chapters 15, 17 Flashcards
A “secured transaction”
gives the creditor a security interest in the debtor’s specified personal property.
The property may be separate from the new transaction
property the debtor already owned (non-purchase money security interest),
or may be the property which is being purchased in the new transaction (purchase money security interest or PMSI)
PMSI/Non-PMSI
Non-PMSI must be perfected by filing a financing statement; PMSI is automatically perfected
A creditor with a security interest may
generally take or repossess the secured property without any court proceeding
Know the different kinds of liens
contractor’s lien, artisan’s lien, and judicial lien
garnishment
When a creditor is allowed by law to take property belonging to the debtor but which is being held by a third party (such as pending wages)
Bankruptcy law
(known as the bankruptcy code) is federal, and is administered across the country by the federal bankruptcy court system
Chapter 7 bankruptcy
Liquidation under Chapter 7 is the most familiar type of bankruptcy proceeding and is often referred to as an ordinary, or straight, bankruptcy. Put simply, a debtor in a liquidation bankruptcy turns all assets over to a bankruptcy trustee, a person appointed by the court to manage the debtor’s funds. The trustee sells the nonexempt assets and distributes the proceeds to creditors. With certain exceptions, the remaining debts are then discharged (extinguished), and the debtor is relieved of the obligation to pay the debts.
Chapter 13 bankruptcy
Chapter 13 of the bankruptcy code provides for the “adjustment of debts of an individual with regular income.” Individuals (not partnerships or corporations) with regular income who owe fixed unsecured debts of less than $394,725 or fixed secured debts of less than $1,184,200 may take advantage of bankruptcy repayment plans.
Among those eligible are salaried employees and sole proprietors, as well as individuals who live on welfare, Social Security, fixed pensions, or investment income. Many small-business debtors have a choice of filing under either Chapter 11 or Chapter 13. Repayment plans offer some advantages because they are typically less expensive and less complicated than reorganization or liquidation proceedings.
Substantial Abuse and the Means Test
A bankruptcy court can dismiss a Chapter 7 petition if the use of Chapter 7 constitutes a “substantial abuse” of bankruptcy law. The revised Code provides a means test to determine a debtor’s eligibility for Chapter 7. The purpose of the test is to keep higher-income people from abusing the bankruptcy process, as was thought to have happened in the past. The test forces more people to file for Chapter 13 bankruptcy rather than have their debts discharged under Chapter 7.
The “automatic stay”
takes effect at the moment a bankruptcy case is filed, and stops or stays the creditors from taking any further collection action.
All routine bankruptcy matters are handled by
a bankruptcy trustee who is appointed to each case.
When the trustee collects and sells the debtor’s assets,
the proceeds are distributed among the creditors by class or group according to priority as set by the law
Know which types of debts are not dischargeable in bankruptcy
Claims for back taxes accruing within two years prior to bankruptcy.
Claims for amounts borrowed by the debtor to pay federal taxes or any nondischargeable taxes.
Claims against property or funds obtained by the debtor under false pretenses or by false misrepresentations.
Claims by creditors who were not notified of the bankruptcy. These claims did not appear on the schedules the debtor was required to file.
Claims based on fraud or misuse of funds by the debtor or claims involving the debtor’s embezzlement or larceny.
Domestic-support obligations and property settlements.
Claims for amounts due on a retirement loan account.
Claims based on willful or malicious conduct by the debtor toward another or toward the property of another.
Certain government fines and penalties.
Student loans, unless payment of the loans causes an undue hardship for the debtor and the debtor’s dependents (when paying the loan would leave the debtor unable to maintain a minimal standard of living, for instance).
Consumer debts of more than $675 for luxury goods or services owed to a single creditor incurred within ninety days of the order for relief.
What is “reaffirmation” of a debt?
An agreement to pay a debt dischargeable in bankruptcy is called a reaffirmation agreement. A debtor may wish to pay a debt—for instance, a debt owed to a family member, physician, bank, or some other creditor—even though the debt could be discharged in bankruptcy. Also, as noted previously, a debtor cannot retain secured property while continuing to make payments on the underlying debt without entering into a reaffirmation agreement.
Under what circumstances would a bankruptcy court refuse to grant a discharge to the debtor?
A bankruptcy court may also deny the discharge based on the debtor’s conduct. Grounds include the following:
The debtor’s concealment or destruction of property with the intent to hinder, delay, or defraud a creditor.
The debtor’s fraudulent concealment or destruction of financial records.
The granting of a discharge to the debtor within eight years prior to the filing of the petition.
The debtor’s failure to complete the required consumer education course.
Proceedings in which the debtor could be found guilty of a felony. (Basically, a court may not discharge any debt until the completion of the felony proceedings against the debtor.)
What kind of debtor generally uses a Chapter 11, or “reorganization” bankruptcy?
he type of bankruptcy proceeding used most commonly by corporate debtors is the Chapter 11 reorganization. In a reorganization, the creditors and the debtor formulate a plan under which the debtor pays a portion of its debts and the rest of the debts are discharged. The debtor is allowed to continue in business. Although this type of bankruptcy is generally a corporate reorganization, any debtor (except a stockbroker or commodities broker) who is eligible for Chapter 7 relief is normally eligible for relief under Chapter 11. Railroads are also eligible.
Know the difference between an employer-employee relationship and an independent contractor relationship.
Employer takes out taxes, sets hours, may provide benefits. Independent contractor sets his own hours and usually provides his own tools. Independent contractors are generally not covered by employment law protections.
Employment-at-will
covers the great majority of workers, but does not apply to those with a contract, union workers, or state government workers
The NC REDA law
protects workers from being fired because they file claims or “whistleblow” regarding workers compensation, worker safety, wage and hour matters, National Guard re-employment.
The federal Fair Labor Standards Act (FLSA)
sets a federal minimum wage. States may set a higher, but not a lower minimum. Know what FLSA requires in terms of overtime pay, and child labor protection, and which employees are exempt (not covered) by FLSA.
How many weeks of annual leave are provided by the Family & Medical Leave Act (FMLA), and must this leave be paid?
An eligible employee may take up to twelve weeks of leave within a twelve-month period for any of the following reasons:
To care for a newborn baby within one year of birth.
To care for an adopted or foster child within one year of the time the child is placed with the employee.
To care for the employee’s spouse, child, or parent who has a serious health condition.
If the employee suffers from a serious health condition and is unable to perform the essential functions of her or his job.
For any qualifying exigency (nonmedical emergency) arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on active duty. For instance, an employee can take leave to arrange for child care or to deal with financial or legal matters when a spouse is being deployed overseas.
In workers compensation, does the worker have to show that the injury was due to the employer’s negligence?
In general, only two requirements must be met for an employee to receive benefits under a state workers’ compensation law:
The existence of an employment relationship.
An accidental injury that occurred on the job or in the course of employment, regardless of fault. (An injury that occurs while an employee is commuting to or from work usually is not considered to have occurred on the job or in the course of employment and hence is not covered.)
An injured employee must notify her or his employer promptly (usually within thirty days of the accident). Generally, an employee must also file a workers’ compensation claim with the appropriate state agency or board within a certain period (sixty days to two years) from the time the injury is first noticed, rather than from the time of the accident. An employee’s acceptance of workers’ compensation benefits bars the employee from suing for injuries caused by the employer’s negligence. A worker may sue an employer who has intentionally injured the worker, however.
Under what conditions may a worker who has been separated from their job collect unemployment insurance benefits?
To be eligible for unemployment compensation, a worker must be willing and able to work. Workers who have been fired for misconduct or who have voluntarily left their jobs are not eligible for benefits. Normally, workers must be actively seeking employment to continue receiving benefits.
