Automatic Stay Once bankruptcy petition filed creditor cannot Receive a security interest Perfect a security interest Enforce a security interest repossess Bankruptcy Trustee Protects unsecured creditors ID: 170984
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Slide1
BankruptcySlide2
Automatic Stay
Once bankruptcy petition filed, creditor cannot:
Receive a security interest
Perfect a security interestEnforce a security interest (repossess)Slide3
Bankruptcy Trustee
Protects unsecured creditors.
Enemy of the secured creditor.Slide4
Status of judicial lien creditor
Bankruptcy trustee has status of judicial lien creditor.
Thus, will prevail over unperfected security interests.
Problem 361 – p. 974Slide5
Power to Raise Debtor’s Defenses
Bankruptcy trustee can raise any defenses the debtor may have such as:
Statute of limitations
Statute of fraudsSlide6
Power of any actual unsecured creditor
Moore v. Bay
–
1931 United States Supreme CourtTrustee’s recovery is not limited to the amount of the unsecured creditor’s claim.Slide7
Preferences
Debtor cannot prefer one creditor over another.
Creditors cannot be overly aggressive.Slide8
Preferences
1. Transfer by debtor
Includes grant of security interest.Slide9
Preferences
2. For preexisting debt
Not a new debt.Slide10
Preferences
3. Within 90 days of filing the bankruptcy petition
One year if transfer is to an insider (e.g., relative, partner, corporate officer)Slide11
Preferences
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.Slide12
Preferences
5. Debtor insolvent at time of transfer
Presumed within 90 days before
filing.Slide13
Preferences -- Exceptions
1. Contemporaneous exchange
New value given for item.
Perfection of new value within 30 days of attachment.Slide14
Preferences -- Exceptions
2. Ordinary course debt payments
Utility bills
Paying ordinary debts (even secured ones)Slide15
Preferences -- Exceptions
3.
PMSI
Perfected within 30 days of debtor receiving possession.Slide16
Preferences
Problem 362 – p. 979
June 8
$80,000 loan
$100,000 collateral
July 18
Perfection
July 19
Bankruptcy filingSlide17
Preferences
Problem 363 – p. 979
Nov. 1
value
Security agreement
Nov. 15
Rights
Attachment
Dec. 6
Bankruptcy filing
Dec. 5
FilingSlide18
Preferences
Problem 364 – p. 979Slide19
Floating Liens
[amount unsecured 90 days before filing]
minus
[amount unsecured at time of filing]
equals
preferenceSlide20
Floating Liens
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. 981Slide21
Fraudulent Conveyances
Under federal or state law.
Actual intent to defraud
Debtor receives less than reasonably equivalent valueProblem 366 – p. 989Slide22
Judicial Liens
Judicial liens within 90 days of bankruptcy filing are preferences and trustee has priority.Slide23
Statutory Liens
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.