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Once bankruptcy petition filed, creditor cannot: Receive a security interest Perfect a security interest Enforce a security interest (repossess)
Protects unsecured creditors. Enemy of the secured creditor.
Bankruptcy trustee has status of judicial lien creditor. Thus, will prevail over unperfected security interests. Problem 361 – p. 974
Bankruptcy trustee can raise any defenses the debtor may have such as: Statute of limitations Statute of frauds
Moore v. Bay – 1931 United States Supreme Court Trustee’s recovery is not limited to the amount of the unsecured creditor’s claim.
Debtor cannot prefer one creditor over another. Creditors cannot be overly aggressive.
1. Transfer by debtor Includes grant of security interest.
2. For preexisting debt Not a new debt.
3. Within 90 days of filing the bankruptcy petition One year if transfer is to an insider (e.g., relative, partner, corporate officer)
4. Increases the amount the creditor receives Creditor is “better off” because of the transfer as compared to what the creditor would receive under a bankruptcy distribution.
5. Debtor insolvent at time of transfer Presumed within 90 days before filing.
1. Contemporaneous exchange New value given for item. Perfection of new value within 30 days of attachment.
2. Ordinary course debt payments Utility bills Paying ordinary debts (even secured ones)
3. PMSI Perfected within 30 days of debtor receiving possession.
Problem 362 – p. 979 June 8 $80,000 loan $100,000 collateral July 18 Perfection July 19 Bankruptcy filing
Problem 363 – p. 979 Nov. 1 value Security agreement Nov. 15 Rights Attachment Dec. 6 Bankruptcy filing Dec. 5 Filing
Problem 364 – p. 979
[amount unsecured 90 days before filing] minus [amount unsecured at time of filing] equals preference
Amount of debt 90 days before filing Value of collateral 90 days before filing Preference = Amount of debt at time of filing Value of collateral at time of filing Problem 365 – p. 981
Under federal or state law. Actual intent to defraud Debtor receives less than reasonably equivalent value Problem 366 – p. 989
Judicial liens within 90 days of bankruptcy filing are preferences and trustee has priority.
Statutory liens have priority over the bankruptcy trustee if under state law: They would prevail against a BFP, and Do not arise only because the debtor is insolvent.
Creditors’ Rights and Bankruptcy Chapter 16. Secured Transactions Article 9 of UCC A transaction in which the payment of a debt is secured by collateral.
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