week 10 class notes - debt security

Question 1

is it better to be a secured or unsecured creditor

Answer 1

secured!

Question 2

pledge/pawn

Answer 2

Possession transfers to creditor
Borrowing money against the property as security or “collateral” for the debt.

Question 3

how does a pawn shop work?

Answer 3

you borrow a certain percentage of the property’s market value. failure to return and pay back the loan and take possession of the property means that: after a certain period of time the pawn shop can sell the property to recover the debt

Question 4

chattel mortgage

Answer 4

debtor retains possession of an item, but creditor keeps title unit debt is paid. it is debt security attaching to personal property

Question 5

what happens if someone fails to pay in a chattel mortgage?

Answer 5

mortgagee has the right to take possession, sell goods, or proceed with foreclosure

Question 6

can chattel mortgagor sell chattel?

Answer 6

cannot sell without consent

Question 7

conditional sales agreement

Answer 7

No “option to purchase”, all money applied toward purchase price from the beginning
Title passes after final payment is made. not uncommon for farmers to do this with tractors, for ex

Question 8

registration of chattel mortgage

Answer 8

usually time-limited, requires renewal

Question 9

sale by manufacturer to retailer is…

Answer 9

not an end sale, it’s for resale

Question 10

if a person has made substantial payment,

Answer 10

no repossession, but can sue for item

Question 11

bill of sale - affidavit registration serves 2 purposes:

Answer 11

1. protects interest of buyer not in possession (i.e. seller cannot sell to someone else)
2. notice to creditors of seller

Question 12

credit cards

Answer 12

merchant pays small amount in percentage for security of payment from the bank issuing the card

Question 13

floating charge

Answer 13

security interest in the assets (usually inv) of the corporation. does not attach to specific assets until default in debt

Question 14

mechanic’s lien or construction lien

Answer 14

Right of a worker to claim security interest in property to secure payment for labour and / or materials applied to land or a chattel

Question 15

owner avoids liability in a construction lien by

Answer 15

providing a “hold back” - 10% in ontario, however this seldom pays all claims

Question 16

3 purposes of bankruptcy

Answer 16

1. provide honest but unfortunate debtors w/ release from their debts, if debtors deliver all assets to creditors
2. eliminate preferences, provide fair & predictable distribution of assets
3. expose and punish debtors who defraud