Biz Law - Other Topics

Question 1

Scienter

Answer 1

Intent to deceive, manipulate or fraud (on the CPA’s part)

Question 2

Documents of title

Answer 2

Governed by UCC Article 7

Warehouse receipt: document of title to goods being stored.
Bill of lading: document title to goods being shipped.

Warehouse man or common carrier is bailee of the goods.

Can be negotiable or nonnegotiable. To be negotiable, must provide that goods are to be delivered to bearer to order of a named person.

Question 3

Warehouseman will be liable to anyone injured due to warehouse receipt not including the following:

Answer 3

– Location of warehouse
- Date of issue of receipt
– Consecutive number of receipt
– Whether goods are to be delivered to bearer to order of a named person
– Rate of storage and handling charges
– Description of the goods or packages in which they are contained
– Signature of warehouse man or agent
– Whether warehouse man is owner of goods solely, jointly, or in common with others
– Statement of amounts of advances made or liabilities incurred for which warehouse man claims a lien or security interest

Question 4

Warehouse man’s duties

Answer 4

– Can be liable for non-receipt or misdescription of goods
– Can qualify description of goods by language like “content, condition, and quantity unknown”
– Owes holder of warehouse receipt the duties of mutual benefit bailee and is required to exercise reasonable care
– If goods are ready to deteriorate or threaten other goods, may terminate bailment through notification
– Generally must keep goods in each receipt separate, but fungible goods can be mingled

Question 5

Negotiable documents of title

Answer 5

Negotiated in same way as negotiable instruments.
If made out to bearer, can be negotiated by delivery.
If made to order of named person, must be indorsed and delivered.

Question 6

Bona fide holder

Answer 6

Person taking negotiable document of title in good faith and in regular course of business. Has same advantages as holder in due course of negotiable instrument.

Holder receiving negotiable document title acquires:
– Title to the document
– Title to the goods
– Rights to the goods delivered to bailee after document is issued
– Direct obligation of issuer to hold or deliver goods according to document’s terms

Question 7

Bankruptcy

Answer 7

Intended performance of debtor becomes impossible due to excessive debt. Solution is to take debtors property and distribute it to unpaid creditors through a uniform process.
It gives honest but overextended debtors a fresh start to discharge of debts or postponement of time for payment.

Question 8

Bankruptcy law

Answer 8

Constitution allows Congress to enact uniform bankruptcy laws. Major laws were enacted in 1898, 1938, 1978 and 2005: Bankruptcy Prevention and Consumer Protection Act of 2005.

Question 9

Bankruptcy law chapters:

Answer 9

1 – General provisions
3 – case administration
5 – creditors and their claims, debtors duties and discharge, and handling of debtors estate
7 – liquidation of debtors estate to pay creditors
9 – adjustment of debt of a municipality
11 – reorganization of debt
12 – adjustment of debts for family farmers
13 – adjustment of debts of individual with regular income
15 – US trustees

Question 10

Chapter 7 bankruptcy

Answer 10

Liquidation of debtors estate to pay creditors

Can apply to business or nonbusiness debtor, like individual.
Can be voluntary or involuntary.

These debtors are not eligible for bankruptcy relief. They are covered by special statutes, and their liquidations are supervised by certain regulatory agencies.

Question 11

Chapter 7 debtor requirements

Answer 11

Must reside in US and have domicile, place of business or property in US.

Debtor cannot be:
– Railroad
– Insurance company
– Domestic bank
– Any other lending institution
– Governmental unit

Question 12

Obligations of attorney for debtor in chapter 7 bankruptcy

Answer 12

– Filing affidavit with bankruptcy court stating they have informed debtor of various forms of bankruptcy and their details
– Reasonably verifying info contained in bankruptcy petition and supporting schedules

Question 13

Chapter 9 bankruptcy

Answer 13

Available only to municipalities and must be voluntary

Question 14

Chapter 11 bankruptcy

Answer 14

Reorganization of debt.
Applies to chapter 7 debtors and railroads. Primarily for businesses.

Use if felt continuing business is preferred to liquidation. Restructure finances so that debtor can continue to operate. It binds nonconsenting creditors while common law composition does not.

May be voluntary or involuntary.

Question 15

Chapter 11 bankruptcy details

Answer 15

– Trustee may or may not be appointed. Debtor may remain in possession of property at court’s discretion. If trustee appointed, they take over business and have same basic powers as in liquidation proceeding.
– Proof of claim need not be filed by creditors because list of creditors is required to be filed by debtor.
- May be converted to chapter 7, one conversion only.

Question 16

Chapter 11 bankruptcy approved plan

Answer 16

Chapter 11 must end with approved plan.

Plan can divide creditors into classes but all creditors in each class must be treated equally.
Court will approve reorganization plan if one is true:
– Each class has approved plan or
– Court ruled plan is fair and equitable to all classes

After plan confirmed:
– Debts in plan not discharged until court grants so
– Debts not in plant are discharged
– Non-dischargeable debts are same in Chapter 11 as in chapter 7

If parties involved cannot produce acceptable plan or plan does not work, court can dismiss case and convert to liquidation proceeding: chapter 7.

Question 17

Chapter 13 bankruptcy

Answer 17

Applies only to individual (and spouse) with regular income who owes unsecured debts of less than $383,175 and secured debts of less than $1,149,525.
Must be voluntary.
Small sole proprietorship can qualify as individual if requirements met. No partnership or corporations.

Question 18

Chapter 13 bankruptcy details

Answer 18

– Repayment. Cannot exceed five years
– Confirmation of plan must result in hearing no sooner than 20 days or more than 45 days after meeting with creditors
– For disposable income, excludes up to 15% of debtors gross income for charitable contributions
– For disposable income, reasonable cost of health insurance considered

Question 19

Bankruptcy process: written notice to consumer debtor

Answer 19

Bankruptcy clerk must give individual over to nose containing:
– Brief description of chapter 7, 11, 12 and 13 and general purpose, benefits and costs of each.
- Brief description of services available from credit counseling agencies
– Statement: person who fraudulently conceals assets or commits perjury will be subject to fine, imprisonment or both
- Statement: all info supplied by debtor is subject to examination by Attorney General

Question 20

Bankruptcy process: voluntary petition

Answer 20

Filed by debtor, which automatically subjects debtors and their property to jurisdiction of bankruptcy court.
- Debtors need not be insolvent, only need to show they have debts.
– Debtor must receive credit counseling from approved agency within 180 days before filing voluntary bankruptcy petition. Certificate must be filed with petition.

Question 21

Bankruptcy process: voluntary petition dismissed by the court for several reasons:

Answer 21

• Unreasonable delay by debtor that is prejudicial to creditors
  – Nonpayment of fees or charges
  – Debtor fails to file required documents in required time.
  – Debtor has income above average median family income for state
  – Debtor fails to pay post petition alimony or child support
• Debtor convicted of drug trafficking crime or violent crime and victim files motion to dismiss petition

Question 22

Bankruptcy process: involuntary petition

Answer 22

Filed by debtor’s creditors.
– 12 or more creditors: three or more must file against debtor if their total unsecured claims are at least $15,325
– Fewer than 12 creditors: one or more must file if their total unsecured claims are at least $15,325

Question 23

Bankruptcy process: involuntary petition allowed for and disallowed against

Answer 23

Allowed only for:

• Chapter 7
• Chapter 11

Disallowed against:
– Farmers
– Wagers
– Railroad, insurance, or banking corporations
– Building and loan associations
– Nonprofit corporations

Question 24

Bankruptcy process: involuntary petition jurisdiction

Answer 24

• When filed, debtor and their property comes under jurisdiction of court if debtor doesn’t challenge

– if debtor contests, creditors must prove either: debtor has not paid debts as they come due, or that his property is in receivership or assignment for benefit of creditors within 120 days before petition was filed

If debtor succeeds in dismissing petition, can recover:
– Court costs and attorneys fees
– Compensatory damages
– Punitive damages

Filing a petition stays all pending actions of creditors against the debtor.

Question 25

Bankruptcy process: debtors estate

Answer 25

Tangible and and hinge will property, including following acquired within 180 days after petition filing date:
– Inheritance
– As beneficiary of life policy
– As a result of divorce decree or property settlement agreement with debtor spouse

Exempt property: not liquidated to pay debts, established by either state or federal law. Includes exemption of household goods and furnishings (wedding rings, antiques under $650).

Question 26

Bankruptcy process: administration

Answer 26

– Debtor must file list of creditors, schedule of assets and liabilities, statement of financial affairs, and list of property claimed as exempt.
– Debtor must cooperate with trustee. If not, court may not discharge debtor.
– Debtor must be at meeting of creditors and answer questions
– Trustee may operate debtors business
– Trustee can employ attorneys, accountants, appraisers and other individuals with prior court approval
– Trustee can sue and be sued as trustee

Question 27

Bankruptcy process: transfers

Answer 27

• Trustee may void preferential or fraudulent transfers made within 90 days of filing
  – Transfers by debtor that defraud creditors are always voidable

Trustee can void transfers made as follows:

• within 2 years of filing with actual intent of defrauding creditors
• or within 2 years of filing and debtor received much less than equal exchange and one of 3 conditions.

Trustee can cancel any contracts of debtor based on any defenses available to debtor

Question 28

Bankruptcy process: creditor claims

Answer 28

Proof of claim: creditors present claims to court by filing these against debtor.

Disallowed claims are not paid:
– Unmatured interest
– Claims already offset by receivable by creditor
– Tax due on property where taxes exceeds value of property
– Excess charges for services by insider or attorney of debtor
– Alimony and child support not yet due
– Claims by lessor of broken lease that exceeds larger of either: one years rent or 15% of total lease payments, but not more than three years rent
– Claims by employees for broken employment contract that exceed one year after filing

Question 29

Bankruptcy process: creditor priority

Answer 29

Secured creditors over unsecured creditors

Unsecured creditors priority:
– Administrative expenses, court costs and fees
– Debts owed to domestic support obligations: alimony, child support
– Unsecured debts incurred during involuntary gap from debtors business
– Wages earned within 180 days of filing up to $12,475 per individual
– Contributions to employee benefit plans for services within 180 days of filing, up to $12,475 per employee
– Unsecured claims of persons engage in production of grain or as US fishermen up to $6150 per individual
- Money deposits to debtor for purchase or rental of property or personal services for personal or household use up to $2775 each
– Federal, state or local taxes
– Allowed unsecured claims based on commitments by debtor to federal deposits were institutions regulatory agency
– Claims for death or personal injury from operation of motor vehicle if unlawful because debtor was intoxicated.

Remainder is split proportionally among general unsecured creditors who filed timely.

Question 30

Bankruptcy process: debts not discharged by bankruptcy

Answer 30

– Taxes
– Debt obtained by false representation
– Debts not listed on schedule submitted by debtor
– Obligations resulting from breach of fiduciary duty
– Judgments for embezzlement or larceny
– Alimony or child support
– Judgments for intentional injury by debtor: intentional torts
– Fines and penalties to two governmental units
– Student loans
- Debts survived from previous bankruptcy
– Consumer debt owed to single creditor of more than $650 for luxury goods or services incurred within 90 days before filing petition
– Cash advances of more than $925 that are extensions of consumer credit under open-end credit plan within 70 days before filing of petition
– Amounts owed for death or personal injury caused by debtors operation of motor vehicle if unlawful because debtor was intoxicated
– Fines or penalties imposed under Federal election law

Question 31

Bankruptcy process: discharge of debtors

Answer 31

Discharge can be given to individuals only.
Discharge generally given unless debtor did any of following within one year prior to filing or during proceedings:
– Destroyed or concealed property to defraud creditors
– Destroyed, falsified or concealed records
– Failed to cooperate
– Refused to obey lawful order of court
– Refused to testify in answering questions approved by court