Module #8 - Debtor and Creditor Law

Question 1

Creditor Strategies

Answer 1

good credit granting policies / banks do this very well and businesses do not do it very well / minimizes risk of fault

Question 2

Collateral/security

Answer 2

something of value that can be used to pay the debts/faults
guarantees

Question 3

Security Interest

Answer 3

an interest in personal property to secure payment or performance of an obligation

Question 4

Personal Properties Security Act

Answer 4

regulate the creation and registration of security interests in all personal property within their respective jurisdictions.

Question 5

enforceable against debtor

Attachment

Answer 5

recieves value, has rights in collateral, signs security agreement, must be IN WRITING

Question 6

Significance of Attachment

Answer 6

allows the creditor to enforce the security interest

Question 7

enforceable against third parties

Perfection

Answer 7

defined as combination of attachment and registration in any order,
registration often comes before perfection

Question 8

Registration

Answer 8

registered notice of the security interest under the PPSA system

Question 9

Significance of Perfection

Answer 9

credit has rights against other parties, like someone who buys the cottarreal

Question 10

Unperfected Security Interest

Answer 10

it has not been perfected, aka not registered and don’t have priority

Question 11

Perfected Security Interest

Answer 11

basically means its enforced against other people

Question 12

When should you register?

Answer 12

register before attachment because priority goes to the first person who registers

Question 13

Registering before loaning money

Answer 13

still wins and they have priority

Question 14

Debtor goes bankrupt

Answer 14

PSI wins over trustee

Question 15

PMSi

Purchase Money Security Interest

Answer 15

allows debtor to increase its assets, they have a better claim to the asset than the PSI

Question 16

General Security Agreement

Answer 16

gives the lender security in all the assets that the debtor has including everything they ever get (every asset they ever get)

Question 17

POCOB

Purchaser in the ordinary course of business

Answer 17

right over PSI

Question 18

Fixed term loans

Answer 18

have fixed repayment (monthly or quarterly), fixed interest rate, secured by real property (to buy land or buildings)

Question 19

Line of credit

Answer 19

no fixed repayment terms) secured by AR and inventory and have floating interest rate

Question 20

Does contract law apply to debtor and creditor law?

Answer 20

YUP!

Question 21

Surplus - PPSA

Answer 21

surplus always goes back to debtor

Question 22

Deficiency - PPSA

Answer 22

deficiency debtor still liable for the money

Question 23

Gurantee

Answer 23

conditional contract between gurantor and creditor

Question 24

Who wants to enforce gurantee

Answer 24

creditor, not enforceable until the debtor defaults

Question 25

where are gurantor contracts found

Answer 25

only in contingent liabilities

Question 26

What should gurantor assume?

Answer 26

any debt that is between debtor and creditor

Question 27

Bankruptcy Insolvency Act

Answer 27

protect creditors by preserving assets rehabilitate debtors for forgiving individuals

Question 28

PSI has favour over trustee in bankruptcy

Answer 28

secured creditors come in immediately and enforce their security and take their collateral in a bankruptcy, all of the collateral is gone to the secured creditors first

Question 29

Bankruptcy

Answer 29

legal process by which the assets of an insolvent debtor are transferred to a Trustee in Bankruptcy for distribution to the debtor’s unsecured creditors

Question 30

Recievership

Answer 30

the appointment of a receiver by a secured creditor to take possession of a debtor’s assets the bank appoints a receiver to take control of all the debtor’s assets

Question 31

What do unsecured creditors get in a receivership situation

Answer 31

0, bank will sell off the assets

Question 32

Involuntary Bankruptcy

Answer 32

court order

Question 33

Voluntary

Answer 33

declaring bankruptcy

Question 34

Individual going bankrupt

Answer 34

have to make payments to a trustee in bankruptcy and most of our debts are forgiven. then the individual debtor starts over again.

Question 35

Corporation going bankrupt

Answer 35

cease to exist when declared bankrupt

Question 36

Division 1 proposal

Answer 36

secured creditors often vote against proposals, defeated=bankrupt

Question 37

Consumer proposal

Answer 37

very effective

Question 38

Distribution on Bankruptcy

Answer 38

1st - secured creditors 2nd - preferred unsecured creditors / get paid everything that their own / rent, trustee fees, employee wages 3rd - ordinary unsecured creditors - trustees distribute what is left to these people

Question 39

Company's Creditors Arrangement Act

Answer 39

if a company has more than 5 million in debt, they can order a stay from all creditors which means they can’t take action against the company for a certain amount of time

Question 40

CCA process

Answer 40

similar to proposals / there is a vote then the company can continue doing business these are very expensive, millions of dollars you need lots of assets to do this (billion dollar companies)

Question 41

Prevent fraud

Answer 41

you can’t transfer funds to other people and then claim bankruptcy