business law chapter 27 and 28

a person who has an ownership or other interest in the collateral and owes payment of a secured obligation

• a person in whose favor a security interest is created or provided under a security agreement.
• THE CREDITOR

an interest in the collateral, such as personal property or fixtures, that secures payment or performance of an obligation

an agreement that creates or provides for a security interest. its a paper you sign to ensure the security interest.

the property that is subject to a security agreement.

the record of an initial financing statement or filed record relating to the initial financing statement. it has given public notice of its security interest in the collateral.

1.A written security agreement

qRequirements

qClearly describe the collateral subject to the security interest

qDebtor must promise to repay the creditor

qDebtor must sign the agreement

qMust set forth creditor’s rights upon debtor’s default

qException (no security agreement required) – Creditor is in possession of the collateral

the secured party must give something of value to the debtor

the debtor must have "rights" to possession in the

occurs when a seller sells goods to a buyer on credit and retains a security interest in the goods.

Occurs when a seller sells goods to a buyer who has obtained financing from a third-party lender who takes a security interest in the goods sold

A situation in which a creditor has an enforceable security interest against a debtor and can satisfy the debt out of the designated collateral.

A security agreement may provide that the security interest attaches to property that was not originally in the possession of the debtor when the agreement was executed. This interest is usually referred to as a floating lien. A floating lien can attach to after-acquired property, sale proceeds, and future advances.

debtor acquires after the security agreement is executed and can still be possessed by the creditor

if you buy a car from a dealer that has defaulted on its loan, the creditor cant take your car but can take the money made on the car

Funds advanced to a debtor from a line of credit secured by collateral. Future advances are future withdrawals from a line of credit.

Example A technology company establishes a $1 million line of credit at a bank and pledges its patents as security for loans taken against the line of credit. The com-pany borrows $600,000 against the line of credit. The loan is secured by the patents. The technology company pays back the $600,000. Subsequently, the company bor-rows $500,000 against the line of credit. This loan is secured by the patents.

filed to perfect a secured credit

creditor obtains physical possession of the collateral

Creditor extends credit to a debtor to purchase consumer goods and obtains a security interest in the goods.

• secured is higher than unsecured
• competing unperfected security interests- first to file
• perfected beats secured claims
• competing perfected- first to filed
• competing secured- first to attach

ability to acquire back the collateral

• Preposition counseling within
• 180 days prior to filing a petition for bankruptcy
• Types of credit,
• use of credit, and budget analysis.

• Before chapter 7 or chapter
• 13- post-petition counseling

A document filed with a bankruptcy court that starts a bankruptcy proceeding

• Petition
• filed by a debtor that states that the debtor has debts

• Petition
• filed by creditors of a debtor that alleges that the debtor is not paying debts
• as they become due

qSome property received within 180 days after filing the petition is also included in the bankruptcy estate

qBankruptcy court can void fraudulent transfers

qPreferential transfers within 90 days before bankruptcy occurs when:

qA debtor transfers property to a creditor within 90 days before the filing of a petition in bankruptcy

qPreferential transfers to insiders may be voided within one year before filing

qOrdinary course of business payments?

• liquidation
• the debtor is permitted to keep a substantial portion of his or her assets (exempt assets); the debtor’s non-exempt property is sold for cash, and the cash is distributed to the creditors; and any of the debtor’s unpaid debts are discharged. The debtor’s future income, even if the debtor becomes rich, cannot be reached to pay the discharged debt. Thus, a debtor would be left to start life anew, without the burden of the prepetition debts

A bankruptcy rule that states that if a debtor’s median family income is at or below the state’s median family income for a family the same size as the debtor’s family, the debtor can receive Chapter 7 relief.

Assume that a state’s median income for a family of four is $75,000. If the median income of the debtor’s family of four is $60,000, the debtor quali-fies for Chapter 7 bankruptcy relief.

A bankruptcy rule that applies to a debtor who has a median family income that exceeds the state’s median family income for families the same size as the debtor’s family. A debtor in this category qualifies for Chapter 7 bankruptcy if the debtor has disposable income below an amount determined by bankruptcy law, but does not qualify for Chapter 7 bankruptcy if he or she has disposable income above an amount determined by bankruptcy law.

• adjustment of debts of an individual with regular income
• A rehabilitation form of bankruptcy that permits bankruptcy courts to supervise the debtor’s plan for the payment of unpaid debts in installments over the plan period.