Bankruptcy: General

Question 1

Bankruptcy:

When debtor doesn’t pay

Answer 1

1. Execute rights under Article 9 secured transactions and/or suretyship agreements
2. Foreclose on lien
   - Baliee’s lien: Bailee has right to compensation or reimbursment and can sell property
   - Artisan’s lien: a contract bailee who improves or repairs bailed property to increase value & can sell property with notice
   * * Most states artisan’s lien has priority over previously perfected statutory filed lien**
3. Obtain a judgement against creditor
   - Attachment: take property
   - Writ of Execution: unsatisfied judgement, writ of levy to (possess and sell) property
   - Garnishment: court order requiring 3rd parties to deliver debtors property held in their posession or pay the debts they owe to the creditor
   - bank accounts, wages
   - cannot garnish Social Security & employers cannot fire because of garnishment.

Question 2

Bankruptcy:

When debtor doesn’t pay 2

Answer 2

1. Composition of creditors agreements
   - creditors agree to discharge debts for lesser sum
   - creditors who do not contract are not bound
   - advantage is immediate payment
2. Setting aside fraudulent conveyances
   - anything done to defraud creditors can be set aside.
3. Assignment for benefit of creditors
   - insolvent debtor voluntarily transfers assets to trustee
   - trustee liquidates and tenders payment on a pro rata basis
   - amount of property turned over is at debtor’s discretion
   - acceptance by creditor is complete discharge of debt
   - rejection eliminates creditors rights to property but then can pursue other remedies

Question 3

Bankruptcy:

Chapter 7

Answer 3

“Straight Bankruptcy”
- voluntary & involuntary
- trustee is appointed and
- Not Eligible: Railroad, insurance, savings bank, savings and loan, cooperative bank, SBA entities
- any person
- Exceptions: Banks, Savings & Loan, Credit Unions, Railroads, Insurance Companies, Government
- must recieve credit counseling within 180 days of filing
Involuntary:
- includes above exceptions, nonprofit, farmers
12+ unsecured creditors with noncontingent claims over $15,325 OR 1 over $15,325
Debtors Challenge:
- prove not paying debts
- debtor made assignment for benefit of creditors within 120 days
- Notice that standard for proving bankruptcy is assets less than liabilities
bad faith could have punitive damages
After Filing
- court issues order for relief
- creditors must stop collecting

Question 4

Bankruptcy:
Chapter 9

Chapter 12

Answer 4

Chapter 9
Applies to municipalities
- voluntary
- rarely addressed
Chapter 12
- voluntary
- family farmer or fisherman

Question 5

Bankruptcy:

Chapter 11

Answer 5

Reorganization of debt “Rehabilitation”

• voluntary & involuntary
• allows companies
• generally no trustee
• Reorg plan approved by 1/2 creditors with 2/3 claims
• court must approve

Question 6

Bankruptcy:

Chapter 13

Answer 6

• Only voluntary
• Less than 383,175 in unsecured and 1,149,525 in secured
• Always trustee
• Only individuals
• Debtor’s plan
• Court Confirmation
• 3-5 years for plan