Debtor Creditor Relationships

Question 1

Liquidation payout structure priority list

Answer 1

1. Admin exps for liquidation proceedings
2. Wages owed at date of bankruptcy filing up to $13,650 per person
3. Contributions to benefit plans up to $13,650 per person
4. Consumer deposits up to $3,025 per person
5. Taxes
6. Other unsecured claims

Question 2

3 elements of a valid financing statement

Answer 2

1. Names & addresses of the debtor and creditor
2. The debtor’s authorization/signature
3. A general description of the collateral property

(The amount is not needed)
Valid for 5 yrs and can be renewed for another 5 yrs (can be renewed indefinitely but must be done within 6 months of renewal expiring each time)

Question 3

3 requirements of Attachment

Answer 3

1. There must be a consensual security agreement (usually in writing, must be signed by debtor and have description of collateral)
2. The creditor must give value to the debtor
3. The debtor must have rights in the collateral property (must be in possession of collateral)

Question 4

Perfection of debt

Answer 4

-Highest level of claim to property, protects against other creditors

3 methods of perfection

1. By taking possession of the collateral w/ debtor’s agreement
2. Publicly filing a Financing Statement (PMSI creditors (purchase money security interests) w/ financing stmts filed w/in 20 days of attachment have highest creditor priority)
3. By attachment - PMSI creditors of consumer goods are automatically perfected once attachment occurs (usually when the money needed to purchase the goods is supplied by the creditor)

*have 4 months to re-perfect, if goods move to another State, by filing financing stmt in other state.

Question 5

Number of creditors needed to force an involuntary bankruptcy petition?

Answer 5

• If 12 or more creditors, then need 3 or more creditors to sign and must debt must total at least $16,750 in unsecured debt.
• If less than 12, only 1 creditor needs to sign but must have at least $16,750 in unsecured debt, or will need at least 1 more creditor to sign and the total debt must be more than $16,750

Question 6

Debts that will NOT be discharged in a Chapter 7 bankruptcy (liquidation provisions)

Answer 6

1. Taxes less than 3 yrs old (from timely filed returns)
2. Child support or alimony
3. Debts incurred thru fraud
4. Debts from malicious torts (drunk driving)
5. Student loans
6. Fines to government units less than 3 yrs old
7. Luxury items purchased within 90 days before bankruptcy in excess of $650

Question 7

Co-surety liability amount

Answer 7

($ amount of liabs assumed by this co-sureor/total $ amount of liabs assumed by ALL co-sureors) x ($ amount pd by this co-surety)

= $ amount that was required from this individual co-surety