encumbrance (claim upon) on property to satisfy a debt or protect a claim for the payment of debt
lien for labor, materials, or service on real estate.
lien for labor and materials on personal property (watch, ring, etc)
lien that arises out of a court decision
Writ of Attachment
court orders sheriff to seize non-exempt property
Writ of Execution
court order to seize and sell debtor's non-exempt real and personal property to satisfy debt
Permits a creditor to collect a debt by seizing property of the debtor held by a third party
Creditors' Composition Agreements
Creditors take less than owed on a liquidated debt, binding on those who agree because consideration given by each depending on one another
Promise by a third person to be primarily liable for the debtor's obligation to the creditor, creditor need not exhaust all legal remedies against the debtor before holding the surety responsible
third person making the guaranty is secondarily liable, have to go after debtor first and exhaust efforts
Right of Subrogation
Any right the creditor had against the debtor becomes the right of the surety—creditor rights in bankruptcy, rights to collateral possessed by the creditor, and rights to judgments secured by the creditor
Right of Reimbursement
The surety is entitled to receive from the debtor all outlays made on behalf of the suretyship arrangement
Right of Contribution
A surety who pays more than his or her proportionate share on a debtor's default is entitled to recover from the co-sureties the amount paid above the surety's obligation
permits a debtor to retain all or part of the family home free from the claims of unsecured creditors or trustees in bankruptcy, must have lived in state for two years, maximum of $146,450
Bankruptcy law primarily deals with which type of law?
referred to as ordinary or straight bankruptcy, debtor turns all assets over to the bankruptcy trustee, trustee sells nonexempt property and distributes the proceeds to the creditors, remaining debts are discharged
any person, corporation, or partnership
Who is chapter 7 available for?
If a debtor files the petition, it is ________
If creditors file a petition, it is ________
Prior to filing, debtor(s) must receive credit counseling within ______ of filing, and submit certificate
substance abuse and means test
used to determine whether debtor's petition will be dismissed under Chapter 7
granted upon filing a petition, protecting debtor from all creditors, creditors can't call or try to collect debts
a person appointed by Court whose duties include collecting assets and paying creditors in order of priority
estate in property
consists of all the debtor's legal and equitable interests in property
strong-arm, avoidance, and right to the possession of the debtor's property
What are the trustee's 3 powers?
Debtor is not permitted to transfer property or make a payment that favors one creditor over another within the previous 90 days
How long does the avoidance power of a trustee extend for preferences to insiders?
domestic support obligations
What is the top unsecured creditor?
objections to discharge
Court may deny claims based on debtor's conduct
exceptions of discharge
A discharge of a debt may be denied under certain circumstances
Reaffirmation of Debt
Debtor agrees to pay a debt in bankruptcy before discharge, disclosure required
corporations and other legal entities
Who is chapter 11 bankruptcy for?
chapter 11 bankruptcy
Debtor and Creditors formulate a plan under which the Debtor pays a portion of its debts and is discharged of the rest, fast-track for small businesses
Private negotiation of creditor-debtor relations
Debtor in Possession (DIP)
The debtor's business operates under court supervision, has same powers as trustee, but court may appoint trustee (receiver) with 'strong arm' powers
chapter 13 bankruptcy
For individuals with regular income who owe fixed unsecured debts of <$360,475 or fixed secured debts of <1,081,400, good faith requirement
cram down provision
courts can confirm a chapter 11 plan even when only one class has accepted it
only the debtor
Who can initiate a chapter 13 case?
there must be a written agreement, creditor must give value to the debtor; and the debtor must have rights in the collateral
What three things need to be present for the creation of a security interest (to attach)?
protects a security interest against some claims of third parties who may wish to have their debts satisfied out of the same collateral
filing a financing statement
What is the most common method for perfecting a security interest?
signed by the debtor, contain the addresses of debtor and creditor, and describe collateral by type or item
What three things must a financing statement do?
perfection by possession and perfection by attachment
What are the two ways to perfect without filing?
5 years (can be renewed)
How long is a filing statement effective?
property acquired after the execution of a security agreement (ex. inventory)
A secured party can take possession of collateral on default unless the security agreement states otherwise, as long as there is no breach of the peace
retain, sell, lease, or dispose of
What can a creditor do with the collateral after default?
reasonable expenses, the balance of the debt, subordinate security interests, and surplus to the debtor
What order are proceeds from the sale distributed in?
central state government office (usually secretary of state)
Where do you file a financing statement?
at the time of credit sale, unless certificate of title is required (PMSI)
When is there automatic perfection?
Purchase Money Security Interest
What does PMSI stand for?
security interest in proceeds, after-acquired property, or in collateral subject to future advances
Who wins for Secured vs. unsecured creditors?
Who wins for Perfected secured vs. unperfected secured creditor?
first in time
Who wins for Secured creditor vs. secured creditor?
Who loses when Buyer not in the ordinary course of the Seller's business?
Who wins for Buyer in the ordinary course of the Seller's business?
Buyers in the Ordinary Course of Business
Buyer in good faith and without knowledge of defects, takes goods free of security interest
requesting to release financing statement to release collateral, for consumer debts, must file within one month or when request in writing, must file within 10 days of receipt of request, whichever is earliest
Difference between sale and what is actually owing by debtor, must be paid by debtor
Debtor or other secured party to retake and maintain the collateral
initial sales of stock
What does the securities act of 1933 govern?
instruments such as corporate stock or limited partnership interests that evidence ownership or debt
Document that describes the security being sold, the financial operations of the issuing corporation, and the investment or risk in the security
well-known seasoned issuers
a firm that has issued at least $1 billion in securities in the previous three years or has at least $700 million of value of outstanding stock in the public's hands. This issuer can offer securities for sale without waiting for SEC review and approval of the registration statement
Regulation A offerings
An issuer's offer of up to $5 million in securities to test the waters in any twelve-month period is exempt. Must have a circular
Noninvestment company offerings up to $1 million in a twelve-month period are exempt
Private, noninvestment company offerings up to $5 million in a twelve-month period are exempt if— • No general solicitation or advertising is used. • The SEC is notified of the sales. • Precaution is taken against nonexempt, unregistered resales. • There are no more than thirty-five unaccredited investors.
Private—nonpublic and not generally advertised—offerings in unlimited amounts are subject to essentially the same requirements as Rule 505, except— • There is no limit on the amount of the offering and • The issuer must believe that each unaccredited investor has sufficient knowledge or experience to evaluate the investment
safe harbor rules
Most securities can be resold without registration (rule 144 and 144a)
resale of securities
What does the securities exchange act of 1934 govern?
Section 10(b) and Rule 10b-5
prohibit fraud in connection with the purchase or sale of a security
(1) invests (2) in a common enterprise (3) reasonably expecting profits (4) derived primarily from others' managerial or entrepreneurial efforts
What are the four characteristics of securities (The Howey Test)?
time when issuer cannot offer or sell securities.
time when securities can be offered by not sold
registration effective 20 days after approval
prohibits the use of any manipulative or deceptive device or contrivance in contravention of rules and regulations of SEC
prohibits the commission of fraud in the connection with the purchase or sale of any security
advance information available to corporate officers and directors that can affect future value of stock
Anyone who acquires inside information as a result of a corporate insider's breach of his or her fiduciary duty can be liable under Rule 10b-5
if an individual misappropriates inside information and trades on it to personal gain, the individual is liable, as long as a fiduciary duty has been violated and harm to the defrauded party has occurred
an intent to defraud or knowledge of the misconduct—false statements, a wrongful failure to disclose material facts, or recklessness as to the truth or falsity of statements
the system by which business corporations are governed and controlled
The Sarbanes-Oxley Act
This act attempts to increase accountability by imposing stricter disclosure requirements and harsher penalties for violations of securities laws
no fault or scienter required (16b)
CEO and CFO
Who must now certify the financial statements?
YOU MIGHT ALSO LIKE...
Series 7 Top-Off Exam Preparation | Knopman Marks Guide