Quiz 35: Bankruptcy
a) This is a requirement for involuntary proceeding of bankruptcy. Hence, this is not an answer. b) Debtor may be insolvent to file for bankruptcy. Hence, this is not an answer. c) This is a requirement for involuntary proceeding of bankruptcy. Hence, this is not an answer. d) Spouses can file jointly for bankruptcy. The answer is d.
Refer to the case In re Lee Case Issue The facts to this case are: • Creditor, a supplier of the bankrupt debtor, received a $100,000 cashier's check from debtor, but did not ship out anymore goods. • Trustee of bankrupt estate claim the cashier's check is voidable preference. The issue is whether this check is voidable preference. Relevant Terms, Laws, and Cases Voidable Preferences - Preferences are transfers of assets by the debtors, voidable preferences are transfers of assets that a trustee of a bankrupt estate may reverse or cancel. Transfers of property within or on 90 days are generally voidable. See Title 11, section 547 of the US Code for preferences in bankruptcy cases. Opinion The court held for the trustee. The court argued that: • The cashier's check was made within 90 days of the bankruptcy petition. • Thus, it fell under the voidable preferences of Title 11, section 547. • There is an exception, for the check to not be voidable the creditor must have given new value for the check. • However, the creditor did not give new value as they haven't made new shipments to debtor. • The exception then doesn't apply to the creditor. Hence, the cashier's check is voidable preference.
Insurance companies are not debtors under the US bankruptcy code. They may not file for bankruptcy as individuals and other companies may. Hence, the answer is d.