Unit 5: Bankruptcy Flashcards
Mechanic’s Lien
Lien on real property, must be cleared before selling
Artisan’s Lien
personal property Lienholder can keep the property until paid, can also sell it to satisfy the debt
Judicial Lien
Creditor can bring legal action against debtor if they fail to pay by due date
Writ of Attachment (Judicial Lien)
Pre-judgement remedy
Court order to take the property/asset into custody of the court
Writ of Execution (Judicial Lien)
After judgement for creditor
Court order of seizure/sale of asset to satisfy the debt
Surety
Co-signer is primarily liable for the debt.
Creditor can go after surety even if debtor doesn’t default
Guaranty
Co-signer is secondarily liable for the debt. Creditor can only go after guaranty after debtor defaults
Release from Surety/Guaranty: Material Modification
Change in the original contract without consent of co-signer
Release from Surety/Guaranty: Surrender of Property
Original debtor returns the item to creditor, co-signer is then released
Release from Surety/Guaranty: Pymt/Tender of Payment
Debtor pays off full amount to creditor, co-signer is then released
Is the co-signer still held liable if the original debtor files for bankruptcy?
Yes, bankruptcy only covers the person affected (original debtor)
Rights of Co-Signer:
Right of Subrogation
Co-signer has same rights as the creditor vs. the original debtor
Rights of Co-Signer:
Right of Reimbursement
Co-signer is entitled to be reimbursed by the debtor
Rights of Co-Signer:
Right of Contribution
If there are 2 or more co-signers, 1 can get compensated if they pay over their share for the debt.
Bankruptcy Code
Article 1, Section 8 US Constitution
Fresh start for debtor, equitable treatment of creditors
Court is federal, judges appointed for 14 yrs
What is the goal of bankruptcy?
Fresh start for debtor, equitable treatment of creditors
Types of Bankruptcy
- CH 7 - liquidation
- CH 11 - biz reorganization
- Ch 13 - repayment plan
Chapter 7 Bankruptcy
Debtor turns over all assets to trustee to liquidate
For Individuals, partnerships, corporations
Who cannot file for CH 7 voluntary or involuntarily?
Railroads, insurance companies, banks, savings & loans, credit unions (voluntarily)
Farmers, charities (involuntarily)
Means Test
Determine if qualified to file Ch 7, can’t have disposable income
How many days does debtor have to file all paperwork for a Ch 7 bankruptcy?
45 Days
Ch 7: Automatic stay
Stops actions by creditors to collect $$ from debtor
Exceptions: Still have to pay secured debts (adequate protection doctrine) & Domestic-support obligations
Estate in Bankruptcy
Everything owned at the time of filing is considered the estate
Anything acquired w/in 180 days of filing becomes part of the estate
Family heirlooms are considered part of the estate and can be sold
Bankruptcy Trustee
Collect debtors estate and liquidate
Has strong arm power (equiv to lien holder) & power of avoidance (void sales and take back property of the estate
Creditor Claims
Must file proof of claim w/in 90 days of creditor meeting
Creditors organized into classes and are paid if there’s any $$
Creditor Class List
- Secured Creditors
- Unsecured Creditors
- Debtors
TRUE OR FALSE Most Chapter 7 bankruptcies are no-asset filling?
True - creditors will get nothing b/c there is nothing to take
Discharge (Bankruptcy)
Debtor release from the debt.
There are exceptions:
- 2 yrs back taxes
- Domestic support obligations
- Retirement acct loans
- Gov’t fines/penalties
- Student loans
- Drunk driving judgements
- Creditor claims NOT listed in the original petition
Bankruptcy Discharge denial
Court can revoke discharge w/in 1 year if they find debtor acted fraudulently or dishonestly during the proceedings
Reaffirmation Agreement
Signed agreement from debtor to take back on debt you could have discharged to retain secured property
ex: Sign an agreement to keep your vehicle/loan/pymts
CH 11 Bankruptcy
For corporations
Reorganization of business debts
Involves a creditor committee
CH 11: Debtor in Possession (DIP)
Debtor keeps control of the business
CH 11: Small business exception
Small business does not need to have a creditor committee if their liability is under 2.7 million and doesn’t own/manage real estate
CH 11: Creditor Committee
Unsecured creditors form to consult with trustee on the bankruptcy
CH 13 Bankruptcy
- Repayment plan
- For individuals with regular income
- Payments made to courts, who pay creditors
- Payment plans run 3-5 years
