University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

145

Pages:

2
Author:

bratrochanter

The text provides a deep dive into Chapter 13 Bankruptcy and concludes with a comparison of various bankruptcy types and illustrative cases. Here are the key points: 1. Chapter 13 Bankruptcy (Consumer Debt Adjustments)     Purpose: Chapter 13 allows individuals with regular income to adjust their debts by creating a structured repayment plan, which can extend from three to five years based on income. It helps debtors manage their financial obligations while potentially retaining more of their property. Plan Requirements: Debtors must allocate disposable income to creditors, with unsecured creditors receiving at least what they would in a Chapter 7 liquidation. Discharge: After successful completion of payments, debtors may receive a discharge from most debts, though certain obligations (such as some tax debts or criminal fines) remain non-dischargeable. Case Example - In re Burt: This case explored the definition of a purchase money security interest (PMSI) within Chapter 13. Here, Ford Motor Credit objected to the debtor’s plan to bifurcate (or split) its claim on a vehicle purchase that included negative equity from a trade-in. The court concluded that the negative equity financed as part of the purchase constituted a PMSI, meaning the entire amount was fully secured and could not be bifurcated. 2. Comparison of Major Bankruptcy Types     Chapter 7 (Liquidation): Involves selling non-exempt property to pay off debts, with most remaining debts discharged, giving individuals a “fresh start.” Chapter 11 (Reorganization): Allows primarily businesses to restructure debts while continuing operations. It includes special provisions for complex cases like collective bargaining or asset protection. Chapter 12 (Family Farmers and Fishermen): Tailored for individuals in farming and fishing with specific income and debt thresholds, allowing debt restructuring without full liquidation. Chapter 13 (Consumer Adjustments): Suited for individuals with regular income to repay debt over time. It protects more assets than Chapter 7 and provides debtors an opportunity to avoid the stigma of liquidation. 3. Illustrative Problems and Cases   Household Goods (Barnes case): Debates whether items like firearms or a VCR qualify as “household goods” exempt from lien, reflecting the importance of necessity in determining exemptions. Residence Exemption (Hurd case): Examines if a horse trailer used as living quarters qualifies as a “mobile home” under Missouri law for   bankruptcy exemptions. Key issues include defining principal residence and statutory interpretation. Fraudulent Transfer (Kranich case): Evaluates a potentially fraudulent transfer of property without consideration before filing bankruptcy, which could allow a trustee to recover such transfers. Student Loan Misrepresentation (Hott case): Considers whether failing to disclose student loan debt on a loan application constitutes fraud, impacting eligibility for debt relief through bankruptcy. These cases illustrate critical issues in bankruptcy law, including property exemptions, treatment of secured claims, and potential misuse of bankruptcy to avoid debts.