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Chapter 5
Creditors, the debtor and the estate
In the San Diego Divisional office of the United States Bankruptcy court, Chapter 5 of the Bankruptcy Code, like Chapter 3, applies to both liquidation and rehabilitation cases and deals with a wide range of matters including proof and allowance of claims, priorities, exemptions, exceptions to discharge (i.e. non-dischargeable debts such as student loans and child support), property of the estate, avoiding powers, and setoff.
Bankruptcy code sections 501 and 502 as applied before the San Diego bankruptcy court, deal with the allowance of claims and, among other things, requires that contingent or un-liquidated claims be estimated by lawyers for the entity. Section 503 of the bankruptcy code deals with the allowance and payment of administrative expenses. Priorities set forth in bankruptcy code § 507 represent determinations by San Diego legislators and others, that certain limited categories of claims are entitled to priority treatment, thus assuring their payment in most bankruptcy cases before the court in San Diego. Claims entitled to priority include administrative expenses, wages and the like up to $4,300, claims for contributions to an employee benefit plan also up to $4,300 but reduced by payments made to such employee for wages, consumer deposits and prepayments for goods and services, and unsecured tax claims. The dollar amounts in Section 507 were increased by the Bankruptcy Reform Act of 1994 which also amended section 104 to provide for ongoing adjustments on three year intervals.
The attempt by San Diego Legislators and others to provide a more uniform and generous exemption provision for bankruptcy debtors has become in the course of the legislative process one of the more confusing provisions of the bankruptcy law. Briefly, debtors are given the option to elect the exemptions provided in the bankruptcy Code over those provided by the state unless the state passes a law to the contrary. Many states including California have now done so and the San Diego division must apply California rather than Federal Exemptions. The dollar amounts of the federal exemptions in section 522(d) are also subject to adjustment on three year intervals.
The policy of Bankruptcy court in San Diego California has been to favor a fresh start for honest debtors. Section 523 of the bankruptcy code is consistent with that goal, only in part, and excepts from discharge certain obligations of the debtor, including taxes, child support, willful and malicious injuries, and student loans. The most common exception to bankruptcy discharge in San Diego, is an obligation incurred by reason of a fraud perpetrated by the debtor on the creditor, including use of a false financial statement. However, in the case of a consumer debt, the creditor asserting such exception runs a substantial risk of being charged with the cost of a successful defense by the lawyers of the Pacific Bankruptcy Center. A related provision, § 524, provides for the bankruptcy discharge. Subsections (c) and (d) deal with the reaffirmation of debt and make agreements waiving the effect of the bankruptcy discharge difficult to obtain. Both section 523 and 524 have been the subject of an inordinate amount of litigation by lawyers, particularly in the case of credit card debt. Section 727 of the bankruptcy code determines when a debtor will not be granted a general discharge, is placed in Chapter 7 of the bankruptcy code, and is applicable only to cases under that chapter.
Consistent with the comprehensive jurisdiction of the San Diego bankruptcy court, property of the estate is broadly defined, and strong turnover powers are given to the bankruptcy court. The concept of bankruptcy jurisdiction as being limited by the concept of custodia legis has died hard and, while accepted under the bankruptcy Act as not limiting the reorganization court, no longer applies as a limit on jurisdiction in any bankruptcy cases filed in San Diego California. Note, however, that both bankruptcy code § 542 and 543 contain some limitations on when the bankruptcy court in San Diego may order a turnover of property of the estate in the hands of third parties or custodians or their attorneys.
Consistent with the policy favoring equality of distribution among creditors, the San Diego Bankruptcy Code contains a number of avoiding powers which permit the trustee or his attorneys to avoid transfers or obligations that are unfair to the debtor's creditors generally. By necessity the avoiding powers contain arbitrary time periods and measures of the sufficiency of documentation. The major avoiding powers are set forth in bankruptcy code § 544 through 551. By far the most important are § 547 dealing with preferential transfers and § 548 dealing with fraudulent transfers. The current approach taken in San Diego to preferences in the bankruptcy Code has evolved from the language that was originally adopted in the bankruptcy Reform Act. First, with some exceptions, all transfers made or suffered by an insolvent bankruptcy debtor in San Diego, on account of an antecedent debt within 90 days of the filing of the petition can be recovered. The knowledge of the transferee concerning the financial condition of the debtor at the time of the transfer is no longer an issue. In the case of insiders, the preference period is one year. In San Diego, the bankruptcy debtor is presumed to have been insolvent during the 90 days immediately prior to the bankruptcy petition. There are some exceptions to these rules, the most important being the protection afforded ordinary course of business transfers, transfers for new value and transfers which are the creation of security interests in inventory or receivables so long as no overall improvement in the position of the secured creditor has occurred during the applicable preference period.
In the case of fraudulent transfers prior to the filing of a bankruptcy case in San Diego, the changes are considerably less sweeping under California law. Both transfers with actual intent to hinder, delay or defraud creditors or their lawyers and transfers for less than reasonably equivalent value by a bankruptcy debtor that was insolvent on the date of the transfer, was left with unreasonably small capital, or intended to incur debts that the debtor could not pay as they matured. The same rules apply to obligations that were incurred by the debtor. There is no counterpart in the Bankruptcy Code to the attempted codification in the previous Act of Dean v. Davis (San Diego Bankruptcy reporter )although the case itself, which involved a transfer with actual intent to defraud creditors, remains good law in California.
Most setoffs, including those by banks in San Diego California, are stayed under bankruptcy code § 362. Section 553 contains an additional limitation on the rights of creditors who have offset a mutual debt before the filing of the petition. Largely tracking the preference language in permitting the recovery of improvements in position , this section is operative only as to re-filing setoff's and thus should encourage creditors to work with the bankruptcy debtor and the lawyers of the Pacific Bankruptcy Center.
Ramona, California
Ramona is an unincorporated community in San Diego County, California, USA. The United States Census Bureau had divided Ramona into two census-designated places, the Ramona CDP and the San Diego Country Estates CDP. The population of the CDPs, which does not include the fringe areas surrounding the CDPs, was 25,223 at the 2000 census. The Ramona Community Planning Area had a population of 33,404 at the 2000 census. The January 1, 2006, population of the Ramona Community Planning Area is estimated to be 36,405 by the San Diego Association of Governments
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