Business Law – week 7 Secured Transactions Bankruptcy Law Quiz Introduction to Employment Law Next Week

Secured Transactions What is a secured transaction? Debtor gives up interest in collateral Must be signed

Secured Transactions Problems that can occur in a secured transaction Same collateral used in more than one loan Secured collateral sold to third party

Secured Transactions In the event of default Secured party takes collection May retain or dispose Debtor may pay off debt and recollect goods

Secured Transactions To dispose Debtor must be notified Money applied to costs/debt Debtor responsible for remaining debt Leftover money from sale given to debtor

Bankruptcy Goals of bankruptcy Preserve debtors property Fairly divide assets between debtor/creditors Fairly divide assets between creditors

Bankruptcy Chapter 7 - liquidation Chapter 11 - reorganization Chpater 13 - consumer reorganization

Bankruptcy What happens: Filing “order of relief” Trustee Creditor meeting Automatic Stay Bankruptcy Estate Payment of claims

Bankruptcy Bankruptcy Estate All assets minus exceptions The estate will void transfers/payments made 90 days prior to filing

Bankruptcy Payment of Claims (in this order) Secured Priority Child support Admin expenses Taxes Employee wages Unsecured

Bankruptcy Bankruptcy benefits Debtors Creditors

Bankruptcy Cannot be discharged Government guaranteed student loans Child support Certain taxes From fraud From malicious injury

Bankruptcy Consider this After chapt 7, a business MUST cease to exist After chapt. 7 or 11 cannot file again - 8 years Fraud, concealment, dishonesty, bad faith Illegal Courts can deny, revoke or discharge

Bankruptcy Chapter 7 - liquidation Assets pay debts Creditors cannot claim future earnings Voluntary or involuntary Limitations - not everyone eligible

Bankruptcy Chapter 7 - limitations Credit counseling required Earn less than state median Cannot pay $6, over 5 years* Involuntary chapter 7 - limitations Owes at least $12,300 unsecured 3 of 12 or more creditors must sign petition Custodian appointed or/ not paying debts

Bankruptcy Chapter 11 reorganization (business or consumer) Company does not die Trustee not required Reorganization plan Small-business bankruptcy - special rules

Bankruptcy Chapter 13 - reorganization (consumer only) Not if over $308,000 unsecured or $923,000 secured Keep most assets Voluntary only Trustee keeps 10% fee Plan must be Feasable 3-5years Pay in full or give up ALL disposable income If circumstances change or debtor violates plan