bankruptcy

name

bankruptcy

description

Bankruptcy law skill for insolvency and debt restructuring matters. Use when the user needs assistance with Chapter 7, Chapter 11, Chapter 13, creditor rights, preference actions, or bankruptcy litigation. Triggers on keywords like "bankruptcy", "Chapter 7", "Chapter 11", "Chapter 13", "insolvency", "creditor", "debtor", "discharge", "reorganization", "automatic stay", "proof of claim", "preference".

Bankruptcy Law

This skill provides expert guidance for bankruptcy proceedings, restructuring, and creditor rights.

Core Capabilities

1. Debtor Representation

• Chapter 7 liquidation
• Chapter 11 reorganization
• Chapter 13 wage earner
• Asset protection planning

2. Creditor Representation

• Proof of claim filing
• Adequate protection
• Relief from stay motions
• Preference/fraudulent transfer defense

3. Business Restructuring

• Pre-bankruptcy planning
• DIP financing
• Sale transactions (§363)
• Plan confirmation

4. Bankruptcy Litigation

• Adversary proceedings
• Contested matters
• Appeals
• Non-dischargeability actions

Chapter Comparison

Feature	Chapter 7	Chapter 11	Chapter 13
Purpose	Liquidation	Reorganization	Wage earner plan
Who	Individuals, businesses	Any debtor	Individuals with regular income
Debt Limits	None	None	$2.75M total (2024)
Trustee	Yes (liquidating)	Usually debtor-in-possession	Yes (standing)
Duration	3-6 months	1-3+ years	3-5 years
Asset disposition	Non-exempt liquidated	Retained, reorganized	Retained
Discharge	Most debts	Per plan	Per plan

Chapter 7 Liquidation

Eligibility (Means Test)

1. Calculate Current Monthly Income (CMI)
   - Average income for 6 months before filing
   - Compare to state median income

2. If above median, apply means test:
   - Deduct allowed expenses (IRS standards + actual)
   - Calculate disposable income
   - If disposable income too high, presumption of abuse

Exemptions

Federal vs. State: Debtor may choose federal exemptions if state allows

Common Federal Exemptions (11 U.S.C. §522(d)):

Property	Amount (2024)
Homestead	$27,900
Motor vehicle	$4,450
Household goods	$14,875 aggregate
Jewelry	$1,875
Wildcard	$1,475 + $13,950 unused homestead
Tools of trade	$2,800
Retirement accounts	Generally unlimited

Chapter 7 Timeline

Filing → Automatic Stay → 341 Meeting (21-40 days) →
Deadline for Objections (60 days after 341) →
Trustee Report of No Distribution (or asset case) →
Discharge (60 days after 341) → Case Closed

Chapter 11 Reorganization

Key Features

• Debtor-in-possession (DIP) continues operations
• Automatic stay protects debtor
• Exclusivity period to propose plan
• Creditor committees may be appointed
• Disclosure statement required before solicitation

Chapter 11 Timeline

Filing → First Day Motions → DIP Financing →
341 Meeting → Claims Bar Date →
Disclosure Statement → Plan Confirmation →
Effective Date → Emergence

First Day Motions (Common)

• Cash collateral use
• DIP financing
• Payment of critical vendors
• Employee wage payment
• Utility adequate assurance
• Joint administration
• Rejection of executory contracts

Plan Confirmation Requirements

1. Best interests test: Creditors receive at least as much as Chapter 7
2. Feasibility: Debtor can make plan payments
3. Good faith: Plan proposed in good faith
4. Acceptance: Requisite votes obtained
5. Priority claims paid: Unless claimant agrees otherwise

Classification and Voting

• Claims grouped by substantially similar legal rights
• Class accepts if:
  • Over 1/2 in number vote yes, AND
  • Over 2/3 in amount vote yes
• Cramdown available if at least one impaired class accepts

Cramdown Requirements (§1129(b))

• Plan does not discriminate unfairly
• Plan is fair and equitable:
  • Secured claims: Retain lien, receive present value
  • Unsecured claims: Either paid in full OR no junior class receives anything (absolute priority rule)

Chapter 13 Wage Earner

Eligibility Requirements

• Individual with regular income
• Secured debt under $2,750,000 (2024)
• Unsecured debt under $2,750,000 (2024)
• Current on tax filings

Plan Requirements

• 3-5 years depending on income
• Priority claims paid in full
• Secured claims: Adequate protection
• Unsecured claims: Best interests and projected disposable income

Chapter 13 Plan Contents

1. Payment terms (amount, duration)
2. Treatment of secured claims
3. Treatment of priority claims
4. Treatment of unsecured claims
5. Adequate protection payments
6. Executory contract treatment
7. Property to surrender

Chapter 13 Discharge

Debts discharged: Most unsecured debts after plan completion Hardship discharge: Available if completion impossible through no fault of debtor

Automatic Stay (§362)

Stay Prohibits

• Collection actions
• Enforcement of judgments
• Creation/perfection of liens
• Setoff
• Litigation commencement/continuation

Stay Exceptions (§362(b))

• Criminal proceedings
• Domestic support obligations
• Police power actions
• Certain tax proceedings
• Pension loan repayments

Relief from Stay (§362(d))

Grounds:

1. For cause (including lack of adequate protection)
2. No equity and property not necessary for reorganization
3. Single-asset real estate cases

Motion Process:

• 30-day deadline for preliminary hearing
• Burden shifting depends on ground

Preferences and Fraudulent Transfers

Preference Elements (§547)

1. Transfer of property
2. To or for benefit of creditor
3. On account of antecedent debt
4. Made while insolvent
5. Within 90 days (or 1 year for insiders)
6. Enables creditor to receive more than Chapter 7

Preference Defenses

Defense	Description
Contemporaneous exchange	New value given at same time
Ordinary course	Payment in ordinary course of business
New value	Subsequent new value provided
Purchase money	PMSI for new value
Small preference	Under $7,575 (business) or $600 (consumer)

Fraudulent Transfer (§548)

Actual Fraud: Transfer with intent to hinder, delay, defraud Constructive Fraud: Transfer for less than reasonably equivalent value while:

• Insolvent or became insolvent
• Unreasonably small capital
• Believed would incur debts beyond ability to pay

Look-back Period: 2 years (§548); longer under state law (§544)

Claims and Distributions

Priority of Claims (§507)

1. Domestic support obligations
2. Administrative expenses
3. Gap claims (involuntary cases)
4. Employee wages (up to $15,150, 180 days)
5. Employee benefit contributions
6. Grain farmers and fishermen
7. Consumer deposits ($3,350 cap)
8. Tax claims
9. DUI judgment claims
10. General unsecured claims

Proof of Claim

Filing Deadline: 70 days after petition (Chapter 7/13) or as set by court (Chapter 11) Contents: Amount, basis, security, priority

Claim Objections

• Claim filed without supporting documentation
• Amount disputed
• Claim paid
• Claim subject to defense
• Claim improperly classified

Non-Dischargeable Debts (§523)

Debt Type	Chapter 7	Chapter 13
Certain taxes	Non-dischargeable	Non-dischargeable
Student loans (absent hardship)	Non-dischargeable	Non-dischargeable
Domestic support	Non-dischargeable	Non-dischargeable
Fraud-based debts	Non-dischargeable	Dischargeable
Willful and malicious injury	Non-dischargeable	Dischargeable
Government fines	Non-dischargeable	Dischargeable
DUI judgment	Non-dischargeable	Non-dischargeable

Integration with Other Skills

• litigation: Adversary proceedings, contested matters
• corporate-ma: Distressed M&A, §363 sales
• contract-lifecycle: Executory contract issues
• real-estate: Property of the estate, foreclosure
• tax-law: Tax claims, discharge of tax debts

Reference Files

For detailed guidance:

• references/chapter-7-checklist.md - Chapter 7 filing guide
• references/chapter-11-process.md - Reorganization procedures
• references/claims-guide.md - Proof of claim and objections