Bankruptcy-Law-Ayer-Sp06 - Bankruptcy Prof Ayer Spring 2006...

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Bankruptcy Prof. Ayer Spring 2006 1
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Prof. Ayer Spring 2006 Part I: Non-Bankruptcy Remedies and Bankruptcy Basics Unit I: Non-Bankruptcy Remedies, Priorities, and Secured Creditors 1) Non-Bankruptcy Remedies. BK law is only one way for creditors and debtors to adjudicate their legal rights. Bk law still looks to non-Bk remedies under Butner . 2) Non-Bankruptcy General Creditor Rights. State laws vary, but this is a good overview. a) General creditor – Creditor whose extended credit is not secured by other consideration. b) Non-judicial recourse for non-payment: i) Send another bill ii) Stop shipment iii) Discount claim and sell to collection agency c) Judicial remedies i) Priority - Creditor wants to have priority over other creditors. (1) Prejudgment – creditor might try to get this to ensure future assets will be available in the event of judgment. Establishes priority over other creditors (2) Lawsuit – If no prejudgment then lawsuit is next step to gain priority and payment d) Judgment – commands debtor to pay creditor. Judgment is docketed and depending on type of property, creditor has various claims e) Lien – judgment establishes a lien. Gives creditor a right to go after property and priority over all those who acquire later liens or property. f) Types of property and creditor’s claim i) Land – Record interest in public records ii) Personal – Need only take physical possession. (1) Docketing judgment gives creditor a “write of execution.” Directs sheriff to seize and sell property. (2) Garnishment – way for creditor to reach a bank account. iii) Fixtures – Goods attached to real property. Treated as real property. g) Problems for creditor i) Used goods sell at a discount ii) Sheriff does not have incentive to get best price. iii) Home equity is often insulated by state law. iv) Federal law limits extent which creditor can garnish wages (Consumer Credit Protection Act). v) Property may have been transferred by debtor to 3rd party – law of fraudulent transfer may apply. 3) Priorities: Claims Amongst Creditors (the Eternal Triangle) a) Eternal Triangle. Represents the entire Bk course. Essentially debtor owes creditors and there is not enough to go around. In this situation, have to establish which creditor will get first shot at the debtor’s assets, and also whether such creditor will take all or a pro rata share of those assets. b) Fraudulent Transfer. Deals with situation where transferor actively intended to “hinder, delay or defraud” creditors. In this case creditors may render such a transaction null, and thus reach the property through the initial transferee. Twyne’s Case deals with this situation. Today fraudulent transfer law is codified. 2
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This note was uploaded on 04/04/2008 for the course LAW ALL taught by Professor Multiple during the Fall '06 term at NYU.

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Bankruptcy-Law-Ayer-Sp06 - Bankruptcy Prof Ayer Spring 2006...

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