Third Party Creditors

Question 1

Rights of Unsecured Creditors

Answer 1

• Ability to sue in court
  
  • Requirement to prove claims to the trustee

Question 2

Rights of Judgment Creditors

Answer 2

• Claim vests with trustee as unsecured creditor
• Obligation to prove claims to the trustee

Question 3

Secured Creditors

Answer 3

• Generally not affected by bankruptcy
  
  • Ability to realize or deal with security
  • Obligation to provide proof of security to the trustee

Question 4

Bankruptcy Advisory Notice

Answer 4

Given by SC who has security in all or substantially all the debtors assets 10 days prior to requesting BR order

Question 5

Executory Contracts

Answer 5

Bankruptcy does
not of itself cause the contract to
come to an end or constitute a
breach of the contract
UNLESS:
1. Stipulated in contract
1. Employment contract

Question 6

Fraud on the
Bankruptcy Law Principle - two branches

Answer 6

Anti-Deprivation Rule prevents parties from agreeing to remove property from a bankrupt’s estate
Pari Passu Rule invalidates contractual provisions that alter the bankruptcy scheme of equal distribution.

(Capital Steel)

Question 7

Capital Steel

Answer 7

Creditor took the position that it was
entitled to further offset against 10 percent of the total contract price, which it alleged Capital Steel had
agreed to forfeit in the event of insolvency.
Court said nope, CL & statute bar.

Question 8

Statutory Anti-Deprivation Rule BIA s. 84.2(1)

Answer 8

No person may terminate or amend –
or claim an accelerated payment or
forfeiture of the term under – any
agreement, including a security
agreement, with a bankrupt
individual by reason **only **of the
individual’s bankruptcy or insolvency

Question 9

Trustee and executory contracts

Answer 9

Trustee may:
1.Affirm (not personal services), if K is valuable to estate. K proceeds become divisble property
2. Disclaim. No liabilty to trustee; contracting party may prove a claim for contractual damages in BR.
3. Assign Consideration given by
assignee becomes divible property. Expansion of CL rule on assignment BIA s. 84.1(1)

Like portrait painting…

Question 10

Assignment of executory K

Answer 10

• BIA s. 84.1(1)
• Must be an individual caryuing on business
• K must relate to the business
• Does not apply to post-initiation K or collective agreements

Question 11

Provable claims

Answer 11

Not limited to debts
Include all liabilities to which the bankrupt was subject on the day of the bankruptcy.
Present and future liabilities

Question 12

Lien Claimants

Answer 12

Secured creditors
Not affected by stay under 69.3(2)