Term
| What approach does Ch. 7 bankruptcy use? |
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Definition
| It uses a liquidation approach by converting a debtor's nonexempt assets into cash. The cash is distributed as dictated by the Bankruptcy Cody. An honest debtor is then discharged from most of the remaining debts. |
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Term
| What parties are eligible for Ch. 7 bankruptcy? |
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Definition
| All debtors, including individuals, partnerships, and corporations. |
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Term
| What parties are not allowed to file Ch. 7? |
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Definition
| Municipalities, Railroads, Insurance companies, Banks, Savings and loan associations, and Credit unions |
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Term
| What happens when an individual debtor is found guilty of abuse with primarily consumer debts? |
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Definition
| This results in dismissal or conversion to a Ch. 13 case |
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Term
| How is abuse with primarily consumer debts determined? |
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Definition
| Abuse is foundd when the debtor does not pass the means test or general grounds exist for the finding |
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Term
| When can any party in interest seek dismisal for abuse? |
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Definition
| If the debtor's income exceeds the relevant state median income. Otherwise, only the judge, U.S Trustee, or bankruptcy administrator may move to dismiss |
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Term
| What is the debtor's income for standing purposes? |
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Definition
| Current Monthly Income (CMI) times 12 |
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Term
| What does the means test determine? |
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Definition
| The debtor's ability to repay general unsecured claims |
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Term
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Definition
| It is a 6 month average of all income received by the debtor and spouse. Social security and certain other items are excluded |
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Term
| Why are presumed deductions allowed and what are some examples? |
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Definition
| They are deductions from CMI allowed for support and payment of higher priority debt. Examples: living expenses for which allowances are specified by IRS, actual expenses recognized by IRS for which it provides no allowances, secured debt coming due within 5 years divided by 60, priority debt divided by 60, and certain other deductions |
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Term
| What is the mandatory trigger point and how is it used? |
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Definition
| The trigger point for presumed abuse is that the debtor has more than $182.50 of CMI after deductions.If CMI after deductions is < $109.58, then the presumption never arises. Abuse is presumed, for other amounts, if 5 year income suffices to pay 25% or more of general unsecured debt |
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Term
| Where does the debtor file the calculations for the means test? |
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Definition
| As a part of the schedule of current income and expenditures |
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Term
| What does a debtor's estate in property include? |
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Definition
| Earnings of the debtor for services rendered after commencement of a Ch.7 proceeding, contributions to employee retirement plans, contributions made more than 365 days prior to filing to educational retirement accounts and state tuition programs, most property of the debtor acquired after the filing of the petition (including gifts), all property currently held, community property, property the trustee recovers from 3rd parties, proceeds and profits from property of the estate, interests in property (inheritances, divorce settlements anything that debtor is entitled to within 180 days after filing), interests in property acquired by the estate after filing |
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Term
| What can a trustee in bankruptcy do with leases? |
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Definition
| Assume and perform the unexpired lease, assume and assign unexpired lease to 3rd party, reject unexpired lease, or sell it. Must act to assume lease within 60 days after order for relief or it is deemed rejected |
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Term
| What are exempt assets and who defines them? |
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Definition
| Considered basic necessities for a fresh start. They are defined by either state or federal law. |
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Term
| Who is eligible for exemptions? |
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Definition
| Only individuals; not corporations |
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Term
| What are states allowed to do regarding exemptions? |
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Definition
| They may require their citizens to accept the exemptions of property as defined by state law. If the state hasn't rejected the federal list, the debtor has a choice of either the state or federal l ist |
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Term
| How is the state of the debtor determined? |
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Definition
| It is the debtor's domicile for the 730 days before filing. If he was in more than 1 state, then the place where he domiciled for the majority of 180 days prior to the 2 year prefiling period is used |
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