Eligibility for bankruptcy

Eligibility for bankruptcy- § 109 (a) p. 75 problem for practicing.  – who is eligible for bankruptcy under chapter 7 and 11?

  1. Must be a “person” and

Person does not include entity, but entity includes person.

109 (41) definition of person;.

109 (15) definition of entity;

chapter 7 and 11 will be focused in this class.

109 (b) a person maybe a debtor under chapter 7. But excluded: railroad, insurance company, bank, saving

109 (d) only a railroad (except a stockholder or a commodity broker), a person and an uninsured … maybe a debtor under chapter 11.


  1. Must have residence, domicile, place of business or property in U.S.



Venue (28 U.S.C. § 1408) – if eligible for bankruptcy, then where to file? It’s not in Bankruptcy Code, but it locates in U.S.C.

District Court for the district in which:

  1. Domicile
  2. Residence
  3. Principal place of business in U.S.
  4. Principal assets in U.S.

Located for 180 days immediately before filling. Or a longer portion of such 180-day period than the domicile, residence, or principal place of business, in the United States, or principal assets in the United States, of such person were located in any other district; Or p. 76 in which there is a pending a case under title 11 concerning such person’s affiliate, general partner, or partnership.

Yes, that could be a trick to make sure you have your bankruptcy case filed only in courts you want to stay. Relevance makes the bankruptcy stay in certain district court.


How to invoke an voluntary bankruptcy case?

301 (a)


How does a corporation authorize filling of bankruptcy?

The coed does not tell us, but state corporate laws tell us we need a board of directors’ authorization for filing it.

Also, for partnership, 303(b)3(A), by fewer than all of the general partners in such partnership.


Automatically and immediately after voluntary filling of bankruptcy relief comes. 301(b)


Even though Chapter 11 could be more desirable than Chapter 7 as Chapter 11 it can bring more money for bankruptcy, Chapter 11 bankruptcy costs much more, namely, attorney fee and some other expenditures.


In Chapter 11, you don’t have all agreed creditors for bankruptcy cases being filled before court. Automatic stay!!!


Involuntary filling of bankruptcy case. 303(a) only under chapter 7 or 11.

How to file a involuntary case? 303(b)

p. 148 petitioning creditors

if 12 creditors, 3 out 12 required. if less than 12, 1 is enough. 303(b) (1) and the disputed subject matter must value at least $15,325 (in 2013 it was $14,425, number increased in a 3-year base.)

Why exclude secured claims from being eligible? b/c collaterals under the secured debt make sure the creditor will receive full repayment.


Grounds for relief. p. 150

No automatic stay for involuntary case, not same as voluntary cases, involuntary cases still require an order from judge for relief. And the court will make such an order if the court finds the debtor cannot repay the obligation/bill in full. (insolvency) not balance sheet insolvency but a cash flow insolvency, b/c cash flow is much easier and more practical.


Definition of “debt” – 101 (12) the term “debt” means liability on a claim. And “claim” means secured and unsecured.


p. 152 Problem 2.14 and problem 2.15

Do we need a collective benefit for the creditors or only the amount of the money being repaid matters? Whether the collective proceeding resolution is the most appropriate for insolvent bankruptcy case?


In 2.14

Alpha $70,000

Beta $100

Gamma $100

70% debt but only 30% creditor being paid.


In 2.15



Dismissal – p. 154

Dismissal based on the reason the court finds that the petitioners failed to prove one of the grounds for relief under § 303(h). Or, it might be dismissed on motion of the petitioners. p. 154


SGL Carbon Corporation p. 95

No insolvency required for filling a bankruptcy petition. You just need to be a person and with minimum contact with the U.S. but most of courts do require voluntary cases to be filed in good faith.


Facts: German company potentially facing a class antitrust suit against them, so they file petition for bankruptcy under Chapter 11 in order to avoid potential liability while financially healthy.


Whether there is a cause for dismissal? No! b/c the appellate court find the company is solvent and no threat to their business operation.

Holding: although early filling is encouraged for allowing the debtor to rehabilitate its business before it is faced with a hopeless situation, no premature filling is allowed

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China Bar Association; Current GWU Law Student; A man had cried at midnight.

Vigilante wrote 64 posts

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