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Flashcards in Creditor's Remedies in Bankruptcy Deck (3)
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1
Q

The Automatic Stay

  1. Definition
  2. Scope
A
  1. Definition - Bankruptcy Code § 362 - the automatic stay freezes the relative rights of creditors as of the moment of the bankruptcy filing.
  2. The Automatic Stay Freezes -
    1. The commencement or continuation of any proceeding to recover on a claim that arose before bankruptcy;
    2. Any act to obtain possession or control of debtors property;
    3. Any act to create or perfect a lien on the debtor’ property if such lien arose before bankruptcy;
    4. Any act to collect, assess, or recover a claim against a debtor that arose before the bankruptcy; and
    5. Any set off of any debt owing to the debtor that arouse before the bankruptcy against any claim of the debtor.
2
Q

Rights of Secured Creditors in Bankruptcy

  1. Eventual Rights to Collateral
  2. Lifting Automatic Stay
A
  1. Eventual Rights to the Collateral - bankruptcy still promises secured creditors eventual access either to their collateral or to property or money of equivalent value.
  2. Lifting the Stay – Upon imposition of the stay, the secured creditor retains its lien and may be able to get the stay lifted and continue with its nonbankruptcy collection efforts.
    1. Grounds for Lifting Stay -
      1. inadequate protection
        1. Cushion - no inadequate protection if cushion of equity in collateral.
      2. lifting the stay doesn’t violate the purposes of bankruptcy. (ie., (1) debtor doesn’t have equity in collateral and (2) the collateral isn’t necessary for the reorganiation)
3
Q

Priority of Creditors in Bankruptcy

  1. Unsecured Creditors
  2. Secured Creditors
A

Priority of Creditors in Bankruptcy

  1. Unsecured Creditors - generally take pro rata
  2. Secured Creditors - secured only to the extent of the value of the collateral.
    1. Any remainder will be an unsecured claim.