Wiley CPAexcel Exam Review 2015 Focus Notes: Regulation

Module 30

Bankruptcy

Bankruptcy

Voluntary Filing—Chapter 7

Means testing for consumer debtor added by Bankruptcy Act of 2005, prohibiting Chapter 7 filing when

• Consumer debtor monthly income exceeds certain specified amounts in the bankruptcy code
• Debtor current monthly income is reduced by
  • Monthly expenses
  • Payment made on secured debts, and
  • Payment made to priority general creditors

Consumer debtor must meet with an authorized credit counselor within 180 days prior to filing for bankruptcy

Involuntary Filing—Chapter 7

12 or more unsecured creditors

• Requires three or more unsecured creditors to file petition
• Total undisputed claims of petitioners ≥ $15,325

Fewer than 12 unsecured creditors

• Requires only one or more unsecured creditors to file petition
• Total undisputed claims of petitioners ≥ $15,325

Powers of Bankruptcy Trustee

Avoidance

Enables trustee to obtain return of debtor's property

Applies to

1. Fraudulent transfers
2. Statutory liens against debtor's property
3. After-filing date transfers
4. Voidable preferences

   His attempt to transfer the property caused a flap

Voidable Preferences

Transfers of property made by debtor that can be recovered by trustee

To be a voidable preference, the transfer must be made:

• Within ninety days of filing of petition if to a noninsider
• Within one year of filing if to an insider
• For a pre-existing (antecedent) debt
• While the debtor is insolvent
• When the transfer exceeds the amount that the creditor would obtain through bankruptcy ...