Business Bankruptcy–Bankruptcy Rules and Crimes

Business Bankruptcy – Simplified Operating Guidelines

A "How-To" Manual

For Non-Bankruptcy Professionals
Page 8
Robert S. Apfelberg, Karrie L. Bercik, Esq.

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Chapter 6. Bankruptcy Rules and Crimes

During the administrative period the debtor’s management may not allow any funds to be used for: (i) payment of pre-petition debts, (ii) loans to insiders or affiliates, (iii) payment of debts guaranteed by insiders if other creditors are not receiving pro-rata amounts, (iv) gaming or highly risky endeavors, and (v) unreported or deceptively reported purposes. Additionally the debtor may not: (i) write a check unless there are sufficient funds in the account at the time, (ii) bounce checks, (iii) fail to pay any administrative period debts as agreed, (iv) operate at a loss, and (v) fail to pay: (a) employees salaries, (b) withholding taxes "trust funds", and (c) sales taxes, etc., in a timely manner.

The consequence for violating these procedures is generally dismissal of the bankruptcy, or conversion to a chapter 7 liquidation. However, OUST, and the bankruptcy court, have increasingly been referring individuals performing deliberate and significant bankruptcy code violations for "bankruptcy crime" investigations. Conduct that may have been a minor problem Pre-petition can become a bankruptcy crime during the administrative period.

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