Bankruptcy

RANDOM BANKRUPTCY FACTOIDS

By mcbride

·        The Means Test is the standard adopted in the 2005 amendments to the Bankruptcy Code to prevent individual high wage earners from filing a Chapter 7 liquidation. However, if more than half of the individual?s debt is related to a failed business, the Means Test may not apply, thus making them eligible to file regardless of income.

·        Bankruptcy cases must be filed in the Federal District where the debtor?s domicile, residence, principal place of business, or principal assets have been located for the 180 days immediately proceeding the filing -or- for the longest portion of such 180-day period (i.e., 91 days).  See 28 U.S.C. §1408, 1409.  A recent case defining ?principal place of business? as the ?nerve center? of that business is Hertz Corp. v. Friend, 559 U.S. ___ (2010) out of the US Supreme Court.

·        Unlike an individual, a business or corporation is not discharged under Chapter 7 bankruptcy proceeding. See 11 U.S.C. § 727(a)(1).

·        When a defendant in a state civil action files for bankruptcy, typically the state court judge will stay the entire case until:

a.   The plaintiff files a notice of non-suit against defendant debtor;

b.   Where there are multiple defendants, defendant debtor is severed from the others and the case continues without that defendant debtor; or

c.   An order to lift the automatic stay is granted in the bankruptcy court.  See 11 U.S.C. § 362.

·        In the case of an individual filing serial bankruptcy cases, a complete automatic stay is put in place for the first filing only.  The debtor must request a stay for the second bankruptcy filing.  Creditors may object to the stay request and the stay may not then be imposed by the judge. However, surprisingly, creditors rarely do this.  There is no automatic stay of proceedings for a third bankruptcy filing subject to further court order.  See 11 U.S.C. 362(c).

·         Chapter 13 bankruptcy relief is generally available to: (i) individuals (not corporations or partnerships); (ii) with regular income; and (iii) who owe less than $307,675 in noncontingent, liquidated unsecured debts and less than $922,975 in noncontingent, and liquidated secured debts. If the debtor falls outside these categories/limits, a motion to dismiss the bankruptcy would generally be appropriate. See 11 U.S.C. § 104(b).

**The aforementioned list does not constitute the rendering of legal advice nor should it be relied upon as such. The attorney-client relationship is not established with the firm absent a signed engagement letter.

Full post as published by Texas Lawyer Blog on July 28, 2010 (boomark / email).