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    Chapter 7 and 11 Bankruptcy

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    Details: The law firm is very concerned that the call center would not be able to pay any judgment levied against it by the courts in a civil tort case. Due to recent robberies and legal troubles with the call center, the firm is worried that the call center although incorporated may have to file bankruptcy. Your firm is currently owed just over $40,000,000 by the call center. Your committee as a group has been tasked with putting together a report on the following issues:

    Can the call center file Chapter 7 bankruptcy? Explain.
    Can the call center file Chapter 11 bankruptcy? Explain.
    Can the call center file Chapter 13 bankruptcy? Explain.
    What are the benefits and the negatives of the call center filing bankruptcy?
    Are there any federal guidelines that might affect the call centers decision to file?

    Make sure to discuss any applicable statutes or case law in your state or country.

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    Interesting assignment!

    Let's look at the questions individually, which can act as a tentative outline for the body of your short paper. Like all academic papers, it should include a short Introduction (including purpose statement) and a Conclusion. I also attached to resources, some of which this response is drawn.


    As a voluntary step to wind-up the company, the directors of the call center may assign the company into bankruptcy. The first step is to consult with a trustee to confirm that this is the best course of action. Bankruptcy may be taken if:

    - There are unencumbered assets which are available to the unsecured creditors
    - The company wishes a final and full accounting provided to the creditors
    - A stay of proceedings is necessary to stop a landlord or judgment creditor distraint.
    - The company wishes to rearrange the priority of statutory creditors. (4)

    There are few limitations on who can file bankruptcy. Rather, the call center need to make a decision of whether to file, and under what Chapter, which is based upon each debtor's need for relief from debts and their capacity and willingness to undertake a procedure that will have long-term consequences on their financial life. (6)

    1. Can the call center file Chapter 7 bankruptcy? Explain.

    In order to file Chapter 7 bankruptcy, the call center must meet the necessary criteria.
    In general, to qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. 11 U.S.C. §§ 101(41), 109(b). In this case, the debtor would be a corporation, the call center. A new law, however, determines the eligibility criteria, referred to a the means test, which the call center would need to meet. The Means Tests is as follows:

    "If the debtor's "current monthly income"(1) is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive. Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $10,000, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $6,000. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor's consent) or will be dismissed. 11 U.S.C. § 707(b)(1)". (1)

    Thus, subject to the means test described above for individual debtors, relief would be available under chapter 7 to the call center irrespective of the amount of the debtor's debts or whether the debtor is solvent or insolvent. An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was ...

    Solution Summary

    In reference to a case scenario, this solution discusses Chapter 7 and 11 bankruptcies and the benefits and the negatives of the call center filing bankruptcy, as well as any federal guidelines that might affect the call centers decision to file. Supplemented with detailed descriptions of Chapter 7 and 11.