Chapter 2 - Debtor/Creditor Relationships Flashcards
What is a security interest
the interest in the collateral that secures payment or performance of obligation
describe the criteria necessary for a security interest attachment when the collateral is not in possession of the secured party
- a written or authenticated agreement describing the collateral, signed by the debtor (MAY BE ORAL AGREEMENT IF CREDITOR HAS POSSESSION OF THE COLLATERAL)
- the secured party must give something of value to the debtor
- the debtor must have rights in the collateral
security agreement
agreement that creates a security interest
what is chattel paper?
a writing that evidences both a security interest in a good and a monetary obligation to pay (example of a security agreement)
What is attachment?
it is the time when a security interest becomes valid. It requires a security agreement and a debtor with interest in the property, and a creditor who gives value
When can a creditor have a valid ORAL security agreement?
when the creditor is in possession of the collateral
Describe what happens to a security interest when a debtor has signed and executed a security agreement, but the collateral has not been shipped to the debtor from the seller.
the security interest does not attach until the debtor has an interest in the goods (until identification has occurred)
what does the secured transactions law under the UCC apply to?
a security interest in personal property (including sales of chattel paper and sale of accounts) but does not apply to an artisan’s or mechanic’s lein
Under the revised UCC secured transactions article, are secured interests in tort claims already assessed by a court of law covered? are after-acquired commercial tort claims?
only already assessed by a court of law security interests in tort claims
Perfection
a means by which the secured party gains priority to a debtor’s collateral over other third parties who also claim to have an interest in the same collateral. Types of third parties who may claim a conflicting interest are unsecured creditors, other secured parties (unperfected) including lien holders, perfected secured parties, trustees in bankruptcy, and purchasers of the collateral.
What is the article 9 60% rule?
if a debtor has paid 60% of the cash price of the collateral, the creditor must sell the collateral
what if the secured party wants to keep the collateral and the debtor has only paid 20% of the amount, is in default, and the secured party has repossessed the collateral?
the secured party may keep the collateral providing notice is sent to the debtor of the intent to keep and the debtor does not object within 20 days of the notice being sent.
difference between bankrupt and insolvent
Bankruptcy is a legal status of a person or other entity that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. Technical insolvency occurs when an individual or a firm is unable to meet their financial obligations.
Debtors estate
All property held at commencement (and for 180 days after) plus appreciation (except employee benefit contributions) and property reacquired by trustee (voidable transfers)
For a trustee to set aside a transfer as a preference,
the debtor’s transfer of property must be to a creditor for a preexisting debt, made while the debtor is insolvent, within 90 days of the filing of the petition, and the creditor must by this transfer receive more than he or she would receive in a Chapter 7 liquidation proceeding.
