Prebankruptcy Options, and Introduction to and Declaration of Bankruptcy Flashcards
Under Article 9, the creditor may:
Repossess the collateral from the debtor, or
Bring suit for collection of the amount due.
Bailee’s lien
A bailee, such as a warehouse company, a common carrier, or an innkeeper, has a right to compensation (by contract) or reimbursement (for expenses incurred in the keeping of the bailed property). To enforce this right of payment from the bailor, the bailee has a lien on the bailed property and can sell the property to satisfy the lien.
Artisan’s lien
A contract bailee who improves or repairs bailed property to increase its value has a lien in that property for the cost of the repairs or any work done on the property. Failure of the bailor to pay as contracted allows the bailee to place a possessory lien on the bailed property, and the bailee, with proper notice, can sell the property to satisfy the lien.
Mechanic’s liens are also covered by the same priority rules as artisan’s liens.
A contract bailee who improves or repairs bailed property to increase its value has a lien in that property for the cost of the repairs or any work done on the property. Failure of the bailor to pay as contracted allows the bailee to place a possessory lien on the bailed property, and the bailee, with proper notice, can sell the property to satisfy the lien.
Under the FDCPA, the creditor may:
Not talk to the debtor once the debtor has a lawyer.
Contact third parties to obtain information about the debtor.
File suit for collection.
Not harass the debtor or call during certain time periods.
Attachment
An action taken by a creditor for a court-ordered seizure for the taking into custody the debtor’s nonexempt property (which is property not protected by statute for the debtor, such as a homestead exemption or child support) prior to the creditor getting a judgment.
Writ of execution
After receiving an unsatisfied judgment, a creditor can seek from the court a writ to levy (possess and sell) on nonexempt property of the debtor. The order usually directs the sheriff or an official of the court to seize and sell the nonexempt property.
Assignment for the benefit of creditors
This process usually involves an insolvent debtor who voluntarily transfers certain assets to a trustee or assignee. The trustee or assignee liquidates the assets and tenders a payment on a pro rata basis in satisfaction of that debt to each creditor.
The amount of property turned over to the trustee or assignee, and thus pro rata share, is entirely at the discretion of the debtor.
Chapter 7 bankruptcy
Referred to as “straight bankruptcy” or liquidation
Permits voluntary and involuntary petitions
Permits individuals and businesses to file
how to file for Chapter 7 bankruptcy
Consumers generally cannot go directly to a Chapter 7 liquidation bankruptcy.
Consumers must establish that they do not have the means to repay their debt.
Known as the “means” test, this test is a formula that takes the debtor’s monthly income, subtracts out allowable expenses provided for under the bankruptcy law, and then determines whether the debtor has the means to pay off his or her debts.
Means Test
The first part of the means test examines the debtor’s monthly income—the average income in the six months preceding the petition for bankruptcy.
Monthly income includes the following:
wages, salary, tips, bonuses, overtime, and commissions gross income from a business, profession, or a farm interest, dividends, and royalties rents and real property income regular child support or spousal support unemployment compensation pension and retirement income workers' compensation annuity payments state disability insurance
Monthly income does not include income tax refunds and Social Security retirement benefits.
If the debtor’s income is at or below the state median income, the bankruptcy can proceed.
If the debtor’s income if above the state median income, then the court examines the debtor’s expenses for food, rent, and other allowable items. If there is sufficient income after the coverage for reasonable expenses to pay off debts, then the debtor is required to go through Chapter 13 bankruptcy.
is trustee required for Chapter 7?
trustee is appointed
Not eligible for Chapter 7:
Railroads Domestic insurance companies Credit unions Savings and loans Banks and cooperative banks Certain SBA entities
Chapter 11 bankruptcy
Allows for the reorganization of a business debtor to pay debts—a rehabilitation of a debtor.
Permits voluntary and involuntary petitions.
Allows companies to restructure and be discharged from certain debts.
Generally, no trustee.
Reorganization plan approved by half of the creditors with two-thirds of the total claims (includes shareholders).
Court must approve.
Not eligible for Chapter 11:
Savings and loans, banks, insurance companies
