| 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
- Best interests test: Creditors receive at least as much as Chapter 7
- Feasibility: Debtor can make plan payments
- Good faith: Plan proposed in good faith
- Acceptance: Requisite votes obtained
- 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:
- For cause (including lack of adequate protection)
- No equity and property not necessary for reorganization
- 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)
- Transfer of property
- To or for benefit of creditor
- On account of antecedent debt
- Made while insolvent
- Within 90 days (or 1 year for insiders)
- 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)
- Domestic support obligations
- Administrative expenses
- Gap claims (involuntary cases)
- Employee wages (up to $15,150, 180 days)
- Employee benefit contributions
- Grain farmers and fishermen
- Consumer deposits ($3,350 cap)
- Tax claims
- DUI judgment claims
- 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 guidereferences/chapter-11-process.md - Reorganization proceduresreferences/claims-guide.md - Proof of claim and objections
