Business Law- Bankruptcy

Question 1

What are artisan or worker lien?

Answer 1

Someone who has IMPROVED the property.

You can take the property. They have a super priority.

Question 2

What is the priority of statutory or common law liens?

Answer 2

Possession is nine points of the law.

These types of statutory and common law liens have priority over previously recorded liens on Article 9 perfected liens.

Question 3

What are mechanic’s liens?

Answer 3

Interest in REAL PROPERTY

Created through statutory process

Usually dates back to the time that work began

Question 4

If the debtor has a lawyer, what must the creditor do?

Answer 4

They must talk with the lawyer

Question 5

If a creditor does not have possession of the property and cannot obtain possession through fair means, what is their next step?

Answer 5

Reducing the suit to a judgement

• The court will order the collection
• court official takes property
• Garnish (bank accounts and wages 25% of take home pay

Question 6

What is chapter 7 bankruptcy? Is it voluntary or involuntary?

Answer 6

Liquidation Providition or straight bankruptcy

Voluntary/Involuntary

Question 7

What is the chapter 7 means test?

Answer 7

Individual must satisfy the means test

Debtors mostly income- allowance expense = means available to pay the test

Trustee

Question 8

What are exceptions (not covered) for chapter 7?

Answer 8

Credit unions, Rail Roads, municipalities, insurers, co-op banks

Question 9

What is Chapter 9 Bankruptcy?

Answer 9

Government body with the power to tax

No Trustee

Question 10

What is chapter 11 bankruptcy?

Answer 10

Reorganization

Voluntary/Involuntary

No Trustee- Court Supervised Process

Automatic stay- all the credit collection has to stop

RR are okay under chapter 11

Question 11

Who is eligible for chapter 11?

Answer 11

Individuals, partnerships, and corporations

Requirements: Must have debts?

Requirements: 1/2 of secured creditors or by sufficient creditors who together are 2/3 of the amount of claims

Shareholders are not apart of this!

Question 12

What is chapter 12?

Answer 12

Family farmer chapter

50/50 requirement (50% income from farm and 50% debts due to farm)

Question 13

What is chapter 13 bankruptcy?

Answer 13

Consumer debt adjustment plan

Limitations: only individuals

There will always be a trustee

Question 14

What are the requirements for bankruptcy declaration?

Answer 14

Voluntary Requirements: Petitioner has debts (consumer exceptions and the chapter 13)

Involuntary:
- There is liability for wrong filing

Requirements:

• Greater than 12 creditors = 1 creditor with more than $16,750
• Less than 12 creditors= 3 creditors with combined amount of $16,750

Question 15

What are the damages for wrongful involuntary filing?

Answer 15

1) Court cost
2) Attorney Fee
3) Compensatory Fee
4) Punitive damages (potentially)

Question 16

What is the means test?

Answer 16

Determines whether bankruptcy can proceed or whether the debtor has enough monthly income to satisfy their debts.

Question 17

What is a trustee?

Answer 17

Appointed by the government 
Collect debtors assets 
Investigate debtors financial affairs 
Furnish reports to interested parties 
Review debtors materials 
Represent debtors estate

Question 18

What are the duties of the debtor?

Answer 18

Schedule of assets- If they don't provide a list of all assets, they could use the discharge 
List of all creditors 
Schedule of current income 
Certificate from counseling agency 
Copy of recent federal income tax return

Question 19

What is included in the debtors estate?

Answer 19

Tangible and intangible property (houses, cars boats, securities, etc)

All property acquired within 180 days following the bankruptcy:

• Inherited gifts
• Property from divorce, superstation, or property settlement
• Life Insurance Proceeds

Question 20

What is not included in the estate?

Answer 20

• Child support and alimony
• Social Security payments
• Wages (earned after declaration of bankruptcy)

Question 21

What are homestead exceptions?

Answer 21

If a homestead is acquired within 3.5 years of bankruptcy filing, homestead EQUITY excepted is limited to 170,350

Must have lived in the state for two years

Question 22

What is a voidable preference? What are the requirements (IMPORTANT):

Answer 22

Tries to stop debtor from giving preferences to certain creditors just before bankruptcy.

Requirements:

1) Transfer for the benefit of the creditor (cash, property)
2) On an antecedent debt (from the past) NOT contemporaneous transactions
3) Transfer was done while they were INSOLVENT (liabilities > assets).
4) Paid within 90 days of the filing OR one year if the creditor was an INSIDER

Question 23

What are exceptions for voidable preferences?

Answer 23

Contemporaries exchange

Ordinary course of business payments

Creation of PMSI-Security interest

Question 24

Who get’s what first when the property is distributed?

Answer 24

1) Secured creditors (to the extend of repossession)
2) Child support and alimony
3) Administration cost
4) Claims in the ordinary course of business (interim creditors)
5) Employee wages (not officers)- 13,650 maximum (know) limited to 6 months preceding petition
6) Contribution to benefit plans- 13,650 maximum
7) Claims on storage of gains
8) Consumer deposit- $3,025 Maximum
9) Taxes (federal, state, local)
10) Unsecured Creditors

Question 25

What debts or nondischargable?

Answer 25

• Taxes within three years of filing bankruptcy petition
• Liability for obtaining money or property on false pretenses
• Willful and malicious injuries
• Debts incurred on a DWI
• Alimony, child support
• Unscheduled debts
• Debts resulting from fraud
• Government finds or penalties
• Educational loans due within five years
• Prior bankruptcy debts
• Mortgage issues
• SOX- Bonuses; fraud
• Reaffirmation agreement (do it for goodwill)