Bankruptcy
description
Transcript of Bankruptcy
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Bankruptcy
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Automatic Stay
Once bankruptcy petition filed, creditor cannot: Receive a security interest Perfect a security interest Enforce a security interest
(repossess)
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Bankruptcy Trustee
Protects unsecured creditors.Enemy of the secured creditor.
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Status of judicial lien creditorBankruptcy trustee has status of
judicial lien creditor. Thus, will prevail over unperfected
security interests.
Problem 361 – p. 974
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Power to Raise Debtor’s DefensesBankruptcy trustee can raise any
defenses the debtor may have such as:
Statute of limitations Statute of frauds
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Power of any actual unsecured creditorMoore v. Bay – 1931 United
States Supreme Court
Trustee’s recovery is not limited to the amount of the unsecured creditor’s claim.
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Preferences
Debtor cannot prefer one creditor over another.
Creditors cannot be overly aggressive.
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Preferences
1. Transfer by debtor
Includes grant of security interest.
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Preferences
2. For preexisting debt
Not a new debt.
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Preferences
3. Within 90 days of filing the bankruptcy petition
One year if transfer is to an insider (e.g., relative, partner, corporate officer)
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Preferences
4. Increases the amount the creditor receives
Creditor is “better off” because of the transfer as compared to what the creditor would receive under a bankruptcy distribution.
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Preferences
5. Debtor insolvent at time of transfer
Presumed within 90 days before filing.
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Preferences -- Exceptions1. Contemporaneous exchange
New value given for item.
Perfection of new value within 30 days of attachment.
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Preferences -- Exceptions2. Ordinary course debt
payments
Utility bills Paying ordinary debts (even
secured ones)
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Preferences -- Exceptions3. PMSI
Perfected within 30 days of debtor receiving possession.
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Preferences
Problem 362 – p. 979
June 8$80,000 loan$100,000 collateral
July 18Perfection
July 19Bankruptcy filing
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Preferences
Problem 363 – p. 979
Nov. 1valueSecurity agreement
Nov. 15RightsAttachment
Dec. 6Bankruptcy filing
Dec. 5Filing
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Preferences
Problem 364 – p. 979
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Floating Liens
[amount unsecured 90 days before filing]
minus
[amount unsecured at time of filing]
equals
preference
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Floating Liens
Amount of
debt 90days before filing
Value ofcollateral90 daysbefore filing
Preference =
Amountof debtat timeof filing
Value ofcollateralat timeof filing
• Problem 365 – p. 981
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Fraudulent Conveyances
Under federal or state law.
Actual intent to defraud Debtor receives less than
reasonably equivalent value
Problem 366 – p. 989
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Judicial Liens
Judicial liens within 90 days of bankruptcy filing are preferences and trustee has priority.
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Statutory Liens
Statutory liens have priority over the bankruptcy trustee if under state law:
They would prevail against a BFP, and
Do not arise only because the debtor is insolvent.