Posted: April 1st, 2015

Bankruptcy Law and Questions

Questions:

1. Explain joint petition, consolidation and joint administration

Joint petition in bankruptcy proceedings refers to a situation whereby the husband and the wife file bankruptcy proceedings together. It is immaterial whether the wife of the husband who seeks to be adjudged bankrupt. The most essential element is that the petition is presented before the court by the husband and wife as the main parties to the bankruptcy proceedings. Consolidation in bankruptcy means bringing together many debts or credit lines. The main aim of consolidation is to device a payoff plan for all the available debts. It may also refer to debt settlement arrangement (Parsons, 322).

Joint administration is a legal instrument whereby several lawsuits are administered together. Joint administrations are designed to save time and dispense the mechanism with the same questions of law and fact expeditiously. However, it is the duty of the court to ascertain that there is no potential or existing conflict of interests between the parties. The main advantage of joint administration is that the two separate individuals or business entities minimize the cost of hiring bankruptcy professionals since the cost is shared (Parsons, 276).

2. What is an involuntary petition?

Involuntary petition is a bankruptcy petition that occurs when creditors make a request in court through a petition to the effect that the creditor should be declared bankrupt. It is to be remembered that the petition is by the creditors and not the debtor. It is the creditor’s right to make the petition, however, the right must be a creature of a statute. Bankruptcy is declared on the debtor once the court approves the petition. Involuntary petition facilitates the collection of debts by creditors. It is imperative to note that the debtor has the right to object the involuntary proceeding. Nonetheless, this is only if the debtor proves that the creditors are forcing him or her to involuntary bankruptcy. The court conducts a hearing after the filing of the objection, and if the debtor wins, he or she is entitled to lawyer fees and all other costs associated with the filing of the defense (Parsons, 326).

3. What are the federal exemptions and what is the right of states to opt out?

A federal exemption refers to personal property and any other property that is excluded from the list of the available property ready for distribution to the creditors. The rights created for individuals who are adjudged bankruptcy must be expressed by the respective law. The properties exempted may include matrimonial home and money held by the debtor on trust. However, the exemption may be waived in instances whereby the debtor includes the exempted property in the list of the property available for distribution upon bankruptcy (Parsons, 467).

At a point where the property under federal exemption is to be determined, the wording of different laws relating to bankruptcy in the states is considered. Matrimonial home and household items are exempt from the bankruptcy estate. Household items include bedding, family heirlooms, and furniture. It is the discretionary of the debtor to exclude the property from the list of properties. The state has a chance of opting out in instances when the debtor waives the exemption preceding bankruptcy proceedings (Parsons, 417).

4. What is the Automatic Stay?

An automatic stay has the powers of bringing the entire bankruptcy process at a halt. This refers to a sanction that has the effect of habitually stopping all orders. Such orders include litigation, foreclosure and garnishee in respect to the debtor. In addition, all creditors or bankruptcy trustee activities in the realization of the debtor’s property are subsequently automatically stopped (Parsons, 405).