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Name 7 credit systems and their case examples
- Home mortgages- nationstar
- Commercial mortgages- City Sav. Bank
- Consumer personal property- Walker-Thomas Furniture
- Business Personal property- Comark
- Federal tax liens- Vogt
- attorney statutory and retaining liens
- judgment liens- johnson
Name the 4 types of bankruptcy
- Chapter 7- liquidation
- Chapter 11- reorganization business
- Chapter 12- reorganization farming
- Chapter 13- reorganization Individuals
What are the 3 main properties of Chapter 7?
- 1. Individuals
- 2. Certain property exempted according to state law
- 3. debtor discharged of personal liability on all or most prebankruptcy debts
What are the 4 main points of Chapter 11?
- 1. Primarily businesses
- 2. debtor proposes plan for paying creditors
- 3. plan generally must be accepted by creditors and stockholders
- 4. Upon "confirmation," debtor discharged of preconfirmation debts
What are the 2 main points of Chapter 12?
- 1. family farms
- 2. permits restructuring debts in bankruptcy while continuing to operate farms
What are the 3 main points of Chapter 13?
- 1. Individuals with regular income and debts below set levels
- 2. plan formulated to pay some or all debts from earnings
- 3. debtor discharged without losing nonexempt property
What are the 5 main things covered by the automatic stay?
- 1. Act to create, perfect, or enforce any lien against debtor's property
- 2. Action to obtain possession of debtor's property
- 3. Informal acts to collect a prebankruptcy debt (collection letters or phone calls)
- 4. enforcement of prebankruptcy judgment against debtor or debtor's property
- 5. judicial proceedings to recover prebankruptcy claim against a debtor
Main code section for default
9-601(a)- after a default, a SP has the rights provided in (article 9 and otherwise enforce its security agreement) and those provided by agreement of the parties
What 4 hypothetical examples of default?
- 1. Failure to pay principal or interest when due
- 2. Failure to perform or observe any of the terms of the agreement
- 3. Any financial statement is incorrect in any material respect
- 4. the debtor files for bankruptcy
What is an acceleration clause?
SP forcing debtor to instantly be owe the full amount of the debt upon default
- Ex. §
- Upon the occurrence of an event of default and
- upon written notice to the borrower, declare the entire indebtedness under this
- loan agreement is immediately due and payable in full
What is waiver in terms of default? (code section, case example)
The SP waiving the default based upon actions after default
Comment 3 to 9-601- depends on parties' agreement and supplemented by law other than this article
Moe v John Deere Co.
What is main code section for repossession?
What are the two options proposed in 9-609?
- repossession with judicial process
- repossession without judicial process- if it proceeds without breach of the peace
What are the 5 code stipulations for breach of peace?
- 1. 9-625(b)- liable for damages in the amount of
- any loss caused by failure to comply with article 9
- 2. 9-625(c)- consumer goods, may recover for
- 3. 9-602- may not waive 9-609 (breach of peace)
- 4. 9-603- may determine by agreement, rights of debtor and SP
- 5. Comment 3- can’t use police force without
- judicial process
What is one case on breach of peace?
Williams v Ford Motor Credit
What are the SP's options after default in regards to disposition of collateral? (code section)
- 1. Accept collateral in satisfaction of the debt
- 2. Judicial foreclosure
- 3. Extra-judicial foreclosure
9-610(a)- after default, a SP may sell, lease, license, or otherwise dispose of any or all of the collateral in present condition or any commercially reasonable prep
What are the 4 main code sections for notification?
What is 9-611(b)?
shall send to persons a reasonable authenticated notification of disposition
Who must the SP notify under 9-611(c)?
- secondary obligor
- any other person who SP of a claim to the collateral
- any other SP with collateral perfected by FS
What is the commercial standards for notification under 9-613?
- -whether notice is sufficient is a question of fact
- -notice can be sufficient even with errors that are not seriously misleading
- -no comparable requirement
What must be notified to the consumers under 9-614?
- -for notice to be sufficient, must contain specified info
- -excuses errors only if they concern info that is not requried
- -requires a description of any liability of the debtor for a deficiency
What is the definition of commercially reasonable in 9-610(b)?
-every aspect of the disposition of collateral must be commercially reasonable including method, manner, time, place, and other terms
What are the two types of proceedings to dispose of collateral?
Public and Private
What are the two stipulations of a public sale?
- 1. Notice must state the time and place of sale
- 2. The SP may purchase the collateral
What are the two stipulations for a private sale?
- 1. Notice need only state the time after which the sale will be made
- 2. the SP may not purchase the collateral
What is marshalling?
- 1. an exception to the security interest in the collateral
- 2. If two or more creditors are owed from a debtor, one creditor can force the other creditor to take funds from the collateral which the first creditor does not have a security interest in
What are the three safe harbors for commercial reasonableness provided in 9-627?
- (a)- higher amount could have been obtained is not itself sufficient to preclude commercial reasonableness
- (b)- conformity with reasonable commercial practice among dealers in the type of property
- (c)- commercially reasonable if sale is approved by court or creditors' committee
What does comment 2 to 9-627 state about a low price?
While not itself sufficient to establish a violation of this Part, a low price suggests that a court should scrutinize carefully all aspects of a disposition to ensure that each aspect was commercially reasonable.
What does 9-615(d) state about liability for deficiency?
-SP shall pay debtor any surplus and obligor is liable for any deficiency
What is the rebuttable presumption rule in 9-626?
- 1. Debtor must contend sale was not commercially reasonable
- 2. SP has burden of proving sale was commercially reasonable
- -If yes, SP entitled to deficiency
- -if No, SP has burden of proving what would be commercially reasonable
- ---if does so, SP entitled to deficiency from new commercially reasonable standard
- ---if not, SP not entitled to deficiency
What are some preliminary changes of bankruptcy?
- -nomenclature change- holders of security interest instead of secured parties
- -holder is asserting a right to specific property
How is secured status defined in BC 506(a)(1)?
- -secured claim to the extent of the value of such creditor's interest in propery
- -unsecured claim for the rest of that interest if collateral's value does not satisfy that interest amount
What option to provided to the trustee in BC 554(a)?
-trustee can abandon the property from the estate
What are the trustee's duties under BC 704(a)(1)?
trustee shall collect and reduce the money/property of the estate of which such trustee serves
What option is provided in BC 362(a)?
What right is provided to the debtor in 9-624?
right to redeem collateral
What are two types of loans?
- 1. Non-recourse loan- lender's recovery is limited to the value of the collateral; the borrower is not personally liable
- 2. recourse loan- the value of the collateral is not sufficient to repay the laon, the borrower is personally liable for the deficiency
Under Chapter 7, what are the trustee's three options if debtor does not want to keep the property? (code sections)
- T sells- BC 363(f)
- T lifts stay- BC 362(d)
- T abandons- BC 554(a)
Under chapter 7, what are the trustee's two options if the debtor wants to keep the property?
- D redeems- 9-623(b)
- D reaffirms-
- no ride through
What are the 4 bankruptcy code sections for consumers under chapter 13?
- BC 506(a)(2)
- BC 1325(a)
- BC 363(e)
- BC 542(a)
What does BC 506(a)(2) state? (exception)
value with respect to personal property securing an allowed claim shall be determined based on the replacement value of such property
exception- motor vehicles under BC 1325(a)
What is court authority for dealing with chapter 13 bankruptcies?
BC 363(e)- on request of an entity that has an interest in property used by the trustee, the court shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest
Describe BC 542(a)
an entity in possession of property that the trustee may use shall deliver to the trustee and account for such property
What privileges are granted to business debtors under BC 1107(a)?
debtor in possession shall have all the rights and powers, and shall perform all the functions and duties of a trustee
What a debtor's plan options under BC 1121?
- 1121(a)- the debtor may file a plan at any time
- 1121(b)- only the debtor may file a plan until after 120 days
- 1121(c)- others may file if the debtor has not filed a plan that has been accepted before 180 days.
What are the requirements of a plan and the court under BC 1129?
- 1129(a)- each holder of a claim or interest of such class has accepted the paln
- 1129(b)(1)- court confirm if it does not discriminate unfairly, is fair and equitable
What is cramdown?
the involuntary imposition by a court of a reorganization plan over the objection of some classes of creditors
What are the 3 cramdown options under BC 1129(b)(2)(a)?
- 1. secured creditors retains its lien on the property and receives deferred cash payments OR
- 2. debtor sells the property free and clear of the lien, "subject to section 363(K)"- which permits the creditor to credit-bid at the sale and provide the creditor with a lien on the sale proceeds OR
- 3. the plan provides the secured creditor with "indubitable equivalent" of its claim
What are the requirements for confirming a plan under 1325 for valuing collateral in bankruptcy?
- 1. holder accepts plan under (A) OR
- 2. debtor surrenders collateral to holder under (C) OR
- 3. "cramdown" allowed under (b) where:
- -debtor keeps the collateral over the creditor's objection AND
- -debtor provides the creditor, over the life of the plan, with the equivalent of the present value of the collateral
What does BC 506(a)(2) state about value?
replacement value shall mean the price of a retail merchant would charge considering the age and condition of the property at the time value is determined
Main requirements for attachment under 9-203(b)
- 1. Value is given
- 2. Debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party
- 3. one of the following conditions is met
What is one of the conditions listed under 9-203(b)(3)(A)
Debtor has authenticated a security agreement that provides a description of the collateral
What does authenticate mean?
- -to sign OR
- -electronic sound, symbol, or process
What are the requirements for the record under comment 9 to 9-203
record need not be permanent or indestructible, but the term does not include any oral or other communication that is not stored or preserved by any means. Must be stored on some medium
What is the composite document rule? (case)
- In re Bollinger
- -documents in conjunction with each other create the security agreement
- -ex. promissory note combined with FS will serve as security agreement
read problem p28-29 for description of collateral
What does 9-204(a) state about after-acquired collateral?
- -security agreement may create or provide for a security interest in an after-acquired collateral
- -(b)(1)- no security interest in consumer goods from after-acquired security clause
What are the relevant code sections for proceeds?
What does 9-203(f) state about proceeds?
-attachment of a security interest in collateral gives the secured party the rights to proceeds AND also attachment of a security interest in "supporting obligation" for the collateral
What does 9-315(a)(2) state about proceeds?
9-315(a)(2)- security interest attaches to any identifiable proceeds of collateral
What are three type of proceeds under its definition?
- (A)- whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral
- (D)- claims arising out of the loss or damage to the collateral
- (E)- insurance payable by reason of loss or damage to the collateral
What is a supporting obligation? (code section)
9-102(a)(78)- "supporting obligation" means a letter-of-credit right or secondary obligation that supports the payment or performance of an account
What is value? (code sections)
- 9-102(a)(57)- "new value" means money's worth in property, services, or new credit
- 1-204- a person gives value for rights if the person acquires them
What is "rights in collateral?" (code section)
comment 6 to 9-203- a debtor's limited rights in collateral, short of full ownership, are sufficient for a security interest to attach
What are the 5 methods of perfection?
- -compliance with other law
What are 3 relevant code sections for perfection?
- 9-308- a SI is perfect if it has attached and all of the applicable requirements for perfection have been satisfied 9-310 thru 9-316
- 9-310- minus exceptions, a FS must be filed to perfect all security interests
- 9-502(d)- a FS may be filed before a security agreement is made or a SI otherwise attaches
What code section states that you should file in the secretary of the state? What code section states the definition of a FS?
What does 9-509(B)(1) state about filing?
- by authenticating or becoming bound as debtor by a security agreement, a debtor or new debtor authorizes the filing of an initial FS
- -comment 4- ipso facto- authorization
What code section govern the filing office?
9-516 thru 9-520
What are the 5 main points for initial FS?
- 1. effective for 5 years (9-515(a))
- 2. safe harbor form (9-521(a))
- 3. debtor must authorize filing (9-509(a))
- 4. debtor's signing security agreement automatically authorizes filing (9-509(b))
- 5. Unauthorized filings
- -not effective (9-510(a))
- -liability for making (9-625)
What are the 5 types of filings?
- 1. initial
- 2. amendment
- 3. continuation
- 4. termination
- 5. information statement
What code section is relevant for assignments?
9-310(c)- if a SP assigns a perfected security interest, a filing is not required to continue the perfected status of the SI
What are the 2 steps for making a FS effective?
- 1. Meet "sufficiency" requirement
- 2. file with office
What are the requirements for sufficiency for a FS?
- -provides name of the debtor
- provides the name of the SP
- indicates the collateral covered by the FS
What are the requirements for a FS under 516(b)?
- -mailing address of the debtor
- -whether debtor is individual or organization
What are the 4 situations of filing a FS in the secretary of state office?
- Complies with 516 and SOS accepts- effective 9-516(a))
- complies with 516 and SOS rejects- effective except relying purchasers (9-516(d))
- no compliance, but SOS accepts- effective except against parties protected by 9-338
- if no and SOS rejects- not effective 9-516(a)
What is the exception in 9-507(b)?
FS is not rendered ineffective if, after the FS is filed, the info provided in the FS becomes seriously misleading under 9-506
What is required for the indication of original collateral?
9-504- covers if FS provides (2) indication that the FS covers all assets or all personal property
What does 9-315 state about indication of proceeds?
- 9-315(d) becomes unperfected on 21st day unless:
- -(1) following conditions are satisfied
- ---(A)- filed FS covers the original collateral
- ---(B)- are collateral that may be perfected in
- same office
- ---(c)- the proceeds are not acquired with cash proceeds
- -(2) identifiable cash proceeds
- ---9-102(a)(9)- money, checks, deposit accounts or the like
- -(3) SI in proceeds perfected other than under 9-315(c)
What are the two relevant code sections for the name of the debtor on the FS?
- 9-519(c)(1)- index by name of the debtor
What does 9-506 state about debtor's name on a FS?
- 9-506(a)- FS is effective, even if it has minor
- errors or omissions, unless seriously misleading
- 9-506(b) no name of debtor is seriously
- 9-506(c)- if a search, using the filing office’s
- standard search logic, if any, would disclose a financing statement, the name provided does not make the FS seriously misleading
What are the 4 code sections for post-filing changes?
- 9-507- a filed FS remains effective with respect to collateral that is sold or otherwise disposed of
- 9-316(a)(3)- a SI remains perfected until the
- expiration of one year after a transfer of collateral to a person located in another jurisdiction
- 9-507(b)- a FS is not rendered ineffective if,
- after the FS is filed, the info provided in the FS becomes seriously misleading
- ---Except 9-507(c)- now insufficient name, 4 months after becoming seriously misleading to file FS
- 9-508- a filed FS naming an original debtor is
- effective to perfect a security interest in collateral in which a new debtor has or acquires rights
What is the relevant code section for perfection by possession?
What types of collateral can be perfected by control?
deposit accounts, investment property, electronic chattel paper, letter-of-credit rights
What does comment 7 to 8-106 state about perfection by control?
purchaser has the ability to have the securities sold or transferred without action by the transferor
What does 9-320(b) state about security interest in consumer goods?
a buyer of goods from a person who used or bought the goods for use primarily for personal purposes takes free of a security interest, even if perfected and before filing of a FS covering the goods
What is the relevant code section for choice of law?
- (1)- where debtor is located
- (2)- where collateral is located
Where is choice of a law for a registered organization?
9-307(e)- a registered organization that is organized under the law of a state is located in that state
Where is choice of law for titled goods?
9-303- local law of the jurisdiction under whose certificate of title that goods are covered governs perfection
Where is choice of law when a debtor's location changes and how long is the FS still sufficient?
- 9-316(a)(2)- a SI perfected remains perfected until the earliest of the expiration of 4 months after a change of the debtor's location to another jurisdiction
What are two relevant code sections for the first to file rule?
- 9-201(a)- a SA is effective according to its terms between parties, against purchasers of
- the collateral, and against creditors
9-322(a)(1)- conflicting perfected security interests rank according to priority in time of filing or perfection
Is there difference for first to file for filing vs perfection?
- Can be either filing first or perfection first
- Ex. problem- bank #1 wins for filing first even though second to make security agreement
What is the relevant code section for future advances?
9-204(c)- a security agreement may provide that collateral secures future advances
comment 7- there is no need to refer to future advances in a FS
what is a policy argument for the first-to-file rule?
comment 4 to 9-322- the justification for determining the priority by order of filing lies in the necessity of protecting the filing system, that is, of allowing the first secured party who has filed to make subsequent advances without each time having to check for subsequent filings as a condition of protection
How does the first-to-file rule work with assignments and requests for accounting?
9-310(c)- if a SP assigns a perfected security interest, a filing is not required to continue the perfected status of the security interest
9-210(a)(4)- request for accounting of a specified date
What are the two types of Purchase-Money security interests?
- 9-103(a)(2)- obligation of an obligor incurred
- -seller- as all or part of the price of the collateral
- -lender- for value given to enable the debtor to acquire rights in, or the use of the collateral if the value is in fact so used
What powers does 9-324(a) give for PMSI?
- (a)- a perfected PMSI in goods has priority over a conflicting security interest in the same goods if perfected when the debtor receives possession of the collateral or within 20 days thereafter
- (g)- seller has priority over lender
What is the definition of a "general intangible"
9-102(a)(42)-comment 5- is the residual category of personal property that is not included in the other defined types of collateral including things in action
What is the exception for filing stated in 9-311(a)(1)
the filing of a FS is not necessary or effective to perfect a sI in property subject to a statute of the US
What are the three relevant cases for Copyrights?
- 1. In re Peregrine Entertainment
- 2. Broadcast Music v Hirsch
- 3. In re World Auxiliary Power Co
What is the relevant code section and case for Trademarks?
15 U.S.C. 1060(a)(1)- an assignment shall be void against any subsequent purchaser unless the prescribed info reporting the assignment is recorded in the US Patent and Trademark office
In re Together Development Corporation
What is the relevant case and code section for Patents?
- In re Cybernetic Services
- 35 U.S.C. 261- an assignment shall be void as against any subsequent purchaser or mortgagee unless it is recorded
What is special about software?
Some software is copyrighted and some is patented
What power is granted in 9-408(a)?
a term in a promissory note or in an agreement that relates to a general intangible, including a license which term prohibits, restricts, or requires the consent to the creation of a security interest is ineffective
What is the code compromise for software?
on the one hand, not going to allow Developer to completely tie up the software to not allow it to be used as collateral, but the developer is entitled to some interest. If you get to the end of the line in bankruptcy, the secured party is entitled to the value of that asset
How do you attach a security interest for investment securities?
9-203(b)(3)(C)- the collateral is a certificated security in registered form and has been delivered to the SP pursuant to the debtor's security agreement
(D)- the collateral is investment property and the SP has control pursuant to the debtor's security agreement
How do you perfect an interest in investment securities?
- 9-314(a)- may be perfected by control of the collateral
- 9-312(a)- a SI in investment property may be perfected by filing
What determines priority for investment securities?
- 9-328- following rules govern priority among conflicting security interests in the same investment property
- (1)- a security interest held by a SP having control has priority over a SI that does not have control
- (2)- conflicting SI held by SP each of which has control rank according to priority in time of obtaining control
- (3) a SI held by a securities intermediary in a securities account has priority over a conflicting security interest held by another SP
What is a concurrent conflict of interest?
A conflict of interest is involved if there is a substantial risk that the lawyer's representation of the client would be materially and adversely affected by (1) the lawyer's own interests or by the lawyer's duties to (2) another current client, a (3) former client, or a (4) third person.
Reasons a lawyer may not represent a client
- -representation is prohibited by law
- -one client will assert a claim against the other in the same litigation OR
- -will not likely provide adequate representation to one or more of the clients
What is the definition of substantially related?
- 1. involves the work the lawyer performed for the former client
- 2. risk that representation will involve the use of info acquired in the course of representing the former client
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