Bankruptcy? There Are Essential Two Primary Purposes

¶ … bankruptcy?

There are essential two primary purposes for the existence of federal bankruptcy laws. The first purpose is to provide debtors with a legally recognized method for discharging their debt and affording said debtors with an opportunity for a fresh start financially. The second purpose is to provide creditors with protection of their interests in the estate of the bankrupt party. In all bankruptcy, all debts are listed and creditors are categorized as either secured or unsecured. Secured creditors enjoy a better position relative to any assets in the bankrupt estate as they have an enforceable interest in said assets. Bankruptcy, depending on the type utilized by the debtor, can either erase the indebtedness of the debtor or allow the debtor additional time to satisfy his debts without interference from his creditors.

What is a lien. Give an example.

In bankruptcy filings liens, claims against property that are filed in order to secure payment, enjoy a special status. The purpose for placing liens on property is to ensure payment in the event of possible bankruptcy and/or attempts by the debtor to transfer an interest in property prior to a debt on said property being satisfied. In bankruptcies there are several different types of liens: tax liens filed by government agencies; mechanics liens filed by contractor performing work on property; and homeowners liens that are filed primarily by condominium associations for unpaid dues.

3. Who abandons property of the bankruptcy estate? a. The Bankruptcy court; b. The debtor; c. The creditor; d. The trustee; e. All of the above

Answer: d. The trustee

4. When a Trustee avoids a preference payment to a creditor: a. The creditor goes to jail; b. The creditor gets to keep the money; c. The debtor's bankruptcy is dismissed; d. all of the above; e. none of the above

Answer: e. none of the above

5. Who would file an Administrative Claim in a bankruptcy and in what order would such creditor be paid?

Administrative claims are for goods sold to the debtor within 20 days prior to the date of the filing of the bankruptcy. In order to be eligible for possible consideration as a valid administrative claim the goods supplier must show 1) that the goods were sold to the debtor; 2) goods were received within 20 days prior to the filing; 3) the goods were sold in the regular course of business; 4) the value of the goods sold to the debtor. The administrative claim can include only the value of the goods sold and not for any related services. In order to be eligible for consideration of one's administrative claim the goods supplier must file application with the Bankruptcy Court. If approved, the supplier will be afforded priority over unsecured creditors but the supplier's claim remains subordinate to the claims of secured creditors. The purpose of this provision is to discourage debtors from making large purchases of goods immediately prior to the filing of a bankruptcy. The provision was a compromise with creditors who were concerned that many debtors were taking this approach. Creditors under this provision are not guaranteed payment but are afforded more protection than they would be otherwise.

6. The first law that comes into effect immediately after a bankruptcy petition is filed is called what?

Under the provisions of the bankruptcy code the filing of a bankruptcy case automatically triggers and injunction against the continuation of any attempt by any creditor to collect on a debt. This injunction affords debtors protection from creditors and under the jurisdiction of the bankruptcy judge. Similarly, all the debtor's assets are also brought under the control of the bankruptcy court. The injunction, which is called an "automatic stay" under the Code prohibits the beginning and continuing of law suits, all collection calls or attempts at collection, repossessions or foreclosures, and the imposition of any garnishments or levies. The automatic stay remains in effect until the bankruptcy lifts the stay, the debtor is discharged in bankruptcy, or an item of property is no longer property of the estate.