Bankruptcy Creditors’ Rights and Debtors’ Protection, Bankruptcy and Secured Transactions

1. BankruptcyCreditors’ Rights and Debtors’ Protection, Bankruptcy and Secured Transactions Entrepreneur Law Massachusetts School of Law Spring 2012

2. Key Terms This Week • Surety: a person who has expressly or implicitly agreed to be liable for another’s debts even if the creditor has not exhausted all remedies for collection. • Guarantor: a person who has expressly or implicitly agreed to be liable for another person’s debts if the creditor cannot collect directly from the debtor.

3. Key Terms - Continued • Bankruptcy: a legal procedure for settling the debts of individuals or business entities that are unable to pay debts as they become due. The debtor’s business may be reorganized; a set payment may be arranged, or the debtor’s nonexempt assets may be liquidated and distributed to creditors. Proper completion of the bankruptcy procedures leaves free from liability on some or all of the remaining debts. • Secured Transaction: any transaction involving a security interest, which generally is an interest in the debtor’s personal property (or fixtures). The security interest is held by the secured party (the creditor) as a means to ensure payment or performance of the debtor’s obligation.

4. Creditor’s Rights: Collection of Debts • Debt Collection Mechanisms: 1. Place lien on debtor’s property 2. Obtain a prejudgment attachment 3. Take a security interest in the debtor’s property 4. Recover the debt before or during the course of a bulk transfer 5. Proceed against property fraudulently conveyed to a third party.

5. Collection of Debts - Continued • Seek payment from a surety or guarantor, who has expressly or implicitly agreed to be liable for the debts of the person or entity • Foreclose on real property • Obtain a writ of execution or garnishment 9. When there are two or more creditors, accept a composition and/or extension agreement or an assignment to a trustee

6. Protection for Debtors • Exemption Statutes • Limits on Garnishment • Consumer Protection Statutes • Lender Liability

7. Bankruptcy and Reorganization

8. Bankruptcy Code • Chapter 7 • Chapter 11 • Chapter 13

9. Bankruptcy - Continued • Procedure and Exemptions • The Trustee’s Role in Bankruptcy • Nondischargable Debts • Denial of Overall Discharge • Limits on Discharge

10. Secured Transactions • Introduction • Pledge • Security Interest • Collateral • Attachment • Perfection

11. Rights and Duties of Secured Parties and Debtors • What is a default? • Rights and duties before default • Rights and duties after default • Special provisions if the secured party chooses to keep collateral • Sale of the collateral

12. Rights and Duties of Secured Parties and Debtors - Continued • Termination Statement • Priority of Creditors

13. Priority of CreditorsGeneral Rules

14. Priority of CreditorsPMSI and Crop Exceptions to “First to Perfect” Rule

15. Priority of CreditorsLien Creditors

16. Priority of CreditorsOther Exceptions to “First to Perfect” RulePurchasers of the Debtor’s Collateral and Trustees in Bankruptcy

17. Priority of CreditorsOther Exceptions to “First to Perfect” RulePurchasers of the Debtor’s Collateral and Trustees in Bankruptcycontinued

18. Priority of CreditorsOther Exceptions to “First to Perfect” RuleFixtures to Real Estate and Accessories to Personal Property