chapters 15, 17

Question 1

A “secured transaction”

Answer 1

gives the creditor a security interest in the debtor’s specified personal property.

Question 2

The property may be separate from the new transaction

Answer 2

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)

Question 3

PMSI/Non-PMSI

Answer 3

Non-PMSI must be perfected by filing a financing statement; PMSI is automatically perfected

Question 4

A creditor with a security interest may

Answer 4

generally take or repossess the secured property without any court proceeding

Question 5

Know the different kinds of liens

Answer 5

contractor’s lien, artisan’s lien, and judicial lien

Question 6

garnishment

Answer 6

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)

Question 7

Bankruptcy law

Answer 7

(known as the bankruptcy code) is federal, and is administered across the country by the federal bankruptcy court system

Question 8

Chapter 7 bankruptcy

Answer 8

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.

Question 9

Chapter 13 bankruptcy

Answer 9

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.

Question 10

Substantial Abuse and the Means Test

Answer 10

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.

Question 11

The “automatic stay”

Answer 11

takes effect at the moment a bankruptcy case is filed, and stops or stays the creditors from taking any further collection action.

Question 12

All routine bankruptcy matters are handled by

Answer 12

a bankruptcy trustee who is appointed to each case.

Question 13

When the trustee collects and sells the debtor’s assets,

Answer 13

the proceeds are distributed among the creditors by class or group according to priority as set by the law

Question 14

Know which types of debts are not dischargeable in bankruptcy

Answer 14

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.

Question 15

What is “reaffirmation” of a debt?

Answer 15

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.

Question 16

Under what circumstances would a bankruptcy court refuse to grant a discharge to the debtor?

Answer 16

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.)

Question 17

What kind of debtor generally uses a Chapter 11, or “reorganization” bankruptcy?

Answer 17

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.

Question 18

Know the difference between an employer-employee relationship and an independent contractor relationship.

Answer 18

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.

Question 19

Employment-at-will

Answer 19

covers the great majority of workers, but does not apply to those with a contract, union workers, or state government workers

Question 20

The NC REDA law

Answer 20

protects workers from being fired because they file claims or “whistleblow” regarding workers compensation, worker safety, wage and hour matters, National Guard re-employment.

Question 21

The federal Fair Labor Standards Act (FLSA)

Answer 21

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.

Question 22

How many weeks of annual leave are provided by the Family & Medical Leave Act (FMLA), and must this leave be paid?

Answer 22

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.

Question 23

In workers compensation, does the worker have to show that the injury was due to the employer’s negligence?

Answer 23

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.

Question 24

Under what conditions may a worker who has been separated from their job collect unemployment insurance benefits?

Answer 24

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.

Question 25

Immigration law

Answer 25

is mostly federal

Question 26

What are the “protected classes” of workers under Title VII of the Civil Rights Act?

Answer 26

itle VII prohibits both intentional and unintentional discrimination against employees, applicants, and union members on the basis of race, color, national origin, religion, or gender at any stage of employment.

Question 27

The required procedure for a worker to seek relief under Title VII requires

Answer 27

that a “charge” of discrimination must first be filed with the federal Equal Employment Opportunity Commission (EEOC), before any court case may be filed.

Question 28

Under Title VII, what is the employer required to do regarding an employee’s religious practices?

Answer 28

An employer must “reasonably accommodate” the religious practices of its employees, unless to do so would cause undue hardship to the employer’s business. This means that an employer may need to make reasonable adjustments to the work environment to allow an employee to practice his or her religion. Reasonable accommodation is required even if the employee’s belief is not based on the doctrines of a traditionally recognized religion, such as Christianity or Judaism, or a particular denomination, such as Baptist. The only requirement is that the belief be sincerely held by the employee.

Question 29

Under Title VII gender discrimination law, what is a “hostile environment?”

Answer 29

en the harassment of co-workers, rather than supervisors, creates a hostile working environment, an employee may still have a cause of action against the employer. Normally, though, the employer will be held liable only if the employer knew, or should have known, about the harassment and failed to take immediate remedial action.

Question 30

At what age does the Age Discrimination in Employment Act (ADEA) apply?

Answer 30

40

Question 31

What kinds of impairments are covered by the Americans with Disabilities Act (ADA)?

Answer 31

he ADA is broadly drafted to cover persons with a wide range of disabilities. Specifically, the ADA defines disability to include any of the following:

A physical or mental impairment that substantially limits one or more of an individual’s major life activities.

A record of such an impairment.

Being regarded as having such an impairment.