REG 20 - Secured Transactions Flashcards
What is attachment?
Process by which a creditor can repossess and sell collateral when a debtor stops payment.
What is the mnemonic for attachment and what does it mean?
PIG-1. Property owned by debtor 2. Interest is created 3. Give value to the debtor
What are examples of “Creating interest” in Attachment?
- Taking possession, such as a pawn shop, or on layaway, OR2. Signed (by debtor) security agreement
What is perfection?
Where a creditor provides notice to other creditors that a security interest exists.
How is perfection performed?
Mnemonic FAT - By doing any ONE of the following 3 steps-1. File a financing statement2. Automatic perfection (PMSI automatically perfected)3. Take possession of the collateral
What loophole exists in perfection?
In automatic perfection, if the debtor sells the goods to a third party in a good faith sale, third party retains ownership from creditor.
How is the perfection loophole closed?
creditor must file a financing statement withing 20 days of attachment
What are the three types of uses for secured goods, and which one cannot be automatically perfected?
Equipment, inventory, and consumer goods. Inventory cannot be automatically perfected.
What is a PMSI?
Purchase money security interest- where the creditor gives the debtor money or credit to purchase collateral.
What does DOTS mean in regard to a creditor protecting his interest from other parties?
DOTS represents the people that a creditor must protect himself from. D - Debtor, creditor needs only to attach. O - Other creditors, T - Trustee in bankruptcy, S - Subsequent purchaser from debtor in good faith transaction.
How is attachment performed?
By performing ALL THREE steps represented by the mnemonic PIG
According to the Bankruptcy Act, at what point in time is the filer considered Bankrupt?
90 prior to filing bankruptcy
What are the elements of a preferential transfer of property?
I-WAIT - Insolvency at time of transfer, Antecedent debt(must be), Improves creditors position, Time increased from 90 days to 1 year if insider
What types of transfers can a bankruptcy trustee void?
FLAP - Fraudulent transfers made within 2 years prior, Liens by statute(mechanics) effective on or after filing date, After petition transfers, Preferential transfer of property
What types of transfers are non-preferential?
C-COGNAC - Charity, Consumer Debt<$650, Ordinary course of business, New value, Alimony & child support, Continuation of installment payments.
What is the order of distribution of assets among creditors?
Secured, Priority, Unsecured/General
What are included in Priority claims?
STOP-IT-Drunk driver - Support or alimony payments, Trustee and admin fees, Owed-after-petition-in-involuntary gap, Payroll(90 days) & employee benefit plans(180 days) up to $12, 475 each, Individual consumer deposits(consumer goods not delivered)<=$2775, Tax claim within prior 3 years.
What does the word “discharge” mean in relation to bankruptcy?
A discharge is a release, meaning the debtor is released from having to pay that particular debt.
How is the word “exemption” used in relation to bankruptcy?
Exemption means “exemption from discharge”, which means that the debt will not be excused, and the debtor will not be released from the money owed on that particular debt.
What is the definition of a preference, or preferential transfer?
A transfer of property to a creditor within prior 90 days of filing to satisfy an antecedent (pre-existing) debt.
