Download Bankruptcy - Professor Beyer


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
July 19
Perfection Bankruptcy filing

Problem 363 – p. 979
Nov. 1
value
Security agreement
Nov. 15
Rights
Attachment
Dec. 5
Filing
Dec. 6
Bankruptcy filing

Problem 364 – p. 979
[amount unsecured 90 days before filing]
minus
[amount unsecured at time of filing]
equals
preference
Preference =
Amount of
debt 90
days before
filing
Value of
collateral
90 days
before filing
• Problem 365 – p. 981
Amount
of debt
at time
of filing
Value of
collateral
at time
of filing

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.