REG Chapter 7 Flashcards
Requirements for Negotiability
- Be in writing
- Signed by the maker (note) drawer (draft)
- Unconditional promise (note) or order (draft) to pay
- Fixed amount of money
- Payable on demand or a definite time
- Payable to order or to bearer (exceptions of checks)
- Contains no unauthorized promises
What additional items will NOT destroy negotiability?
- Acceleration clauses
- Extension clauses
- Promises regarding the collateral (give, maintain, or protect it)
- Waivers of the right to jury trial
- Promises to pay legal fees
- Promises to pay a prepayment penalty
Elements to become a holder in due course
Must takes the paper:
- for value (not a gift)
- in good faith
- without notice of any defenses to or claims of ownership
- negotiable (front only)
Real defenses against holders in due course
FAIDS:
F - Fraud in the execution & Forgery
A - Adjudicated insanity & Alteration
I - Infancy or minority of the maker & Illegality (void)
D - Duress (void) & Discharge
S - Suretyship & Statute of limitations
Warranty Liability: Transfer Warranties
- Transferor has good title
- All signatures are genuine
- No material alteration
- No defenses of any party
- No knowledge of insolvency
What the four types of collateral
- Goods (personal use, inventory, equipment)
- Intangibles (receivables)
- Investment property (stocks & bonds)
- Proceeds (the items received after a trade-in transaction)
Requisites for attachment
Agreement evidenced by:
- record signed by debtor or take possession
- value must be given by creditor
- debtor must have rights in collateral or possession
What are the five methods of perfection
- file a financing statement (effective 5 years)
- possession
- control
- automatic (PMSI consumer goods)
- temporary perfection (20 days after trade in or 4 months if debtor moves to new state)
What is the priority between creditors.
- A buyer in the ordinary course of business
- Perfected PMSI
- Perfected security interest (nonPMSI) or judicial lien
- Unperfected security interest
- Debtor
Limitations to debtors in Chp 7/11 bankruptcy
RIBS:
- Railroads
- Insurance companies
- Banks / Brokers (chp 11)
- Savings institutions
Duties of a debtor
Must file within 45 days after filing:
- list of creditors and their addresses
- schedule of assets and liabilities (FMV)
- schedule of current income and expenditures
- statement of financial affairs
- copies of pay stubs (60 days)
- statement of monthly net income
- federal tax returns
Define a preferential payment
- A transfer made to or for the benefit of creditor
- on account of an antecedent (old) debt
- made within 90 days of filing (one year if insider)
- made while debtor was insolvent
- results in creditor getting more than they would have under the Bankruptcy Code
What are the exceptions to discharge for bankruptcy proceedings?
WAFTED:
- Willfull and malicious injury
- Alimony and other settlements from divorce
- Fraud (debts incurred by), fines/penalties
- Taxes
- Education & Embezzelment
- Debts undisclosed
What are the basic categories of claimants in the order that they will be paid?
- Secured claimants
- Priority claimants (SAG WEG CTI)
- General creditors
What is the order of disbursements to priority claimants under chapter 7 bankruptcy?
SAG WEG CTI
- Support obligations (spousal/child)
- Administrative expenses
- Gap claims (involuntary cases)
- Wage claims (up to 12,475/emp)
- Employee benefit plans (up to $12,475, reduced by amount paid for wages)
- Grain farmers
- Consumer Deposits (up to $2,775)
- Taxes
- Injury claims caused by intoxicated driving
