Mgmt 108 Final Flashcards
(35 cards)
Attachment
The bank’s right against the borrower; the secured party has priority to collateral over the borrower
Attachment Takes Place When
All of the following occur:
1) The creditor gives value (the gave credit/economic value/consideration)
2) The debtor has rights in the collateral (its their item)
3) The creditor takes possession of the collateral or the debtor signs a security agreement; creditor needs proof in words or actions but not both
Perfection
The bank’s right over all other people; the secured party has priority to collateral over all others
Perfection Takes Place When
Any of the following occur:
1) The creditor files a financing statement
2) The creditor takes possession of the collateral (keeps possession of collateral, eg. pink slip for a car)
3) Automatic: a creditor is considered to be immediately perfected for PMSI in consumer goods
Types of Collateral
Consumer goods, inventory, and equipment
Rules for filing a financing statement
A creditor is allowed a 20 day lookback period for all PMSI except inventory; don’t have to file for consumer goods; no grace period for inventory; make sure someone has owned something 21 days before you buy it
What is PMSI
Purchase money security interest
When Does PMSI Exist
Exists if a lender provides financing that enables a borrower to have rights in collateral in the first place;
Ex) Buying a tv from best buy and financing it with them
*PMSI still exists even if financing is through a third party
Trustee in Bankruptcy
Divides cash dispersal in bankruptcy
Who wins if perfection has occurred
A secured party has priority to collateral over all others except: any buyer in the ordinary course of business, or a good faith buyer of used consumer goods, unless the original seller filed a financing statement
Creditor rights upon repossession
1) Sell the collateral
2) Keep the collateral using a deficiency waiver agreement
Creditor rights upon repo: Sell the collateral
A public auction or private sale is allowed; the sale must be commercially reasonable; if the proceeds exceed the unpaid debt and the selling costs, the creditor must return the excess proceeds to the borrower; if the proceeds are less than the debt and the selling costs, the creditor may still sue for the unpaid deficiency
Creditor rights upon repo: Keep the collateral
General rule: if the borrower does not object in writing within 21 days, the borrowers silence is considered to be binding; But, if the borrower has paid 60% or more of the purchase price for consumer goods, the borrower’s actual signed agreement is required
Types of Bankruptcy
1) Chapter 7 Liquidation
2) Chapter 11 Reorganization
Voluntary Bankruptcy
You file for bankruptcy; only the poor half of the population can do this
Involuntary Bankruptcy Definition and Requirements
Forced into bankruptcy;
Need three elements: the debtor is insolvent; the total unsecured debt is $10k or greater; and 3 co-signers are required when the number of creditors is 12 or more or 1 signer is required when the number is less than 12
Automatic Stay
When a bankruptcy petition is filed, all lawsuits pending against the debtor temporarily are stopped
Assets exempted from Bankruptcy
Necessities like clothes, tools for trade, medication, basic amount of equity in a car, and homestead exemption ($50k-100k in CA or full value of home equity in the south)
Bankruptcy Estate: Preferential Transfers Definition
1) Creditor improves its postion
2) The transfer occurs shortly before the petition date: 1 year lookback to Insiders (family/friends) or 90 days for non-insiders
3) The transfer is to satisfy a pre-existing debt other than a debt arising in the ordinary course of business
4) The debtor is insolvent
What can the bankruptcy estate take from the petition date up through 180 days out
All assets obtained except for: Alimony/child support, pension/social security, injury awards, and wages
Order of How people are paid in bankrupty
CANEAT; child support, administrative, new credit obtained post filing, employee wages and pensions incurred within 90 days pre-petition ($5000 max per employee), advances from customers ($2500 max per customer), taxes, and lastly general unsecured debts (fractions of what is left)
Discharge of Debts: General Rule
All debts owed by an individual are cancelled in bankruptcy, except: loans obtained through fraud, alimony/child support, debts that arose from intentionally injuring another person, unscheduled debts (no assurance of payment), student loans, and taxes
Discharge of Debts: General Denial of Discharge
No debts at all are cancelled if the debtor: received a bankruptcy discharge within the past 6 years, concealed records or assets from the court, or is a corporation or partnership
Chapter 11 Bankruptcy
All rules applicable to Chapter 7 bankruptcy also apply except:
1) A trustee is not necessarily appointed, instead the bankrupt debtor is often allowed to continue operating the company, this is called debtor in possession
2) The debtor’s assets are not liquidated and distributed, instead the debtor receives a partial discharge of certain debts and continues in business after a reorganization plan has been approved
3) After the court has grouped the creditors with similar claims into separate categories, each class of creditors must approve the reorganization plan. A class of creditors is considered to want the plan only if the vote is approved by: a majority of the creditors in number and by two thirds of the creditors based of dollar amount
