entered into before the petition was filed, but
the payments were due after the filing.
¾¾¨¾¾
Case 32.2
IN RE ANDREWS
United States Court of Appeals,
Fourth Circuit, 1996.
80 F.3d 906.
BACKGROUND AND FACTS Tarmac Acquisition, Inc., bought AMAX
Corporation, a ready-mix concrete company. As part of the deal,
the AMAX owners, including John Andrews, signed agreements not
to compete with Tarmac. Andrews was to receive $1 million, payable
in quarterly installments over a five-year period. Three years
later, Andrews filed a bankruptcy petition. He asked the federal
bankruptcy court not to include, in the property of his estate
(which would ultimately be distributed to creditors), any future
installments. The court refused, and a federal district court
affirmed this decision. Andrews appealed to the U.S. Court of
Appeals for the Fourth Circuit.
IN THE LANGUAGE OF THE COURT
ELLIS, District Judge:
* * * *
* * * Pre-petition assets, like the NCA [noncompetition agreement]
payments, are those assets rooted in the debtors pre-petition
activities, including any proceeds that may flow from those assets
in the future. These assets belong to the estate and ultimately
to the creditors. Post-petition assets are those that result from
the debtors post-petition activities and are his to keep free
and clear of the bankruptcy proceeding.
* * * *
Seen in this light, the NCA payments due Andrews fall clearly
on the pre-bankruptcy or past side of the bright line. These payments
are plainly rooted in, and grow out of, Andrewss pre-petition
activities. * * * [B]ut for the [AMAX] sale, there would have
been no NCA and no quarterly payments to Andrews. * * * Given
this close connection between the NCA and the pre-petition sale
of the debtors share in the concrete business, we are persuaded
that the payments were well rooted in the pre-bankruptcy past.
* * * [T]hey should be included in Andrewss estate.
DECISION AND REMEDY The U.S. Court of Appeals for the Fourth
Circuit affirmed the lower courts decision.
Full text of case
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CREDITORS MEETING AND CLAIMS
Within a reasonable time after the order for relief has been granted
(not less than ten days or more than thirty days), the bankruptcy
court must call a meeting of creditors listed in the schedules
filed by the debtor. The bankruptcy judge does not attend this
meeting.
The debtor is required to attend the meeting (unless excused by
the court) and to submit to examination under oath by the creditors
and the trustee. Failing to appear when required or making false
statements under oath may result in the debtors being denied a
discharge in bankruptcy. At the meeting, the trustee ensures that
the debtor is aware of the potential consequences of bankruptcy
and of his or her ability to file for bankruptcy under a different
chapter.
To be entitled to receive a portion of the debtors estate, each
creditor must normally file a proof of claim with the bankruptcy
court clerk within ninety days of the creditors meeting.(5) The
proof of claim lists the creditors name and address, as well as
the amount that the creditor asserts is owed to the creditor by
the debtor. If a creditor fails to file a proof of claim, the
bankruptcy court or trustee may file the proof of claim on the
creditors behalf but is not obligated to do so.
Generally, any legal obligation of the debtor is a claim. In the
case of a disputed, or unliquidated, claim, the bankruptcy court
will set the value of the claim. Any creditor holding a debtors
obligation can file a claim against the debtors estate. These
claims are automatically allowed unless contested by the trustee,
the debtor, or another creditor. A creditor who files a false
claim commits a crime.
The Code, however, does not allow claims for breach of employment
contracts or real estate leases for terms longer than one year.
Such claims are limited to one years wages or rent, despite the
remaining length of either contract in breach.
EXEMPTIONS
The trustee takes control over the debtors property, but an individual
debtor is entitled to exempt certain property from the bankruptcy.
The Bankruptcy Code exempts the following property:(6)
1. Up to $15,000 in equity in the debtors residence and
burial plot (the homestead exemption).
2. Interest in a motor vehicle up to $2,400.
3. Interest, up to $400 for a particular item, in household
goods and furnishings, wearing apparel, appliances,
books, animals, crops, and musical instruments (the
aggregate total of all items is limited, however, to
$8,000).
4. Interest in jewelry up to $1,000.
5. Interest in any other property up to $800, plus any
unused part of the $15,000 homestead exemption up to
$7,500.
6. Interest in any tools of the debtors trade up to
$1,500.
7. Any unmatured life insurance contract owned by the
debtor.
8. Certain interests in accrued dividends and interest
under life insurance contracts owned by the debtor.
9. Professionally prescribed health aids.
10. The right to receive Social Security and certain welfare
benefits, alimony and support, and certain pension benefits.
11. The right to receive certain personal injury and other
awards, up to $15,000.
Individual states have the power to pass legislation precluding
debtors from using the federal exemptions within the state; a
majority of the states have done this (see Chapter 31). In those
states, debtors may use only state, not federal, exemptions. In
the rest of the states, an individual debtor (or a husband and
wife filing jointly) may choose either the exemptions provided
under state law or the
federal exemptions.(7)
Next page of section
THE TRUSTEE
Promptly after the order for relief in the liquidation proceeding
has been entered, an interim, or provisional,
trustee is appointed by the U.S. Trustee (a government official
who performs appointing and other administrative tasks that a
bankruptcy judge would otherwise have to perform).The interim,
or provisional, trustee presides over the debtors property until
the first meeting of creditors. At this first meeting, either
a permanent trustee is elected or the interim trustee becomes
the permanent trustee.
The basic duty of the trustee is to collect the debtors available
estate and reduce it to money for distribution, preserving the
interests of both the debtor and unsecured creditors. This requires
that the trustee be accountable for administering the debtors
estate. To enable the trustee to accomplish this duty, the Code
gives the trustee certain powers, stated in both general and specific
terms. These powers must be exercised within two years of the
order
for relief.
TRUSTEES POWERS The general powers of the trustee are described
by the statement that the trustee occupies a position equivalent
in rights to that of certain other parties. For example, the trustee
has the same rights as a lien creditor who could have obtained
a judicial lien on the debtors property or who could have levied
execution on the debtors property. This means that a trustee has
priority over an unperfected secured party to the debtors property.
This right of a trustee, equivalent to that of a lien creditor,
is known as the strong-arm power. A trustee also has power equivalent
to that of a bona fide purchaser of real property from the debtor.
Nevertheless, a creditor with a purchase-money security interest
may prevail against a trustee, if the creditor files within ten
days of the debtors receipt of the collateral, even if the bankruptcy
petition is filed before the creditor perfects. For example, Baker
loaned Newbury $20,000 on January 1, taking a security interest
in the machinery Newbury purchased with the $20,000 on that same
date. On January 27, before Baker perfected her security interest,
Newbury filed for bankruptcy. The trustee can invalidate Bakers
security interest, because it was unperfected when Newbury filed
the bankruptcy petition. Baker can only assert a claim as an unsecured
creditor. But if Newbury had filed for bankruptcy on January 7,
and Baker had perfected her security interest on January 8, she
would have prevailed, because she would have perfected her purchase-money
security interest within ten days of Newburys receipt of the machinery.
The trustee has the power to require persons holding the debtors
property at the time the petition is filed to deliver the property
to the trustee. (A trustee does not usually take actual possession
of a debors property. Instead, a trustees possession is constructive.
For example, to obtain control of a debtors business inventory,
a trustee might change the locks on the doors to the business
and hire a security guard.) The trustee also has specific powers
of avoidancethat is, the trustee can set aside a sale or other
transfer of the debtors property, taking it back as a part of
the debtors estate. These powers include any voidable rights available
to the debtor, preferences, certain statutory liens, and fraudulent
transfers by the debtor. Each of these powers is discussed in
more detail below.
The debtor shares most of the trustees avoidance powers. Thus,
if the trustee does not take action to enforce one of his or her
rights (for example, to recover a preference), the debtor in a
liquidation bankruptcy can nevertheless enforce that right.(8)
VOIDABLE RIGHTS A trustee steps into the shoes of the debtor.
Thus, any reason that a debtor can use to obtain the return of
his or her property can be used by the trustee as well. These
grounds include fraud, duress, incapacity, and mutual mistake.
For example, Ben sells his boat to Tara. Tara gives Ben a check,
knowing that there are insufficient funds in her bank account
to cover the check. Tara has committed fraud. Ben has the right
to avoid that transfer and recover the boat from Tara. Once an
order for relief under Chapter 7 of the Code has been entered
for Ben, the trustee can exercise the same right to recover the
boat from Tara, and the boat becomes a part of the debtors estate.
PREFERENCES A debtor is not permitted to transfer property
or to make a payment that favorsor gives a preference toone creditor
over others. The trustee is allowed to recover payments made both
voluntarily and involuntarily to one creditor in preference over
another.
To have made a preferential payment that can be recovered, an
insolvent debtor generally must have transferred property, for
a preexisting debt, within ninety days of the filing of the petition
in bankruptcy. The transfer must give the creditor more than the
creditor would have received as a result of the bankruptcy proceedings.
The trustee does not have to prove insolvency, as the Code provides
that the debtor is presumed to be insolvent during this ninety-day
period.
Sometimes the creditor receiving the preference is an insideran
individual, a partner, a partnership, or an officer or a director
of a corporation (or a relative of one of these) who has a close
relationship with the debtor. If this is the case, the avoidance
power of the trustee is extended to transfers made within one
year before filing; however, the presumption of insolvency is
confined to the ninety-day period. Therefore, the trustee must
prove that the debtor was insolvent at the time of earlier transfer.
Not all transfers are preferences. To be a preference, the transfer
must be made for something other than current consideration. Therefore,
it is generally assumed by most courts that payment for services
rendered within ten to fifteen days prior to the payment of the
current consideration is not a preference. If a creditor receives
payment in the ordinary course of business, such as payment of
last months telephone bill, the payment cannot be recovered by
the trustee in bankruptcy. To be recoverable, a preference must
be a transfer for an antecedent (preexisting) debt, such as a
year-old printing bill. In addition, the Code permits a consumer-debtor
to transfer any property to a creditor up to a total value of
$600, without the transfers constituting a preference. Also, payment
of paternity, alimony, maintenance, and support debts is not a
preference.
If a preferred creditor has sold the property to an innocent third
party, the trustee cannot recover the property from the innocent
party. The creditor, however, generally can be held accountable
for the value of the property.
LIENS ON DEBTORS PROPERTY The trustee has the power to avoid
certain statutory liens against the debtor's property, such as
a landlords lien for unpaid rent. The trustee can avoid statutory
liens that first became effective against the debtor when the
bankruptcy petition was filed or when the debtor became insolvent.
The trustee can also avoid any lien against a bona fide purchaser
that was not perfected or enforceable on the date of the bankruptcy
filing.
FRAUDULENT TRANSFERS The trustee may avoid fraudulent transfers
or obligations if they are made within one year of the filing
of the petition or if they are made with actual intent to hinder,
delay, or defraud a creditor. Transfers made for less than a reasonably
equivalent consideration are also vulnerable if by making them,
the debtor became insolvent, was left engaged in business with
an unreasonably small amount of capital, or intended to incur
debts that he or she could not pay. When a fraudulent transfer
is made outside the Codes one-year limit, creditors may seek alternative
relief under state laws. State laws often allow creditors to recover
for transfers made up to three years prior to the filing of a
petition.
DISTRIBUTION OF PROPERTY
The rights of perfected secured creditors were discussed in Chapter
30. The Code provides that a consumer-debtor, either within thirty
days of filing a liquidation petition or before the date of the
first meeting of the creditors (whichever is first), must file
with the clerk a statement of intention with respect to the secured
collateral. The statement must indicate whether the debtor will
retain the collateral or surrender it to the secured party.(9)
The trustee is obligated to enforce the debtors statement within
forty-five days after it is filed.
If the collateral is surrendered to the perfected secured party,
the secured creditor can enforce the security interest either
by accepting the property in full satisfaction of the debt or
by foreclosing on the collateral and using the proceeds to pay
off the debt. Thus, the perfected secured party has priority over
unsecured parties as to the proceeds from the disposition of the
collateral. Indeed, the Code provides that if the value of the
collateral exceeds the perfected secured partys claim, the secured
party also has priority as to the proceeds in an amount that will
cover reasonable fees and costs incurred because of the debtors
default. Any excess over this amount is used by the trustee to
satisfy the claims of unsecured creditors. Should the collateral
be insufficient to cover the secured debt owed, the secured creditor
becomes an unsecured creditor for the difference.
Bankruptcy law establishes an order of priority for classes of
debts owed to unsecured creditors, and they are paid in the order
of their priority. Each class must be fully paid before the next
class is entitled to any of the remaining proceeds. If there are
insufficient proceeds to pay fully all the creditors in a class,
the proceeds are distributed proportionately to the creditors
in the class, and classes lower in priority receive nothing. The
order of priority among classes of unsecured creditors is as follows:
1. Administrative expensesincluding court costs, trustee
fees, and attorneys fees.
2. In an involuntary bankruptcy, expenses incurred by the
debtor in the ordinary course of business from the date
of the filing of the petition up to the appointment of the
trustee or the issuance by the court of an order for
relief.
3. Unpaid wages, salaries, and commissions earned within
ninety days of the filing of the petition, limited to $4,000
per claimant. Any claim in excess of $4,000 or earned
before the ninety-day period is treated as a claim of a
general creditor (listed as number 9 below).
4. Unsecured claims for contributions to be made to
employee benefit plans, limited to services performed
during 180 days prior to the filing of the bankruptcy
petition and $4,000 per employee.
5. Claims by farmers and fishers, up to $4,000, against
debtor operators of grain storage or fish storage or
processing facilities.
6. Consumer deposits of up to $1,800 given to the debtor
before the petition was filed in connection with the
purchase, lease, or rental of property or purchase of
services that were not received or provided. Any claim
in excess of $1,800 is treated as a claim of a general
creditor (listed as number 9 below).
7. Paternity, alimony, maintenance, and support debts.
8. Certain taxes and penalties due to government units,
such as income and property taxes.
9. Claims of general creditors.
If any amount remains after the priority classes of creditors
have been satisfied, it is turned over to the debtor.
Exhibit 321 illustrates graphically the collection and distribution
of property in most voluntary bankruptcies.
In a bankruptcy case in which the debtor has no assets,(10) creditors
are notified of the debtors petition for bankruptcy but are instructed
not to file a claim. In such a case, the unsecured creditors will
receive no payment, and most, if not all, of these debts will
be discharged.
DISCHARGE
From the debtors point of view, the primary purpose of liquidation
is to obtain a fresh start through a discharge of debts.(11) Certain
debts, however, are not dischargeable in bankruptcy. Also, certain
debtors may not qualify to have all debts discharged in bankruptcy.
These situations are discussed below.
EXCEPTIONS TO DISCHARGE Discharge of a debt may be denied because
of the nature of the claim or the conduct of the debtor. Claims
that are not dischargeable in a liquidation bankruptcy include
the following:
1. Claims for back taxes accruing within three years prior
to bankruptcy.
2. Claims for amounts borrowed by the debtor to pay
federal taxes.
3. Claims against property or money obtained by the
debtor under false pretenses or by false representations.
4. Claims by creditors who were not notified and did not
know of the bankruptcy; these claims did not appear on
the schedules the debtor was required to file.
5. Claims based on fraud or misuse of funds by the debtor
while he or she was acting in a fiduciary capacity or
claims involving the debtors embezzlement or larceny.
6. Alimony, child support, and (with certain exceptions)
property settlements.
7. Claims based on willful or malicious conduct by the
debtor toward another or the property of another.
8. Certain government fines and penalties.
9. Certain student loans, unless payment of the loans
imposes an undue hardship on the debtor and the
debtors dependents.
Business Law in Action: Scam Schools and Student Loans
10. Consumer debts of more than $1,000 for luxury goods
or services owed to a single creditor incurred within
sixty days of the order for relief. This denial of
discharge is a rebuttable presumption (that is, the
denial may be challenged by the debtor), however, and
any debts reasonably incurred to support the debtor or
dependents are not classified as luxuries.
11. Cash advances totaling more than $1,000 that are
extensions of open-end consumer credit obtained by the
debtor within sixty days of the order for relief. A
denial of discharge of these debts is also a rebuttable
presumption.
12. Judgments or consent decrees against a debtor as a
result of the debtors operation of a motor vehicle while
intoxicated.
In the following case, the question of the discharge of a student
loan is at issue.
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Case 32.3
IN RE BAKER
United States Bankruptcy Court, Eastern District of Tennessee,
1981.
10 Bankr. 870.
HISTORICAL AND SOCIAL SETTING In 1980, about 53 percent of
married women in the United States were working, compared with
about 41 percent ten years earlier. More than 60 percent of wives
who were separated from their husbands worked outside the home
in 1980, compared with about 52 percent in 1970; for divorced
women, the figures were about 74 percent and 72 percent, respectively.
On average, however, in 1980, women earned only 62 cents for every
dollar that men earned. In American families, husbands averaged
nearly $21,000 in earnings, and wives, $8,600. At the same time,
of mothers who were entitled to child support, less than 75 percent
actually received any payments. Of mothers living below the poverty
line, more than 60 percent received
nothing at all.
BACKGROUND AND FACTS Mary Lou Baker attended three different
institutions of higher learning, the University of Tennessee at
Chattanooga, Cleveland State Community College, and the Baroness
Erlanger School of Nursing. At these three schools, she received
educational loans totaling $6,635. After graduation, she was employed,
but her monthly take-home pay was less than $650. Monthly expenses
for herself and her three children were approximately $925. Her
husband had left town and provided no child or other financial
support. She received no public aid and had no other income. In
January 1981, just prior to this action, Mary Lou Bakers church
paid her gas bill so that she and her children could have heat
in their home. One child had difficulty reading, and another required
expensive shoes. Baker had not been well and had been unable to
pay her medical bills. She filed for bankruptcy. In her petition,
she sought a discharge of her educational loans based on the hardship
provision, which is the issue before the court.
IN THE LANGUAGE OF THE COURT
Ralph H. KELLEY, Bankruptcy Judge.
This cause came on to be heard on May 5, 1981, on debtors complaint
to determine dischargeability of certain educational loans. The
complaint alleges that debtor is entitled to relief under 11 U.S.C.
[Section] 523 (a)(8) which reads as follows:
Exceptions to discharge.
(a) A discharge under section 727, 1141, or 1328(b) of this title
does not discharge an individual debtor from any debt * * * .
(8) to a governmental unit, or a nonprofit institution
of higher education, for an educational loan, unless
(B) excepting such debt from discharge under this
paragraph will impose an undue hardship on the
debtor and the debtors dependents[.]
* * * *
In 1976 the Congress passed the Educational Amendments which restricted
a discharge in bankruptcy. The restriction was designed to remedy
an abuse by students who, immediately upon graduation, would file
bankruptcy to secure a discharge of educational loans. These students
often had no other indebtedness and could easily pay their debts
from future wages.
* * * *
The court concludes that under the circumstances of this case,
requiring the debtor to repay the debts owed to the three defendants
in the amount of $6,635.00 plus interest would impose upon her
and her dependents an undue hardship. In passing the Educational
Amendments of 1976 and including these amendments in the Bankruptcy
Reform Act of 1978, Congress intended to correct an abuse. It
did not intend to deprive those who have truly fallen on hard
times of the fresh start policy of the new Bankruptcy Code.
DECISION AND REMEDY The debtors student loans were discharged.
Given the fact that she had truly fallen on hard times, Baker
should be allowed to have her debts discharged in bankruptcy to
avoid undue hardship.
Full text of case
¾¾¨¾¾
OBJECTIONS TO DISCHARGE In addition to the exceptions to discharge
previously listed, a bankruptcy court may also deny the discharge
of the debtor (as opposed to the debt). In the latter situation,
the assets of the debtor are still distributed to the creditors,
but the debtor remains liable for the unpaid portion of all claims.
Some grounds for the denial of discharge of the debtor follow.
1. The debtors concealment or destruction of property
with the intent to hinder, delay, or defraud a creditor.
2. The debtors fraudulent concealment or destruction of
financial records.
3. The granting of a discharge to the debtor within six
years of the filing of the petition.
EFFECT OF DISCHARGE The primary effect of a discharge is to
void any judgment on a discharged debt and enjoin any action to
collect a discharged debt. A discharge does not affect the liability
of a co-debtor.
REVOCATION OF DISCHARGE The Code provides that a debtor may
lose his or her bankruptcy discharge by revocation upon petition
by the trustee or a creditor. The bankruptcy court may, within
one year, revoke the discharge decree if it is discovered that
the debtor acted fraudulently or dishonestly during the bankruptcy
proceedings. The revocation renders the discharge void, allowing
creditors not satisfied by the distribution of the debtors estate
to proceed with their claims against the debtor.
REAFFIRMATION OF DEBT
A debtor may wish to pay a debtsuch as, for example, a debt owed
to a family member, family doctor, close friend, or some other
partynotwithstanding the fact that the debt could be discharged
in bankruptcy. An agreement to pay a debt dischargeable in bankruptcy
is called a reaffirmation agreement. To be enforceable, reaffirmation
agreements must be made before the debtor is granted a discharge.
The agreement must be filed with the court. Approval by the court
is required unless the debtors attorney files an affidavit stating
that the reaffirmation agreement is voluntarily made, that the
debtor understands the consequences of the agreement and of a
default under the agreement, and that the agreement will not result
in an undue hardship on the debtor or the debtors family. If court
approval is required, a separate hearing need not be held.
The agreement must contain a clear and conspicuous statement advising
the debtor that reaffirmation is not required. The debtor can
rescind, or cancel, the agreement
at any time prior to discharge or within sixty days of the filing
of the agreement, whichever is later. This rescission
period must be stated clearly and conspicuously in the reaffirmation
agreement
Section 3: Reorganizations.
The type of bankruptcy proceeding used most commonly by corporate
debtors is the Chapter 11 reorganization. In a reorganization,
the creditors and the debtor formulate a plan under which the
debtor pays a portion of his or her debts and is discharged of
the remainder. The debtor is allowed to continue in business.
Although this type of bankruptcy is commonly a corporate reorganization,
any debtor (except a stockbroker or a commodities broker) who
is eligible for Chapter 7 relief is eligible for relief under
Chapter 11.(12) Prior to 1991, some courts barred individuals
from petitioning for reorganization, even though the language
of the Code does not limit the use of reorganization to business
debtors. The United States Supreme Court, however, ruled in 1991
that a nonbusiness debtor may petition for relief under Chapter
11.(13)
The same principles that govern the filing of a liquidation petition
apply to reorganization proceedings. The case may be brought either
voluntarily or involuntarily. The same principles govern the entry
of the order for relief. The automatic stay and adequate protection
provisions are applicable in reorganizations as well.
In some instances, creditors may prefer private, negotiated adjustments
of creditor-debtor relations, also known as workouts, to bankruptcy
proceedings. Often, these out-of-court workouts are much more
flexible and thus more conducive to a speedy settlement. Speed
is critical, because delay is one of the most costly elements
in any bankruptcy proceeding. Another advantage of workouts is
that they avoid the various administrative costs of bankruptcy
proceedings.
Under Section 305(a) of the Bankruptcy Code, a court, after notice
and a hearing, may dismiss or suspend all proceedings in a case
at any time if dismissal or suspension would better serve the
interests of the creditors. Section 1112 also allows a court,
after notice and a hearing, to dismiss a case under reorganization
for cause. Cause includes the absence of a reasonable likelihood
of rehabilitation, the inability to effect a plan, and an unreasonable
delay by the debtor that is prejudicial to (may harm the interests
of) creditors.(14) In the following case, creditors of the Johns-Manville
Corporation sought to dismiss, under Section 1112, a voluntary
petition filed
by Manville.
¾¾¨¾¾
Case 32.4
IN RE JOHNS-MANVILLE CORP.
United States Bankruptcy Court, Southern District of New York,
1984.
36 Bankr. 727.
COMPANY PROFILE In 1858, H. W. Johns founded a roofing materials
business in Brooklyn. By 1901, Johns had patented a line of products
containing asbestos and merged with the Manville Covering Company,
which had begun in 1886 in Milwaukee to produce pipe coverings
and insulation materials. Control of the renamed Johns-Manville
Company was acquired by J. P. Morgan & Company in 1927. Under
Morgan, the company concentrated on making building materials.
Johns-Manville moved to Colorado in the early 1970s and in 1981
renamed itself Manville Corporation. In 1974, nearly 500 men who
had worked with Manville products in the construction of ships
during World War II filed the first major asbestos lawsuit against
the company. By 1982, Manville had settled more than 4,000 asbestos-related
lawsuits but faced a backlog of nearly 17,000. Manville phased
out all activities related to asbestos and in 1988 began to focus
on forest products, fiberglass, and mining.
BACKGROUND AND FACTS On August 26, 1982, the Johns-Manville
Corporation filed for protection under Chapter 11 of the Bankruptcy
Code. This filing came as quite a surprise to some of Manvilles
creditors, as well as to some of the other corporations that were
being sued, along with Manville, for injuries caused by asbestos
exposure. Manville asserted that the nearly 17,000 lawsuits pending
as of the filing date and the potential lawsuits of people who
had been exposed to asbestos but who would not manifest asbestos-related
diseases until some time in the future necessitated its filing.
The creditors of Manville, including people harmed by asbestos
exposure who had won lawsuits or settlements, contended that Johns-Manville
had not filed in good faith and that the voluntary reorganization
petition should thus be dismissed under Section 1112 of the Bankruptcy
Code.
IN THE LANGUAGE OF THE COURT
Burton R. LIFLAND, Bankruptcy Judge.
* * * *
In determining whether to dismiss under Code Section 1112(b),
a court is not necessarily required to consider whether the debtor
has filed in good faith because that is not a specified [requirement]
under the Code for filing. Rather, according to Code Section 1129(a)(3),
good faith emerges as a requirement for the confirmation of a
plan. * * * It is thus logical that the good faith of the debtor
be deemed a predicate primarily for emergence out of a Chapter
11 case. It is after confirmation of a concrete and immutable
reorganization plan that creditors are foreclosed from advancing
their distinct and parochial interests in the debtors estate.
* * * *
In the instant case, not only would liquidation be wasteful and
inefficient in destroying the utility of valuable assets of the
companies as well as jobs, but, more importantly, liquidation
would preclude just compensation of some present asbestos victims
and all future asbestos claimants. This unassailable reality represents
all the more reason for this Court to adhere to this basic potential
liquidation avoidance aim of Chapter 11 and deny the motions to
dismiss. Manville must not be required to wait until its economic
picture has deteriorated beyond salvation to file for reorganization.
DECISION AND REMEDY The motions to dismiss the Manville petition
were denied. The court concluded that a bankruptcy proceeding
was appropriate in this situation.
Full text of case
¾¾¨¾¾
DEBTOR IN POSSESSION
Upon entry of the order for relief, the debtor generally continues
to operate his or her business as a debtor in possession (DIP).
The court, however, may appoint a trustee (often referred to as
a receiver) to operate the debtors business if gross mismanagement
of the business is shown or if appointing a trustee is in the
best interests of
the estate.
The DIPs role is similar to that of a trustee in a liquidation.
The DIP is entitled to avoid pre-petition preferential payments
made to creditors and pre-petition fraudulent transfers of assets.
The DIP has the power to
decide whether to cancel or assume pre-petition executory contracts
(those that are not yet performed) or unexpired leases.
Under the strong-arm clause(15) of the Bankruptcy Code, a DIP
can avoid any obligation or any transfer of property of the debtor
that could be avoided by certain parties. These parties include
(1) a creditor who extended credit to the debtor at the time of
bankruptcy (petition) and who consequently obtained a lien on
the debtors property; (2) a creditor who extended credit to the
debtor at the time of bankruptcy and who consequently obtained
a writ of execution against the debtor that was returned unsatisfied;
and (3) a bona fide purchaser of real property from
the debtor, if at the time of the bankruptcy the transfer
was perfected.
COLLECTIVE BARGAINING AGREEMENTS
Under the Bankruptcy Reform Act of 1978, questions arose as to
whether a reorganization debtor could reject a recently negotiated
collectively bargained labor contract. In National Labor Relations
Board v. Bildisco and Bildisco, the United States Supreme Court
held that a collective bargaining agreement subject to the National
Labor Relations Act of 1935 (see Chapter 35) is an executory contract
and thus subject to rejection by a debtor in possession.(16) The
Court emphasized that such a rejection should not be permitted
unless there is a finding that the policy of Chapter 11 (successful
rehabilitation of debtors) would be served by the action. Hence,
when the bankruptcy court determines that a rejection of a collective
bargaining agreement should be permitted, it must make a reasoned
finding on the
record as to why it has determined that a rejection should
be permitted.
The Code attempts to reconcile federal policies favoring collective
bargaining with the need to allow a debtor company to reject executory
labor contracts while trying to reorganize. The Code sets forth
standards and procedures under which collective bargaining contracts
can be assumed or rejected under a reorganization filing. In general,
a collective bargaining contract can be rejected if the debtor
has first proposed necessary contractual modifications to the
union and the union has failed to adopt them without good cause.
The company is required (1) to provide the union with the relevant
information needed to evaluate this proposal and (2) to confer
in good faith in attempting to reach a mutually satisfactory agreement
on the modifications.
CREDITORS COMMITTEES
As soon as practicable after the entry of the order for relief,
a creditors committee of unsecured creditors is appointed. The
committee may consult with the trustee or the DIP concerning the
administration of the case or the formulation of the plan. Additional
creditors committees may be appointed to represent special-interest
creditors. Orders affecting the estate generally will be entered
only with either the consent of the committee or a hearing in
which the judge hears the position of the committee.
Businesses with debts of less than $2 million that
do not own or manage real estate can avoid creditors committees.
In these cases, orders can be entered without
a committees consent.
THE REORGANIZATION PLAN
A reorganization plan to rehabilitate the debtor is a plan to
conserve and administer the debtors assets in the hope of an eventual
return to successful operation and solvency. The plan must be
fair and equitable and must do the following:
1. Designate classes of claims and interests.
2. Specify the treatment to be afforded the classes. (The plan
must provide the same treatment for all claims in a particular
class.)
3. Provide an adequate means for execution.
Only the debtor may file a plan within the first 120 days after
the date of the order for relief. If the debtor does not meet
the 120-day deadline, however, or if the debtor fails to obtain
the required creditor consent (discussed below) within 180 days,
any party may propose a plan. If a small-business debtor chooses
to avoid creditors committees, the time for the debtors filing
is shortened to 100 days, and any other partys plan must be filed
within 160 days.
Once the plan has been developed, it is submitted to each class
of creditors for acceptance. Each class must accept the plan unless
the class is not adversely affected by the plan. A class has accepted
the plan when a majority of the creditors, representing two-thirds
of the amount of the total claim, vote to approve it.
Even when all classes of claims accept the plan, the court may
refuse to confirm it if it is not in the best interests of the
creditors.(17) A spouse or child of the debtor can block the plan
if it does not provide for payment of their claims in cash.
The plan is binding upon confirmation. The debtor is given a reorganization
discharge from all claims not protected under the plan. This discharge
does not apply to any claims that would be denied discharge under
liquidation.
Even if only one class of claims has accepted the plan, the court
may still confirm the plan under the Codes so-called cram-down
provision. In other words, the court may confirm the plan over
the objections of a class of creditors. Before the court can exercise
this right of cram-down confirmation, it must be demonstrated
that the plan does not discriminate unfairly against any creditors
and that the plan is fair and equitable.
Section 4: Additional Forms of Bankruptcy Relief.
In addition to bankruptcy relief through liquidation and reorganization,
the Code also provides for individuals repayment plans (Chapter
13) and family-farmer debt adjustments (Chapter 12).
INDIVIDUALS REPAYMENT PLANS
Chapter 13 of the Bankruptcy Code provides for Adjustment of Debts
of an Individual with Regular Income. Individuals (not partnerships
or corporations) with regular income who owe fixed unsecured debts
of less than $250,000 or fixed secured debts of less than $750,000
may take advantage of bankruptcy repayment plans. This includes
salaried employees; individual proprietors; and individuals who
live on welfare, Social Security, fixed pensions, or investment
income. Many small-business debtors have a choice of filing a
plan for reorganization or for repayment. There are several advantages,
however, with repayment plans. One advantage is that they are
less expensive and less complicated than reorganization proceedings
or, for that matter, even liquidation proceedings.
FILING THE PETITION A repayment plan case can be initiated
only by the filing of a voluntary petition by the debtor. Certain
liquidation and reorganization cases may be converted to repayment
plan cases with the consent of the debtor.(18) A trustee, who
will make payments under the plan, must be appointed. Upon the
filing of a repayment plan petition, the automatic stay previously
discussed takes effect. Although the stay applies to all or part
of a consumer debt, it does not apply to any business debt incurred
by the debtor.
THE REPAYMENT PLAN A plan of rehabilitation by repayment must
provide for the following:
1. The turnover to the trustee of such future earnings or
income of the debtor as is necessary for execution of
the plan.
2. Full payment in deferred cash payments of all claims
entitled to priority.(19)
3. The same treatment of all claims within a particular class.
(The Code permits the debtor to list co-debtors, such as guarantors
or sureties, as a separate class.)
Filing the Plan. Only the debtor may file for a repayment plan.
This plan may provide either for payment of all obligations in
full or for payment of a lesser amount. The time for payment under
the plan may not exceed three years unless the court approves
an extension. The term, with extension, may not exceed five years.
The Code requires the debtor to make timely payments, and the
trustee is required to ensure that the debtor commences these
payments. The debtor must commence making payments under the proposed
plan within thirty days after the plan has been filed. If the
plan has not been confirmed, the trustee is instructed to retain
the payments until the plan is confirmed and then distribute them
accordingly. If the plan is denied, the trustee will return the
payments to the debtor less any costs. Failure of the debtor to
make timely payments or to commence payments within the thirty-day
period will allow the court to convert the case to a liquidation
bankruptcy or to dismiss the petition.
Confirmation of the Plan. After the plan is filed, the court
holds a confirmation hearing, at which interested parties may
object to the plan. The court will confirm a plan with respect
to each claim of a secured creditor under any of the following
circumstances:
1. If the secured creditors have accepted the plan.
2. If the plan provides that creditors retain their liens and
if the value of the property to be distributed to them
under the plan is not less than the secured portion of
their claims.
3. If the debtor surrenders the property securing the
claims to the creditors.
Objection to the Plan. Unsecured creditors do not have a vote
to confirm a repayment plan, but they can object to it. The court
can approve a plan over the objection of the trustee or any unsecured
creditor only in either of the following situations:
1. When the value of the property to be distributed under
the plan is at least equal to the amount of the claims.
2. When all the debtors projected disposable income to
be received during the three-year plan period will be
applied to making payments. Disposable income is all
income received less amounts needed to support the
debtor and dependents and/or amounts needed to
meet ordinary expenses to continue the operation of
a business.
Modification of the Plan. Prior to completion of payments,
the plan may be modified at the request of either the debtor,
the trustee, or an unsecured creditor. If there is an objection
to the modification by any interested party, the court must hold
a hearing to determine approval or disapproval of the modified
plan.
DISCHARGE After completion of all payments, the court grants
a discharge of all debts provided for by the repayment plan. Except
for allowed claims not provided for by the plan, certain long-term
debts provided for by the plan, and claims for alimony and child
support, all other debts are dischargeable. A discharge of debts
under a Chapter 13 repayment plan is sometimes referred to as
a super-discharge. One of the reasons for this is that the law
allows a Chapter 13 discharge to include fraudulently incurred
debt and claims resulting from malicious or willful injury. Therefore,
a discharge under Chapter 13 may be much more beneficial to some
debtors than a liquidation discharge under Chapter 7.
Even if the debtor does not complete the plan, a hardship discharge
may be granted if failure to complete the plan was due to circumstances
beyond the debtors control and if the value of the property distributed
under the plan was greater than would have been paid in a liquidation.
A discharge can be revoked within one year if it was obtained
by fraud.
FAMILY-FARMER PLANS
In 1986, to help relieve economic pressure on small farmers, Congress
created Chapter 12 of the Bankruptcy Code by passing the Family
Farmer Bankruptcy Act. The act, which was to remain in effect
until October 1, 1993, was recently extended for another five
years. The act defines a family farmer as one whose gross income
is at least 50 percent farm dependent and whose debts are at least
80 percent farm related. The total debt must not exceed $1.5 million.
A partnership or closely held corporation (at least 50 percent
owned by the farm family) can also take advantage of this law.
The procedure for filing a family-farmer bankruptcy plan is very
similar to the procedure for filing a repayment plan under Chapter
13. The farmer-debtor must file a plan not later than ninety days
after the order for relief. The filing of the petition acts as
an automatic stay against creditors and co-obligorsactions against
the estate.
The content of a family-farmer plan is basically the same as that
of a Chapter 13 repayment plan. The plan can be modified by the
farmer-debtor but, except for cause, must be confirmed or denied
within forty-five days of the filing of the plan.
Court confirmation of the plan is the same as for a repayment
plan. In summary, the plan must provide for payment of secured
debts at the value of the collateral. If the secured debt exceeds
the value of the collateral, the remaining debt is unsecured.
For unsecured debtors, the plan must be confirmed if either the
value of the property to be distributed under the plan equals
the amount of the claim or the plan provides that all of the farmer-debtors
disposable income to be received in a three-year period (or longer,
by court approval) will be applied to making payments.
Disposable income is all income received less amounts needed to
support the farmer-debtor and family and to continue the farming
operation. Completion of payments under the plan discharges all
debts provided for by the plan.
A farmer who has already filed a reorganization or repayment plan
may convert the plan to a family-farmer plan. The farmer-debtor
may also convert a family-farmer plan to a liquidation plan.
Profile: Family Farmer Bankruptcy Act
Concept Summary 32-1
ACCESSING THE INTERNET:
BUSINESS LAW AND LEGAL ENVIRONMENT
The U.S. Bankruptcy Code is online at
http://www.law.cornell.edu:80/uscode/11
Cornell Law Schools Legal Information Institute provides a general
introduction to bankruptcy law and links to related Internet resources
at
http://www.law.cornell.edu/topics/bankruptcy.html
You can find links to an extensive number of bankruptcy resources
on the Internet by accessing the Bankruptcy Lawfinder at
http://www.agin.com/lawfind
The American Bankruptcy Institute (ABI) is also a good resource
for bankruptcy information. The ABI site includes a collection
of selected bankruptcy court decisions, daily and weekly summaries
of important bankruptcy news, legislative updates, and so on.
You can access the site at
http://www.abiworld.org
You can get answers to the most frequently asked questions about
personal bankruptcy at
http://www.bhs.com/art/bkfq.html
If you want to read articles about bankruptcy law and related
subjects, you can go to
http://www.law.indiana.edu/ftp/archives/bankrlaw/bankrlaw.html
For a discussion of alternatives to bankrupcy, go to
http://apocalypse.berkshire.net/~mkb/
The site includes information on the following alternatives: Debt
Workout, Do Nothing, and Pay Creditors.
Dockets, records, and some of the decisions of the bankruptcy
courts can be accessed online through the federal courts electronic
bulletin board system, PACER (see the Accessing the Internet section
at the end of Chapter 3 for information on PACER).