Reg Flashcards - Chapter 7
Negotiablity requirements for notes
- Be in writing
- Signed by the maker (note) or drawer (draft)
- Contain an unconditional promise (note) or order (draft) to pay
- Fixed amount
- Payable on demand or at a specific time
- Payable to order or to bearer
- Contain no additional undertaking or instruction not authorized by the UCC
Special endorcement
Names a specific person as the endorsee
Blank endorcement
Does not name a special endorsee
Qualified endorcement
“without recourse” = no guarantee of payment by the endorser
Restrictive endorcement
“only”, “for deposit”, “for collection”
Holder in Due Course requirements
Take the paper:
- For value
- In good faith
- Without notice of any defenses to or claims of ownership on the instrument
- Negotiable (front only)
Shelter Doctrine
Even though the transferee himself might not qualify as an HDC, he can claim the rights of an HDC who held the commercial paper before him
Real defenses for Holder in Due Course Rule
FAIDS:
- Fraud in the execution
- Forgery
- Adjudicated insanity
- Material Alteration
- Infancy
- Illegality
- Duress
- Discharge in bankruptcy
- Suretyship defenses
- Statute of limiations
PMSI
Purchase Money Security Interest
Arises when
1. Creditor sells the collatoral to the debtor on credit, retaining a security interest for the purchase price
2. Creditor advances funds used by the debtor to purchase the collateral
Ask, “Did the debtor receive the collatoral with the creditor’s money?”
Requirements for Attachment
- Parties must have an agreement creating the security interest
- Value must be given by the secured party in exchange for the security interest
- Debtor must have rights to the collateral
5 methods of perfection
- Filing (financing statement effective for 5 years)
- Taking possession of the collateral
- Control
- Automatic perfection
- Temporary perfection
Order of priority to collateral
- Buyer in ordinary course of business
- Holder of perfectly perfected PMSI
- Holder of a perfected security interest
- Unperfected security interest
- Debtor
Chapter 7 bankruptcy
Liquidation
Trustee is appointed
Indivudals, partnerships, and corporations
Chapter 9
Municipal debt adjustment
Chapter 11
Reorganization
No liquidation
Trustee not required
Individuals, partnerships, and corporations
Chapter 12
Family farmers with regular income
Chapter 13
Adjustment of debts of individuals with regular income
Individuals only
Pay back over a 3 year period to a maximum 5 years
Voluntary only
Chapter 15
Ancillary and other cross-border cases
Dismissal or conversion of a Chapter 7 case
Individual consumer debtor may be dismissed (or converted to Chapter 13) if Chapter 7 would constitute abuse
1. Calculation of debtor’s income = average of 6 months preceding filing
If debtor income less than state median - Chapter 7 permitted
If debtor income exceeds state median income - means test applied
Means test
Used to determine whether the debtor has sufficient income to repay debts usinga Chapter 13 plan
- Current monthly income * 60 [(average mo income - exp) * 60]
- Less than $7,475 = Chapter 7 permitted
- $12,475 or more = presumption of abuse
- Less than $12,475 but more than $7,475 = Abuse only if amount equals 25% of nonpriority claims
May not file under Chapter 7
RIBS Railroads Insurance companies Banks Savings institutions and Small businesses
Automatic stay
Stops collection efforts
Section 341 Meeting
Creditors’ Meeting
Ordinarily within 20-40 days after the order for relief
Debtor must attend = creditors have an opportunity to examine the debtor
Things exempt from debtor’s estate
- Homestead (up to $22,975)
- Motor vehicle (up to $3,675)
- Household goods (up to $575/ item; $12,250 in total)
- Unmatured life insurance contracts
- Tools of trade or professional books (up to $2,300)
- Health aids
- Government benefits
Reaffirmation of discharged debts
Debtor may not want a particular debt discharged in bankruptcy
- Agreement must occur before the granting of the discharge
- Agreement contains a clear provision that the debtor has a right to rescind the agreement
- Reaffirmation is not required by law
Priorities for distribution of debtor’s estate
1. Secured claimants SAG WEG CTI 2. Support obligations 3. Administrative expenses 4. Involuntary case Gap claims 5. Wage claims up to $12,475 6. Employee benefit plans up to $12,475 7. Grain farmers and fisherman up to $6,150 8. Consumer deposits up to $2,775 9. Tax claims 10. Personal Injury resulting from Intoxicated driving
- Non-secured claimants
Case gap
Claims that accrue in the ordinary course of business ater and involuntary petition is filed but before the order for relief or appointment of a trustee
