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Flashcards in Bankruptcy: General Deck (6)
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1

Bankruptcy:
When debtor doesn't pay

1. Execute rights under Article 9 secured transactions and/or suretyship agreements
2. Foreclose on lien
- Baliee's lien: Bailee has right to compensation or reimbursment and can sell property
- Artisan's lien: a contract bailee who improves or repairs bailed property to increase value & can sell property with notice
** Most states artisan's lien has priority over previously perfected statutory filed lien**
3. Obtain a judgement against creditor
- Attachment: take property
- Writ of Execution: unsatisfied judgement, writ of levy to (possess and sell) property
- Garnishment: court order requiring 3rd parties to deliver debtors property held in their posession or pay the debts they owe to the creditor
- bank accounts, wages
- cannot garnish Social Security & employers cannot fire because of garnishment.

2

Bankruptcy:
When debtor doesn't pay 2

1. Composition of creditors agreements
- creditors agree to discharge debts for lesser sum
- creditors who do not contract are not bound
- advantage is immediate payment
2. Setting aside fraudulent conveyances
- anything done to defraud creditors can be set aside.
3. Assignment for benefit of creditors
- insolvent debtor voluntarily transfers assets to trustee
- trustee liquidates and tenders payment on a pro rata basis
- amount of property turned over is at debtor's discretion
- acceptance by creditor is complete discharge of debt
- rejection eliminates creditors rights to property but then can pursue other remedies

3

Bankruptcy:
Chapter 7

"Straight Bankruptcy"
- voluntary & involuntary
- trustee is appointed and
- Not Eligible: Railroad, insurance, savings bank, savings and loan, cooperative bank, SBA entities
- any person
- Exceptions: Banks, Savings & Loan, Credit Unions, Railroads, Insurance Companies, Government
- must recieve credit counseling within 180 days of filing
Involuntary:
- includes above exceptions, nonprofit, farmers
***12+ unsecured creditors with noncontingent claims over $15,325 OR 1 over $15,325***
Debtors Challenge:
- prove not paying debts
- debtor made assignment for benefit of creditors within 120 days
- Notice that standard for proving bankruptcy is assets less than liabilities
***bad faith could have punitive damages***
After Filing
- court issues order for relief
- creditors must stop collecting

4

Bankruptcy:
Chapter 9

Chapter 12

Chapter 9
Applies to municipalities
- voluntary
- rarely addressed
Chapter 12
- voluntary
- family farmer or fisherman

5

Bankruptcy:
Chapter 11

Reorganization of debt "Rehabilitation"
- voluntary & involuntary
- allows companies
- generally no trustee
- Reorg plan approved by 1/2 creditors with 2/3 claims
- court must approve

6

Bankruptcy:
Chapter 13

- Only voluntary
- Less than 383,175 in unsecured and 1,149,525 in secured
- Always trustee
- Only individuals
- Debtor's plan
- Court Confirmation
- 3-5 years for plan

Decks in REG Class (109):