Exam 39: Bankruptcy

Edward's Excursions Inc.filed for Chapter 7 bankruptcy.It has $100,000 in assets.The outstanding debts include: $50,000 to Arthur secured by a boat worth $25,000.$30,000 to Bradley secured by a truck worth $30,000.$20,000 to Clarence unsecured.The month before Edward's closed and filed for bankruptcy, its employees earned $10,000 for which they did not get paid.They also should have been credited with $3,000 for their pension plan.Edward's owes $4,000 in back taxes.In the process of administering the estate, the trustee paid $5,000 in attorney fees.In what order will these claims be paid?

Any person who may be a debtor under Chapter 7, except a stockbroker or a commodity broker but including railroads, may be a debtor under Chapter 11.

A trustee under a Chapter 11 or 13 proceeding performs the same duties as a Chapter 7 trustee.

MATCHING Part VIII Matching Match each statement with the correct term below.a.The right in personal property that secures payment or performance of an obligation.b.Relief from liability for all debts except those specified in the Bankruptcy Code.c.A document filed to provide notice of a security interest.d.Property subject to a security interest.e.Tangible or electronic record that evidences both a debt and a security interest in specific goods.f.Creation of a security interest that is enforceable against a debtor.g.Delivery of personal property to a creditor as security for payment of a debt.h.An agreement between the debtor and creditor creating a right in personal property that secures payment or performance.i.Movable things bought or used primarily for personal, family, or household purposes.j.Creditor's remedy involving a statutory proceeding directed at a third person who owes a debt to or has property of a debtor.k.A surety liable to a creditor immediately upon the default of a principal debtor.l.Creation of a security interest enforceable against most third parties.m.The right of a surety to be relieved of his obligation to the creditor by having the principal debtor perform the obligation.n.A surety's right to assume the creditor's rights.o.A person who promises to answer for the payment of a debt or the performance of a duty owed to the creditor by the principal debtor upon the principal debtor's failure to perform.p.A way to begin a bankruptcy case that is available to any debtor even if solvent.q.May be filed by creditors only under Chapter 7 or 11.r.The person responsible for collecting, liquidating, and distributing the debtor's estate.s.Surety liable to a creditor only after creditor has exhausted legal remedies against the principal debtor.t.Any entity that has a claim against the debtor.u.A claim with a lien on property of a debtor; a claim tied to specific property of the debtor.v.Certain preferential transfers made by the debtor to favored creditors before the date of bankruptcy and invalidated by the Bankruptcy Code.w.An agreement between the debtor and two or more of her creditors that each will take a portion of his claim as full payment.x.Prevents attempts by creditors to recover claims against the debtor.y.A voluntary transfer by the debtor of some or all of his property to a trustee, who applies the property to the payment of all of the debtor's debts. -involuntary petition

An involuntary petition in bankruptcy:

John's brother, Phil, loaned him $10,000 to start his business.John didn't do too well and planned to file for bankruptcy.In May, he gave Phil his car worth $8,000 to satisfy the debt.John filed his petition in November.After liquidation, if the car were included in his assets, every unsecured debtor would have received 85% of the debt owing to him.Will this be a voidable preference?

In the case of Till v.SCS Credit Corporation, the court stated:

The doctrine of subordination of claims might result in two unsecured creditors getting unequal proportions of their debts paid.

Confirmation of a plan for reorganization under Chapter 13 may be given only if:

Chapter 3 of the Bankruptcy Code contains provisions dealing with the commencement of a case in bankruptcy.

Which chapter of the Bankruptcy Code covers transnational insolvencies?

A receiver is a disinterested person appointed at the discretion of the court to manage, liquidate, and conserve assets of a debtor.

Chapter 3 of the Bankruptcy Code deals with:

In an assignment for the benefit of creditors, if each creditor is paid a pro rata share of his original obligation, the debtor is then discharged from any further obligation to the creditor.

MATCHING Part VIII Matching Match each statement with the correct term below.a.The right in personal property that secures payment or performance of an obligation.b.Relief from liability for all debts except those specified in the Bankruptcy Code.c.A document filed to provide notice of a security interest.d.Property subject to a security interest.e.Tangible or electronic record that evidences both a debt and a security interest in specific goods.f.Creation of a security interest that is enforceable against a debtor.g.Delivery of personal property to a creditor as security for payment of a debt.h.An agreement between the debtor and creditor creating a right in personal property that secures payment or performance.i.Movable things bought or used primarily for personal, family, or household purposes.j.Creditor's remedy involving a statutory proceeding directed at a third person who owes a debt to or has property of a debtor.k.A surety liable to a creditor immediately upon the default of a principal debtor.l.Creation of a security interest enforceable against most third parties.m.The right of a surety to be relieved of his obligation to the creditor by having the principal debtor perform the obligation.n.A surety's right to assume the creditor's rights.o.A person who promises to answer for the payment of a debt or the performance of a duty owed to the creditor by the principal debtor upon the principal debtor's failure to perform.p.A way to begin a bankruptcy case that is available to any debtor even if solvent.q.May be filed by creditors only under Chapter 7 or 11.r.The person responsible for collecting, liquidating, and distributing the debtor's estate.s.Surety liable to a creditor only after creditor has exhausted legal remedies against the principal debtor.t.Any entity that has a claim against the debtor.u.A claim with a lien on property of a debtor; a claim tied to specific property of the debtor.v.Certain preferential transfers made by the debtor to favored creditors before the date of bankruptcy and invalidated by the Bankruptcy Code.w.An agreement between the debtor and two or more of her creditors that each will take a portion of his claim as full payment.x.Prevents attempts by creditors to recover claims against the debtor.y.A voluntary transfer by the debtor of some or all of his property to a trustee, who applies the property to the payment of all of the debtor's debts. -discharge

Pre-judgment attachment permits a creditor to seize the debtor's property:

Which of the following claims will be paid first from the debtor's estate under Chapter 7?

Fritz is seriously considering bankruptcy, because he has a large number of outstanding debts, the principal ones of which are as follows: (1) he owes his ex-wife $25,000 in back alimony and child support; (2) he owes $20,000 in guaranteed student loans; (3) he has a lawsuit pending against him in which his ex-girlfriend is asking for $50,000 in damages (the suit is based upon the intentional tort of battery and arises from an incident in which Fritz got mad at his girlfriend and beat her up); and (4) he owes the First Bank $20,000 for the loan securing his new sports car.Should Fritz file for bankruptcy?

A debt is an obligation to pay money owed by a debtor to a creditor.

Monica's husband is an accountant who keeps the books for her business.When the business goes bankrupt, will Monica's husband's claim for services be allowed by the bankruptcy courts?