Bill: Pending Bankruptcy Band-Aid Act

[Scassany]

A
BILL
To

Provide a Temporary Bankruptcy Law​

The people of the Commonwealth of Redmont, through their elected Representatives in the Congress and the force of law ordained to that Congress by the people through the constitution, do hereby enact the following provisions into law:

1 - Short Title and Enactment

(1) This Act may be cited as the 'Bankruptcy Band-Aid Act.'

(2) This Act shall be enacted immediately upon its signage.

(3) This Act has been authored by Representative Scassany, with the original text by Matthew100x.

(4) This Act has been co-sponsored by Speaker Multiman155.

2 - Reasons
(1) With the repeal of the Business Structuring Act, we currently have no bankruptcy law.
(2) As a temporary measure until a better law is drafted, I am proposing the previous bankruptcy code as-is to ensure that there is a process defined in law in the event of a bankruptcy.


3 - Bankruptcy Code

(1) Definitions:

(a) Debtor: An individual, corporation, or other entity that owes a debt to another. This includes any person or organization that has a legal obligation to pay money, deliver goods, or perform services to another party.

(b) Creditor: An individual, corporation, or other entity to whom a debt is owed. This encompasses any person or organization that holds a claim against the debtor, whether the claim is secured or unsecured.

(c) Insolvency: The state of being unable to pay debts as they come due. A debtor is considered insolvent when their liabilities exceed the fair value of their assets by 25% (Insolvency at $125 dollars with $100 dollars of assets); or when they are generally not paying their Active Debts as they become due, unless such debts are the subject of a legal dispute.

(d) Bankruptcy Trustee: An officer appointed to administer the debtor's estate. The trustee is responsible for collecting the debtor's assets, liquidating them, and distributing the proceeds to creditors in accordance with the priorities established by this code. The trustee also investigates the financial affairs of the debtor and performs other duties as specified by the court.

(e) Estate: All legal or equitable interests of the debtor in property as of the commencement of the bankruptcy case. This includes tangible and intangible assets, whether located within or outside the jurisdiction, and all proceeds, products, offspring, rents, or profits of or from such property.

(f) Secured Claim: A creditor's claim that is backed by collateral. If the debtor fails to pay the secured debt, the creditor has the right to repossess or sell the collateral to satisfy the debt.

(g) Unsecured Claim: A claim or debt for which a creditor holds no special assurance of payment.

(h) Proof of Claim: Any contract or other legal obligation between the creditor (or creditors) and the debtor that establishes an amount owed.

(i) Discharge: The release of a debtor from liability for certain debts.

(j) Liquidation: A conversion of all or part of the debtor’s assets to convert into cash.

(k) Reorganization Plan: A proposal by the debtor, or sometimes by creditors, or sometimes organized by a court of law; to restructure the debtor's obligations. The plan outlines how debts will be paid over time, how the business will be operated, and how the debtor will return to a sound financial footing.

(l) Bankruptcy: a legal process through which any debtor who cannot repay debts to creditors may seek relief.

(m) Active Debt: Is any debt that is under an active repayment plan or is a Secured Claim.

( n) Passive Debt: All other debt that is not Active Debt.

(2) Bankruptcy Process

(a) If a debtor is able to demonstrate their ability to pay off a debt to a creditor, they will never be subject to the bankruptcy process or any part of the Bankruptcy Code, unless the debtor is insolvent by way of their debt being greater than their assets.
(i) Accountants can serve as expert witnesses in any court of law regarding any issue in the Bankruptcy Process.

(b) Bankruptcy can be declared in the first instance by the debtor:

(i) The debtor who declares bankruptcy in the first instance has priority and agency in resolving their debt obligations. The Debtor must meet some definition of Insolvency with Proof of Claim as well as proof of being unable to pay their debts.

(ii) The debtor must announce publicly within their own discord (if they have one) and to the DOC Secretary that they are declaring bankruptcy. The DOC Secretary, upon confirmation, that the Debtor’s Insolvency is valid, will post a government announcement informing the public and any prospective creditor of the bankruptcy.

(iii) Creditors are compelled to work with a debtor in this instance to amicably resolve debts in this instance. Debtors will be allowed to submit their own Reorganization Plan to establish repayment of Active Debts and/or to reduce debt beneath 75% of their total assets (if applicable).
All creditors are not allowed to have their debts involuntarily lessened under this instance unless ordered so by a court.
Debtors are allowed to freely choose whether to use Liquidation to pay for debts, provided the asset they are liquidating is not controlled by a secure claim nor otherwise protected nor is the liquidation of said asset is prohibited by law.
Creditors with a Secured Claim can choose to exercise their right to secure the collateral they own and have their debt paid off in that manner.
Only Creditors with an Active Debt with the debtor can exercise their right with proof of claim to be included on the Reorganization Plan.
Debtors must be authorized by the DOC Secretary or a designated employee to pay-off debt by issuing new debt, such as getting a loan to pay for debts or issuing new stock.
Debtors have the right under this instance to apply to a court of law, depending on the value of the case, to place themselves into an Estate and for a Bankruptcy Trustee to manage the Reorganization Plan. If this happens, this will become a Bankruptcy in the third instance.

(iv) A public accounting of the Reorganization Plan must be made by either an Accountant or a member of the DOC if there is no Accountant available. The Reorganization Plan must have a clear path to paying Active Debt to Creditors who are included on the Reorganization Plan.

(v) In order for a Reorganization Plan to be enacted, the Debtor must get all Creditors to agree to the terms. Creditors in this instance are expected to work with the Debtor to compromise on issues that they have with the Reorganization Plan. Creditors may be sued for failure to cooperate with the debtor under this instance of bankruptcy and have their debt discharged. Cases under this situation should be handled by motion for summary judgment as the facts should be agreed on, except for the issue at play keeping that Creditor from agreeing with the Debtor. The finalized Reorganization Plan with the public accounting attached must be submitted to the DOC Secretary for the purposes of keeping a public record.

(c) Bankruptcy can be declared in the second instance by a creditor:

(i) An individual creditor who is owed an Active Debt or Passive Debt by a Debtor, even with Proof of Claim, cannot demand insolvency of that Debtor under normal circumstances.

(ii) Creditors, as a class, may demand Bankruptcy in the second instance when a debtor:
Fails to make bond interest payment.
Fails to pay dividends.
Fails to meet the obligations of a stock buyback.
Fails to allow creditors to withdraw money (outside of any withdrawal limits created by contract) from their bank or stock exchange account.
Fails to pay creditors’ wages.
Defaults on creditor's loans.
Any of the above counts as Insolvency for Bankruptcy in the second instance.

(iii) In order to establish a class for creditors, a creditor who has been harmed by a debtor in one of the situations described in the above subsection (The Firm Act - 17.3(c)(ii)) must seek out competent legal counsel. Once a retainer has been signed between a creditor and legal counsel, the legal counsel must immediately notify the DOC Secretary of their intention to form a class of creditors against a debtor. Only one legal counsel is allowed to form a class against a specific debtor at a time, on a first-come-first-serve basis. The DOC Secretary, upon confirmation that the Debtor’s Insolvency is valid, will post a government announcement informing the public and any prospective creditor of the bankruptcy. Prospective Creditors are to reach out to the legal counsel to become part of the class.

(iv) The Debtor is compelled to work with the Creditors to amicably resolve debts in this instance. Creditors’ counsel will be allowed to submit the Reorganization Plan to establish repayment of Active Debts and resolve the Insolvency.
Creditors may choose to allow the Debtor to Discharge Active Debts that the Debtors have to streamline debt repayment.
In this instance, Creditors are not allowed to demand a Debtor to use Liquidation to pay for Active Debts if said liquidation harms Debtor’s income stream.
Any Liquidation done to any of the Debtor’s assets must not be controlled by a Secured Claim held by a Creditor nor otherwise protected by law nor should the Liquidation be prohibited by law.
Creditors with a Secured Claim can choose to exercise their right to secure the collateral they own and have their debt paid off in that manner.
All Creditors with either an active or passive debt with the Debtor can exercise their right with Proof of Claim to be included on the Reorganization Plan.
Debtors must be authorized by the DOC Secretary or a designated employee to pay-off debt by issuing new debt, such as getting a loan to pay for debts or issuing new stock.
Creditors have the right under this instance to apply to a court of law, depending on the value of the case, to place the debtor into an Estate and for a Bankruptcy Trustee to manage the Reorganization Plan. If this happens, this will become a Bankruptcy in the third instance.

(iv) A public accounting of the Reorganization Plan must be made by either an Accountant or a member of the DOC if there is no Accountant available. The Reorganization Plan must have a clear path for the Debtor to pay the Creditors who are included on the Reorganization Plan.

(v) In order for a Reorganization Plan to be enacted, the Creditors’ counsel must get the debtor to agree with the Reorganization Plan. Debtors in this instance are expected to work with the Creditor’s Counsel to compromise on issues that they have with the Reorganization Plan. Any draft of the Reorganization Plan must be approved by a simple majority of Creditors. Creditors’ voting power regarding the approval of the Reorganization Plan drafted by their counsel shall be distributed based on the percentage of Active Debt and Passive Debt that they own against the Debtor. The finalized Reorganization Plan with the public accounting attached is to be submitted to the DOC Secretary for the purposes of keeping the public informed.

(v) In order for a Reorganization Plan to be enacted, the Debtor must get all Creditors to agree to the terms. Creditors in this instance are expected to work with the Debtor to compromise on issues that they have. Creditors may be sued for failure to cooperate with the debtor under this instance of bankruptcy and have their debt discharged. The finalized Reorganization Plan with the public accounting attached must be submitted to the DOC Secretary for the purposes of keeping a public record.

(d) Insolvency can be declared in the third instance by a court order:

(i) A court of law must have a case of Bankruptcy brought before it from the first or second instance.

The debtor who declares bankruptcy in the first instance has priority and agency in resolving their debt obligations. The Debtor must meet some definition of Insolvency with Proof of Claim as well as proof of being unable to pay their debts.