Unit 5: Bankruptcy

Question 1

Mechanic’s Lien

Answer 1

Lien on real property, must be cleared before selling

Question 2

Artisan’s Lien

Answer 2

personal property Lienholder can keep the property until paid, can also sell it to satisfy the debt

Question 3

Judicial Lien

Answer 3

Creditor can bring legal action against debtor if they fail to pay by due date

Question 4

Writ of Attachment (Judicial Lien)

Answer 4

Pre-judgement remedy
Court order to take the property/asset into custody of the court

Question 5

Writ of Execution (Judicial Lien)

Answer 5

After judgement for creditor
Court order of seizure/sale of asset to satisfy the debt

Question 6

Surety

Answer 6

Co-signer is primarily liable for the debt.
Creditor can go after surety even if debtor doesn’t default

Question 7

Guaranty

Answer 7

Co-signer is secondarily liable for the debt. Creditor can only go after guaranty after debtor defaults

Question 8

Release from Surety/Guaranty: Material Modification

Answer 8

Change in the original contract without consent of co-signer

Question 9

Release from Surety/Guaranty: Surrender of Property

Answer 9

Original debtor returns the item to creditor, co-signer is then released

Question 10

Release from Surety/Guaranty: Pymt/Tender of Payment

Answer 10

Debtor pays off full amount to creditor, co-signer is then released

Question 11

Is the co-signer still held liable if the original debtor files for bankruptcy?

Answer 11

Yes, bankruptcy only covers the person affected (original debtor)

Question 12

Rights of Co-Signer:
Right of Subrogation

Answer 12

Co-signer has same rights as the creditor vs. the original debtor

Question 13

Rights of Co-Signer:
Right of Reimbursement

Answer 13

Co-signer is entitled to be reimbursed by the debtor

Question 14

Rights of Co-Signer:
Right of Contribution

Answer 14

If there are 2 or more co-signers, 1 can get compensated if they pay over their share for the debt.

Question 15

Bankruptcy Code

Answer 15

Article 1, Section 8 US Constitution

Fresh start for debtor, equitable treatment of creditors

Court is federal, judges appointed for 14 yrs

Question 16

What is the goal of bankruptcy?

Answer 16

Fresh start for debtor, equitable treatment of creditors

Question 17

Types of Bankruptcy

Answer 17

• CH 7 - liquidation
• CH 11 - biz reorganization
• Ch 13 - repayment plan

Question 18

Chapter 7 Bankruptcy

Answer 18

Debtor turns over all assets to trustee to liquidate
For Individuals, partnerships, corporations

Question 19

Who cannot file for CH 7 voluntary or involuntarily?

Answer 19

Railroads, insurance companies, banks, savings & loans, credit unions (voluntarily)

Farmers, charities (involuntarily)

Question 20

Means Test

Answer 20

Determine if qualified to file Ch 7, can’t have disposable income

Question 21

How many days does debtor have to file all paperwork for a Ch 7 bankruptcy?

Answer 21

45 Days

Question 22

Ch 7: Automatic stay

Answer 22

Stops actions by creditors to collect $$ from debtor

Exceptions: Still have to pay secured debts (adequate protection doctrine) & Domestic-support obligations

Question 23

Estate in Bankruptcy

Answer 23

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

Question 24

Bankruptcy Trustee

Answer 24

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

Question 25

Creditor Claims

Answer 25

Must file proof of claim w/in 90 days of creditor meeting

Creditors organized into classes and are paid if there’s any $$

Question 26

Creditor Class List

Answer 26

1. Secured Creditors
2. Unsecured Creditors
3. Debtors

Question 27

TRUE OR FALSE Most Chapter 7 bankruptcies are no-asset filling?

Answer 27

True - creditors will get nothing b/c there is nothing to take

Question 28

Discharge (Bankruptcy)

Answer 28

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

Question 29

Bankruptcy Discharge denial

Answer 29

Court can revoke discharge w/in 1 year if they find debtor acted fraudulently or dishonestly during the proceedings

Question 30

Reaffirmation Agreement

Answer 30

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

Question 31

CH 11 Bankruptcy

Answer 31

For corporations
Reorganization of business debts
Involves a creditor committee

Question 32

CH 11: Debtor in Possession (DIP)

Answer 32

Debtor keeps control of the business

Question 33

CH 11: Small business exception

Answer 33

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

Question 34

CH 11: Creditor Committee

Answer 34

Unsecured creditors form to consult with trustee on the bankruptcy

Question 35

CH 13 Bankruptcy

Answer 35

• Repayment plan
• For individuals with regular income
• Payments made to courts, who pay creditors
• Payment plans run 3-5 years