Bankruptcy, Debtor and Creditor Relations, Secured Transactions

Question 1

Bankruptcy in simple terms

Answer 1

discharge of all debt, liquidate assets and restart

Question 2

What are creditor proofed assets in bankruptcy

Answer 2

pension, insurance products, RESPs

Question 3

Superintendent of bankruptcy roles (4)

Answer 3

1. set uniform practice in bankruptcy and insolvency procedures
2. reorganize debtors business and workout arrangement with creditors
3. equitable distribution of debtors assets among creditors
4. release debtor to begin again

Question 4

Bankruptcy and Insolvency Act 1992 applies to 3 groups

Answer 4

Insolvent persons or business
People who declare themselves bankrupt
People placed in bankruptcy by creditors

Question 5

Bankruptcy - Proposal

Answer 5

Make a deal with creditors e.g., more time, lower debt, lower interest.

Question 6

Proposal: Consumer
- who is it made by ?
- amount less than ?
- what if creditor rejects proposal ?
- protection?

Answer 6

• made by individual whose debts, not including those secured by mortgage
• total less than $250 000
• Individual is NOT automatically considered bankrupt
• termination leases

Question 7

Proposal: Commercial
- who is it made by?
- Is it similar to consumer proposal and what if creditor rejects proposal

Answer 7

• majority of each class of shareholders vote you are bankrupt, court approves, debtors and creditors accept (binding)
• yes but if creditor rejects, you are automatically considered bankrupt

Question 8

Bankruptcy - Assignment & Voluntary

Answer 8

Place yourself into bankruptcy through assignment and voluntarily

Question 9

Acts of bankruptcy (4)

Answer 9

Fraudulent transfer of assets or money
Fraudulent preferences
Absconding of funds
Failure to pay debts as they come

Question 10

Bankruptcy - Receiving order

Answer 10

creditors place you in bankrupt through petitioning to the court, you owe more than 1000 and within 6 months

Question 11

Receiving order - you are bankrupt, role of court trustee (4)

Answer 11

1. Prove debtor has done things to avoid paying creditors
2. Govern your assets and affairs
3. Recover property of debtor
4. Distribute assets to creditor

Question 12

Trustee - Recover property of debtor: Settlement, timeline and example

Answer 12

• Gifts made by debtor gratuitously within 1-5yrs prior to bankruptcy
• Example giving car away when you know you are going bankrupt

Question 13

Trustee - Recover property of debtor: Fraudulent Preferences, timeline, and example

Answer 13

give creditor payments to make them better off within last 3 months prior to bankruptcy.
Example: Give Advantage to one creditor over others

Question 14

Trustee - Recover property of debtor: Reviewable Transactions, timeline, and example

Answer 14

12 months prior to bankruptcy where transactions didn’t require fair market value to be paid. Etc selling 30K car for 2K

Question 15

What happens to income generated through period of bankruptcy and what does the amount depend on

Answer 15

Creditors and trustee can take $ of it and depends on amount of dependents (children)

Question 16

what are debts you can’t get rid of with bankruptcy (3)

Answer 16

students loans
alimony (child support or spouse support)
Fraudulent actions

Question 17

1st creditor paid and how much

Answer 17

Secured creditors -> fully paid by funds available

Question 18

2nd creditor paid and how much

Answer 18

preferred creditors -> paid in full to trustee, employees

Question 19

3rd creditor paid and how much

Answer 19

unsecured creditors:

Question 20

Importance of Debtor and Creditor Relations

Answer 20

Economy would not be sustainable if everything done on a cash basis

Question 21

What does credit rely on (2)

Answer 21

confidence in people and certainty in rules

Question 22

Representations of Cash - Negotiable Instruments

Answer 22

Transfer of funds between parties without physical exchange of cash

Question 23

Negotiable Instruments is a form of ______ in _____ and _______ property

Answer 23

choses in action
personal property

Question 24

4 types of negotiable instruments

Answer 24

Promissory Notes, Mortgages, Cheques, Bills of Exchange

Question 25

Rules that govern negotiability distinguishes Negotiable instruments from others ->

Answer 25

method that they can be transferred from a creditor to third party with debtor remaining liable on instrument

Question 26

Negotiable instrument is a contract containing a……..?

Answer 26

promise expressed or implied to pay a sum of money to bearer or specific person. Transfer ownership of intangible

Question 27

Negotiable Instrument transfer process called and used to transfer

Answer 27

negotiation and Transfer ownership of intangible assets

Question 28

3 rules for Non negotiable interest

Answer 28

1. Notice to promissory of assignment (contractual right)
2. Assignee can only receive rights assignor has and is subject to equities of them
3. Assignee and Assignor must join to sue a defaulted promissory

Question 29

4 rules for Non negotiable interest

Answer 29

1. rules for Non-NI don’t apply
2. Holder need not give notice to promisor
3. Third party can obtain better title than assignor
4. Subsequent holder can sue debtor by themselves

Question 30

Criteria for Negotiability to have certainty or close to as cash as possible (7)

Answer 30

1. promise/order in writing
2. obligation for money payments
3. fixed sum
4. promise/order unconditional
5. instrument payable at fixed or determined time
6. Who instrument negotiated
7. instrument is signed by payer/debtor

Question 31

When signing a cheque the signor is personably liable unless they use the word ___ and act in ______ capacity

Answer 31

per, representative

Question 32

2 ways to negotiate

Answer 32

Assignment and Endorsement and Delivery

Question 33

Negotiate - Assignment
Transfer of
What it doesn’t transfer
Subject to?

Answer 33

transfer of contractual right but not transfer liabilities, subject to original terms of contract

Question 34

Negotiate - Endorsement and Delivery

Answer 34

Payable to A to negotiate, A must endorse it and deliver it (sign on reverse side) when signed it is bearer instrument

Question 35

Secured Transactions
two types

Answer 35

Debt with collateral, if debts not paid, creditor has ability to obtain other assets of debtor

Personal Property or Real-estate

Question 36

Secured transaction is all about ?
Priority over X2
priority is for ?

Answer 36

Debt Security
general or unsecured creditors
bankruptcy asset distribution

Question 37

Security Interest

Answer 37

Legal control of property owned by borrower

Question 38

Personal Property Secured Transactions - Conditional Sales Contract

Answer 38

sell retains interest and title to goods until all payments received

Question 39

Personal Property Secured Transactions - Chattel mortgage

Answer 39

debtor has possession but title of good is with the lender, transfer title and both negotiable instruments etc car loan

Question 40

Personal Property Secure legislation

Answer 40

various registries in each province but in MB it is Personal Property Security Act

Question 41

Personal Property Security Act Purpose (3)

Answer 41

1. define a secured part’s remedies against debtor
2. create a system of registration for all secured interests
3. define priorities between a secured, third, and general creditors

Question 42

Three stages to determine who has priority in respect of chattel and describe
first party to complete all steps take priority (CAP)

Answer 42

Creation: consensual entrance into secured agreement
Attachment: attach to object, debtor has ownership
Perfection: creditor takes possession of property (collateral)

Question 43

Personal Property Secured Transactions - lease

Answer 43

if you do not pay your lease, your chattel can be seized by the lessor. At the end of the lease, you can elect to buy the asset

Question 44

Personal Property Secured Transactions - Consignment

Answer 44

A retailer has insufficient capital to carry inventory, as an alternative they bring in stock shipped on consignment. The wholesaler remains the owner

Question 45

Personal Property Secured Transactions - Bill of Sale

Answer 45

evidence of ownership, in Manitoba. The vendor acknowledges transfer of ownership of goods to the purchaser for a stated price

Question 46

Personal Property Secured Transactions - Share Hypothecation

Answer 46

pledge money for purpose (common in shares)

Question 47

Personal Property Secured Transactions - General Security Agreement

Answer 47

free to purchase and sell inventory assets used as security without interference.

Question 48

General Security Agreement 2 parts

Answer 48

Floating Charges (crystallizes upon default and priority over other creditors) and Fixed Mortgage

Question 49

Secured transaction: Real-estate - Mortgage
- Borrow is called?
- lander is called?
- instrument using land for?
- MB Torrens system and who has the title?

Answer 49

• mortgagor
• mortgagee
• debt security
• certificate of title when a mortgage is granted remains in the name of the mortgagor

Question 50

Equity of Redemption with Debt Default on mortgage house

Answer 50

Courts of chancery recognized the unfairness and allowed the debtor to reclaim the property, even after default, by paying money owing plus any expenses involved. There was a time limit to pay. If they failed to pay, an order would be forever made to foreclose the property

Question 51

What is Foreclosure

Answer 51

lender has right to basically sell your house and take title due to debt default.

Question 52

Foreclosuer process (2)

Answer 52

1. forced sale: They get money above amount owned and auction house
2. Title ownership: if no one buys lender takes title