Code Sections
101(5).
Disputed claim.
The debtor doesn't agree that the claim is valid.
What does a creditor file if they think they have a claim?
Proof of claim.
What would the trustee call an unperformed obligation owed to the debtor when bankruptcy starts?
An asset! Contracts which haven't been fully performed are basically assets of the estate.
What has higher priority, unsecured child support obligations, or administrative expenses?
Child support.
Section which determines secured status
506
Unliquidated claim.
No set dollar amount for the claim.
Bob owns a house. The house is worth $10,000. But, due to some reason I am too lazy to think of, the property tax levied against the house is $50,000. How much can the state claim in taxes against the house?
Under 502(b)(3), property tax claims cannot exceed the value of the property. The maximum allowable claim is for $10,000.
There are 100 general unsecured creditors in a bankruptcy case. They are each owed the same amount of money, amounting to $100,000. There is only $10,000 remaining to pay them. How are they paid?
These types of claims are paid pro rata, and therefore each claimant will get $100.
What has higher priority, administrative expenses or unsecured wage claims?
Administrative expenses.
Section which determines treatment of general unsecured claims in Chapter 7.
726
Contingent claim.
A claim that may or may not ultimately come due, depending on certain events.
Bob ran up quite the credit card debt. Bob files bankruptcy, and the credit card company wants to claim both the debt, the unpaid interest, and the interest which will be accrued during the proceeding. Can they?
They can claim the debt and the unpaid interest, but unmatured interest is "cut off" once the petition is filed.
A claimant has a complicated antitrust case against the debtor, and claims the value of that lawsuit. The antitrust case will take a few years to complete. What can the Court do?
Unliquidated contingent claims can be estimated by the court for expediency.
What has higher priority, secured claims or domestic support obligations?
Secured claims.
Code section which determines priority.
507
Priority claim.
Claim that is entitled to payment ahead of other debts.
Bob has a creditor with a claim of damages relating to a breach of contract. Bob wants to use a nonbankruptcy defense (presenting evidence that the debtor never actually signed the contract). Can he?
Yes. Under 502(b)(1), all nonbankruptcy defenses are available to disprove claims.
Secured claims are set at the lesser of the value of the collateral or the value of the outstanding debt. Bob can claim $5,000 for A, and $10,000 for B.
What has higher priority, trustee fees or administrative expenses?
Trustee fees.
Code section which "cuts off" unmatured interest in bankruptcy proceedings. This sections disallows claims for interest which would accumulate during the proceeding.
502(b)(2)
Unmatured claim.
A claim that will be due at some point for sure, but is not due yet.
Bob owned a big business and leased a big property. But hes an idiot, so the company fails. The landlord is claiming 5 months of unpaid rent at $3,000 a month. Further, the landlord is claiming all future rent for the remainder of the lease term. Can he?
Under 502(b)(6), landlord seeking unpaid and future rent are limited to 1 year of future rent plus all unpaid rent. So, ($3,000 x 12) + ($3,000 x 5) = $51,000.
What is a secured claimant entitled to?
Either the transfer of the collateral, or the full payment of the secured claim.
What has higher priority, domestic support obligations or trustee fees?
Trick question, both have the same priority. (Not sure how this functionally works tho, and I don't really know if im right.)