Bankruptcy Outline | Study notes Law

INTRODUCTION

I. The Federal Bankruptcy Statute

I.a. Prior to 1978, known as the “Act”

I.b. Since 1978, known as the “Code”

I.c. The Code’s main chapters:

I.i. Consumer Bankruptcy / Individual Bankruptcy

I.1. Chapter 7

I.a. Involves ﬁling, handing over all non-exempt assets to get a discharge

of all debts

I.b. A discharge of debts is unique on the earth to the US

I.c. 2005, cr. card companies lobbied to make this harder to get. Which

didn’t actually happen, but public perception was altered to make people

think it was harder to get.

I.d. 2008 – Bankruptcies are back up.

I.2. Chapter 11

I.e. Involves committing future income to a plan

I.f. Not often used by individuals

I.3. Chapter 13

I.g. Payments are made over 5 years, and all debts are discharged

I.h. You keep your stuﬀ, but commit your income to payments

I.i. Harder to get chap 13 than chap 7.

I.ii. Business Bankruptcy

I.4. Chapter 7 - Businesses can do the same as consumers (see above)

I.5. Chapter 11

I.j. Business can go forward, committing future income to a plan

I.k. Corporations are likely to use this.

I.d. “Creditors remedies” – refers to the state debt collection process.

I.e. B-judges are only bound by Circuit Court and Supreme Court opinions.

STATE REMEDIES

I. Introduction to Judgment Collection

I.a. How to Collect on a Debt

I.i. (1) Ask to get paid

I.ii. (2) Get a judgment

I.1. This declares that the money is owed

I.2. This is not an order to pay

I.3. Does not give an interest or any priority in any of the debtors

property or income

I.4. Unsecured.

I.iii. (3) Locate the Property of the Debtor

I.5. Need to get an interest in the property of the debtor

I.6. Several ways to do this:

I.a. Execution

I.b. Garnishment

I.iv. (4) Levy = the process of seizure.

I.7. The Sheriﬀ takes possession of the debtor’s property

I.8. Custodia legis = once the Sheriﬀ has seized the property, actually or

constructively, and it is in the custody of the court.

I.9. Return = the document describing Sheriﬀ’s eﬀorts to ﬁnd the

property. Nulla bona = written on the return, means the sheriﬀ did not ﬁnd any

property

I.v. (5) Sheriﬀ sells the property to pay the debt.

I.b.

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INTRODUCTION

I. The Federal Bankruptcy Statute

I.a. Prior to 1978, known as the “Act”

I.b. Since 1978, known as the “Code”

I.c. The Code’s main chapters:

I.i. Consumer Bankruptcy / Individual Bankruptcy

I.1. Chapter 7

I.a. Involves filing, handing over all non-exempt assets to get a discharge

of all debts

I.b. A discharge of debts is unique on the earth to the US

I.c. 2005, cr. card companies lobbied to make this harder to get. Which

didn’t actually happen, but public perception was altered to make people think it was harder to get.

I.d. 2008 – Bankruptcies are back up.

I.2. Chapter 11

I.e. Involves committing future income to a plan

I.f. Not often used by individuals

I.3. Chapter 13

I.g. Payments are made over 5 years, and all debts are discharged

I.h. You keep your stuff, but commit your income to payments

I.i. Harder to get chap 13 than chap 7.

I.ii. Business Bankruptcy

I.4. Chapter 7 - Businesses can do the same as consumers (see above)

I.5. Chapter 11

I.j. Business can go forward, committing future income to a plan

I.k. Corporations are likely to use this.

I.d. “Creditors remedies” – refers to the state debt collection process.

I.e. B-judges are only bound by Circuit Court and Supreme Court opinions.

STATE REMEDIES

I. Introduction to Judgment Collection

I.a. How to Collect on a Debt

I.i. (1) Ask to get paid

I.ii. (2) Get a judgment

I.1. This declares that the money is owed

I.2. This is not an order to pay

I.3. Does not give an interest or any priority in any of the debtors

property or income

I.4. Unsecured.

I.iii. (3) Locate the Property of the Debtor

I.5. Need to get an interest in the property of the debtor

I.6. Several ways to do this:

I.a. Execution

I.b. Garnishment

I.iv. (4) Levy = the process of seizure.

I.7. The Sheriff takes possession of the debtor’s property

I.8. Custodia legis = once the Sheriff has seized the property, actually or

constructively, and it is in the custody of the court.

I.9. Return = the document describing Sheriff’s efforts to find the

property. Nulla bona = written on the return, means the sheriff did not find any property

I.v. (5) Sheriff sells the property to pay the debt.

I.b.

Execution

I.vi. Execution = The whole process from writ issuance to seizure.

I.vii. Execution Writ – aka Writ fieri facias (writ fi. fa. ) – aka writ of attachment =

orders Sheriff or Marshal to look for non-exempt property of the judgment debtor, to seize it, to sell it, and pay the proceeds to the judgment creditor until the judgment is fully paid.

I.viii. After you have a judgment, you take it to the clerk of court, who issues the

execution writ. Then you pick a sheriff in the county where the property of the debtor exists.

I.10. To do this, you need to find the property.

I.c. State allows you to do discovery:

I.i. Deposition in aid of execution

I.ii. Process in aid of execution – the debtor goes

under oath in front of the judge. Judge can then order the debtor to turn over property.

I.d. Also can use: investigators, ex-spouse, etc.

I.ix. Execution Lien = you obtain this when you levy the property.

I.x. General Levy

I.11. Does not exist

I.12. You can only get a lien on a specific piece of property.

I.c. Turnover Orders

I.xi. Turnover statutes = permits examination of the debtor under oath so assets

can be found.

I.xii. Debtor can be ordered to produce the property

I.xiii. Generally relates to intangible assets that cannot be levied.

I.d. Kinds of Liens

I.xiv. Judicial Liens

I.13. Execution Lien

I.14. Attachment Lien

I.15. Garnishment

I.xv. Judgment Liens by Recordation

I.16. Obtained by filing a certified copy of the judgment in the real estate

records

I.17. Applies to existing and future real estate.

I.18. FL – you can get a judgment lien on personal property by recording.

I.xvi. Statutory Liens

I.19. C/L – artisans lien – someone did work on the property

I.20. State laws also create liens by operation of law in favor of certain

types of creditors

I.21. Eg:

I.e. Lawyers – get one on judgments they get for fees

I.f. Banks – lien on anything deposited

I.g. Construction liens = most common

I.xvii. Consensual Liens (aka Voluntary Liens)

I.22. Art 9 UCC (secured transactions)

I.23. Liens by agreement

I.h. On real estate = mortgage

I.i. On personal property = security interest

I.24. Creditors can make themselves secured creditors by obtaining

voluntary liens.

I.25. Recordation is not required to perfect the security interest.

I.e.

I.44. If S never levies then the lien never becomes choate and the creditor

has no priority against any other creditor.

I.xxx.

2 Judgments recorded prior to the debtor getting an interest in property:

I.45. In re Robbins, p. 52

I.o. Timeline:

I.iii. 9/62: Bank records its judgment against

R

I.iv. 10/65: Tax Commission gets warrants

(establishes lien) against R

I.v. 8/67: R inherits land

I.p. Upon inheritance, the judgment liens attach

immediately & simultaneously. This is because it happens at the moment R’s interest is created.)

I.46. NY/Minority Rule: (applied) When liens attach simultaneously,

creditors share pro rata.

I.47. Majority Rule: Priority goes to the lien that was recorded first.

I.48. Florida: We don’t know yet which view it will adopt.

I.49. * When one claimant is a tax lien, it will take priority regardless of

these rules.

I.h. Unsecured vs. Secured

I.xxxi. The first to perfect wins.

I.xxxii. A secured creditor or the mortgagee perfects when it records its consensual

lien according to the statute.

I.i. Judgment & Secured Creditors vs. Buyers: 1 st^ in time wins.

I.j. Dormancy & SOL’s

I.xxxiii. A judgment that has not been the subject of enforcement efforts for a while

may face disability in 2 ways: Dormancy & Limitations

I.xxxiv. Dormancy

I.50. Creditor fails to seek enforcement for a while (usually 1 year)

I.51. Judgment still exists but is not enforceable until revived.

I.52. Revival occurs by a special action brought by the creditor for the

purpose of reviving the judgment with service provided to the creditor.

I.xxxv. SOL / Lapse

I.53. If a judgment is not revived, it will lapse and creditor loses its priority.

Weaver, p. 54

I.54. Judgment liens don’t last forever.

I.55. FL:

I.q. judgment lien is good for 5 yrs in Florida

I.r. judgment itself is good for 20 yrs

I.s. Can bring an action on an existing judgment and get a

new judgment that will be good for another 20 yrs.

I.k. Execution & Levy

I.xxxvi. A levy is generally the judgment creditor’s perfection

I.xxxvii. Credit Bureau of Broken Bow v. Moninger p. 56

I.56. Priority dispute between judicial lien & a consensual lien.

I.57. Timeline:

I.t. T1: Bank lends & gets an oral security interest in the

truck

I.u. T2: Creditor B gets a writ of executions & delivers it to

S. I.v. T3: S goes to truck & “hugs” it, but doesn’t actually

take it. At this time S got notice of the bank’s interest in the truck.

I.w. T4: Bank signs the security agreement & perfects the

security interest by noting it on the title.

I.x. T5: S takes possession of truck & sells it.

I.58. Issue: who has priority?

I.59. Holding: Levy occurred when S “exercised dominion” over the

truck. S took constructive levy at T3. ( The oral security interest is an unenforceable k)

Problems of Priority: PS 2, p. 60

I.xxxviii. 2.

I.62. C = first to levy, 1st^ to get an execution lien, = gets $10k

I.63. Neither A nor B have liens (neither levied)

I.64. The remaining $5k goes back to the debtor

I.65. B has an inchoate lien, but S did not levy on B’s writ of execution. S’s

levy on behalf of C doesn’t help B. B should levy. In some states you can levy on property in custody of the court and in others you can’t.

I.66. If B levies on the rest of the inventory, he will be senior to C in a state

in which levy occurs when you serve the writ of execution.

I.xxxix. 2.

I.67. You can beat a perfected security interest with a lien.

I.68. The argument is that if we apply Broken Bow, then S made a

constructive levy. (pretty weak argument tho).

I.69. Even in states with constructive possession, if you leave

goods with a debtor too long, you can lose your lien.

I.70. The attorney should have gotten a voluntary lien on the shoes (a

perfected security interest) or a personal guarantee.

I.xl. 2.

I.71. You can request that the court issue an order directing Handler to

assign the LOC over to you. Under Gerdes the court has broad authority to do this.

I.72. If the work is only ½ done, you will have to get creative because the

work must be fully complete before you can get paid on the LOC:

I.y. You could complete the job yourself

I.z. Could induce Handler to complete the job

III. Discovery

I.m. Relates to getting information about the existence, location, and exemption status of the

leviable property.

I.n. Fed Rules CP 69 & most state rules of CP: allow the judgment creditor to conduct discovery.

IV. Garnishment

I.o. Garnishment = the process by which you go after the debtor’s property that is in the hands

of a 3 rd^ party.

I.p. E.g. Garnishable Property: wages, bank accounts, contents of a safe deposit box

I.q. 2 Parts to a Writ of Garnishment:

I.xli. Set of questions to determine if the garnishee (person served with the

writ) owes any money to the debtor or has any property belonging to the debtor

I.xlii. Command to garnishee to withhold payment or return of the debtor’s

property pending further order of the court

I.r. Available both pre- and post-judgment

I.s. Procedurally: Garnishment is an ancillary lawsuit against the 3 rd^ party garnishee.

I.xliii. Judgment Creditor sues the account debtor (the one who owes money to the

Debtor). Serves the account debtor (the garnishee) with a writ of garnishment, like a complaint.

I.xliv. Account Debtor is required to answer within 20 days

I.xlv. Garnishee is liable for property in its possession at the time of service & all

the property it receives until the answer is served.

I.t.

Judgment DebtJudgment CreditorDebtorAccount DebtorComplaint / WritAnswerDebt

Webb v. Erickson, p. 62 : If a garnishee, doesn’t respond to a garnishment, the entire debt is put on him thru a default judgment.

I.xlvi. Default judgments are nearly impossible to vacate.

I.73. must show excusable neglect as to why you didn’t answer the

complaint.

I.74. Ct is sympathetic because the defendant in the garnishment action

isn’t a real party at interest.

I.75. Even if a default judgment is thrown out, you still will have to answer

the original complain.

I.xlvii. However, there are meritorious defenses:

I.76. I don’t owe money (an issue of fact to be explored in the garnishment

action)

I.77. Debtor doesn’t owe the money you claim

I.78. You didn’t bring the action correctly

I.u. 2 Most common ∆’s in a Garnishment Action: Banks & Employers

I.v. Bank Accounts

I.xlviii. debtor/creditor relationship when you make a deposit.

I.xlix. Banks can often setoff the bank acct against any debts owed to the bank.

I.w. Restrictions on Wage Garnishment

I.l. The consequence of garnishing 100% of wages is devastating. Sniadach.

I.li. The Consumer Credit Protection Act

I.79. States that the maximum wage garnishment = 25% of disposable

earnings.

I.80. Disposable Earnings = Gross Income – Deductions Required By Law

I.81. Deductions Required by Law = do not include voluntary reduction,

like retirement contributions.

I.82. Maximum Limitation = 30 x Minimum Wage

I.aa. Although the Act says you can take up to 25% of

disposable earnings, the person at least has to take home 30 x the minimum wage.

I.lii. States can impose stricter protections than the CCPA.

I.83. FL protects 100% of wages for head of household up to $500 (provide

more than ½ of the dependent’s support)

I.84. If state limits are more protective than federal limits, then you apply

the lowest garnishable amount. (Denson)

I.liii. Commonwealth Edison v. Denson, p. 66

I.85. Debtor’s wages were already subject to support order ($60/week) and

the IL had a maximum garnishable amount of 15% of gross earnings. The new creditor sought to garnish and Caterpillar defended.

I.86. Creditor argued that the $60 be seen as expenses and then the rest

could be seen as disposable and thus allow creditor to get ALL of their garnish amount.

I.87. Court held that support order should be seen as another creditor that

got their first in the race and should be included in the garnishable amount.

I.88. Federal limits are part of the formula (and state limits-look at

what is lower)

I.liv. Support Orders

I.89. general proposition: support orders beat other kinds of creditors

You can garnish up to 60% of disposable earnings in a support order.

I.lv. The Character of Wages:

I.90. Money has the character of “wages” only in the hands of the

employer.

I.91. Once it is paid to the employee, it not longer retains the “wage”

characteristic, and it is not protected anymore, unless the state statute provides further protection (as does Florida’s; stays a wage for 6 months as long as it is traceable)

Garnishing “New Property”

I.lvi. Network Solutions Inc. v. Umbro, p. 69

I.92. As technology evolves, garnishment statutes need to evolve. Debtor

owned 18 domain names-this entails contracting with domain name supplier (NSI) and they provide you services (they make your domain name work). It is valuable and they are bought and sold all the time.

I.93. VA statute tells you what kind of property may be garnished.

I.bb. Can only garnished liabilities.

I.cc. Here, the court found the website to be an executory

contract, which was not able to be garnished.

I.dd. Contracts could not be garnished.

I.94. Shows that garnishment is a statutory remedy that is

available only to the extent provided in the statute

I.lvii. Florida:

I.95. Any tangible or intangible personal property of a ∆ can be garnished

if it’s in the hands of a third party, so the case may have been different under our law.

I.96. FL statute = broader than VA statute.

I.y. Simultaneous service of Garnishment Writs (Problem 3.1(A), p. 77)

I.lviii. In situations in which 2 Garnishment Writs were given to the Sheriff at

different times, but the Sheriff served them on the bank simultaneously: You must research state law to determine whether one creditor has priority over the other or whether they must share pro rata.

I.z. Calculating Liability (Problem 3.2(B), p. 77)

I.lix. Timeline:

I.97. 2/1 – FFC got a $3k judgment against WS & delivered writ of

garnishment to S.

I.ee. (account overdrawn by $10)

I.98. 2/5 – WS deposited $5k into account

I.99. 2/7 – SFC obtained judgment against WS for $3500 & delivered writ of

garnishment to S.

I.100. 2/9 – S served both writs simultaneously. WS wrote a $500 check to

phone company.

I.101. 2/10 – Bank paid check by mistake

I.102. 2/11 – WS deposited $200 more.

I.103. 2/15 – Bank answered garnishment writ.

I.104. 2/16 – Employer direct deposits $300.

I.lx. What the Bank is liable for in the garnishment action:

I.105. 2/5: Account contains: $4,990 (the $5,000 – $10 overdrawn)

I.106. 2/10: Account contains: $4,490 ($4,990 - $500 pd to phone company)

I.ff. However, the bank will still be liable for this amount in

the garnishment action.

I.107. 2/11: Account Contains $4,690 ($4,490 + $200 deposit by WS)

I.108. The bank is liable for what was in the account on the date the

writ was served plus any deposits made prior to service of the answer, which took place on 2/15.

I.109. Thus, the bank is liable for $4,990 + $200 (deposited on 2/11)

I.lxi. The $500 mistakenly paid to the phone company:

I.110. Bank might try to get that money back through subrogation

I.111. Theory of unjust enrichment

I.aa.

Firing Employees

I.lxii. § 304 of the Consumer Credit Protection Act

15 USC § § 1674. Restriction on discharge from employment by reason of garnishment

(a) Termination of employment No employer may discharge any employee by reason of the fact that his earnings have been subjected to garnishment for any one indebtedness.

(b) Penalties Whoever willfully violates subsection (a) of this section shall be fined not more than $1,000, or imprisoned not more than one year, or both.

I.lxiii. Act limits ability of employer to fire people because of garnishment.

I.lxiv. “For any one indebtedness”

I.112. This means that the same creditor can garnish over and over.

I.113. But if 2 separate creditors garnish, than the protection is lost.

I.lxv. The actual protection is pretty weak

I.114. people can find other reasons to fire

I.115. If the employer is mad enough, he will just pay the $1,000 fine.

I.116. Thus, the protection is limited.

V. Pre-Judgment Remedies

I.bb. While you are working toward your judgment, the debtor may be moving around property

I.lxvi. Garnishment is available pre and post judgment

I.lxvii. Attachment-prejudgment equivalent of execution-sheriff will grab the

property

I.cc. Because you haven’t established you are entitled to payment, grabbing property deprives

them and the US Const. says cannot deprive w/o due process of law

I.lxviii. Process that assures fairness as best we can

I.lxix. B/c of it being pre-judgment, there are extra hoops-an emergency hearing-

issue is whether you are probably going to win the lawsuit and that you probably won’t get paid if you don’t grab the stuff now

I.lxx. Also have to post big bond if you don’t win lawsuit;

I.lxxi. These remedies are fast, dangerous, and expensive & sometimes can

achieve similar result with preliminary injunction but this is tricky too

VI. I.126. The date of levy, not the date of sale is the significant date for lapse.

I.127. If the lapse date occurs after the levy and prior to the sale, the lien

does not lapse.

I.hh.

Distribution of Funds - § 56.

I.xcii. Money Received from execution is distributed this way:

I.128. The Sheriff for costs

I.129. The levying creditor gets their $500 back (which was the expense of

levy)

I.130. The priority lienholder

I.131. The next lienholder

I.132. Etc...

I.xciii. Priority

I.133. Priority is established at the date and time the JLC is filed. § 55.

I.134. How priority is established if the debtor does not yet have an interest

in property:

I.jj. E.g.: Debtor inherits a sailboat

I.kk. § 55.202(2)(c) – no lien attaches to property until the

debtor acquires an interest in the property, priority among competing judgment liens is determined in order of filing date and time.

I.ii. Sheriff’s Liability § 56.

I.xciv. (4) The levying creditor has to file an affidavit setting forth certain

information about the existing liens on the personal property

I.xcv. (5) A Sheriff making a payment in accordance with the levying creditor’s

affidavit is not liable to anyone for damages arising from a wrongful levy.

VII. Fraudulent Conveyances

I.jj. Origins of Fraudulent Conveyance Law:

I.xcvi. Statute of Elizabeth (1571)

I.135. Made voidable a transfer with actual intent to “hinder, delay or

defraud” creditors.

I.136. Included the “ proviso defense” – transfers are not voidable against

a transferee who was a bona fide purchaser for value.

I.xcvii. Twyne’s Case (1601 England) p. 79

I.137. Introduced the notion of Badges of Fraud (BOF) – circumstantial

evidence of proof that a debtor was trying to hinder, delay or defraud creditors.

I.138. Original BOF’s include:

I.ll. General transfer-“all my assets”

I.mm. Debtor continued in possession

I.nn. Secret Transfer

I.oo. there was a writ pending-lawsuit

I.pp. transfer in trust-meaning agreed to transfer back when

dust clears

I.qq. Expressions of honesty

I.rr. Additional badges were added-family transfers

I.xcviii. UFCA (1918) - added the notion of constructive fraud which carried

through to the UFTA actual intent does not have to be proven. If you can show a transfer was made for less than fair value at a time when the debtor was insolvent, then you have proven constructive fraud. There is no benefit of the proviso defense.

I.kk. Introduction to The Uniform Fraudulent Transfer Act (UFTA) (1980’s)

I.xcix. Adopted in 41 states.

I.c. Explicitly incorporates the BOF’s and adds others. UFTA § 4.

I.ci. ACLI Government Securities v. Rhoades p. 82

I.139. Debtor transferred prop to his sister day before a $1.5M judgment

entered against him for $1.

I.140. This was a question of insolvency that came down to a battle of the

experts.

I.141. Ct found insolvency plus actual fraud (family, secret transfer, timing,

low price)

I.ll.

I.yy. (3) which rendered the debtor insolvent (or the debtor

was already insolvent), and

I.zz. (4) which is attacked by a pre-transaction creditor.

I.156. Ct makes the selling s/h’s pay.

I.mm.

UFTA and Florida’s Homestead Exemption – Havoco (handout)

I.cv. Under the C/L, if you convert non-exempt assets to exempt assets in order to

hinder, delay or defraud, the conversion is void as fraudulent.

I.cvi. Issue: whether the C/L rule applies when the exempt asset you convert to is

a homestead.

I.cvii. FL Sct – hands are tied – must apply the plain language of Florida’s

constitution. There are 3 exceptions to the Homestead exemption:

I.157. Taxes and Assessments

I.158. Obligations for purchases, improvements and repairs

I.159. Obligations contracted for labor performance on real estate.

I.160. *Plus the court added another exception for equitable liens if you

acquire money by fraud or other conduct and use it to pay your mortgage then that person can follow that money to the asset and get an equitable lien on the homestead. (the only exception outside of the constitution)

I.cviii. Thus: The homestead is protected under the Florida constitution

even if it was purchased with non-exempt assets in order to hinder, delay or defraud creditors.

I.nn. Breaking Down UFTA

I.cix. 2 Sections that Describe a Fraudulent Transfer:

I.161. § 4 – Applies to Present and Future Creditors

I.162. § 5 – Applies only to Present Creditors

I.cx. § 4 – Transfers Fraudulent as to Present and Future Creditors

I.163. Debtor had Actual Intent § 4(a)(1)

I.aaa. Elements:

I.vi. Transfer made by debtor,

I.vii. Creditor’s claim arose before or after the

transfer, and

I.viii. Debtor had actual intent to hinder, delay,

or defraud any creditor.

VII.1. To show Actual Intent evaluate

the presence of the factors in § 4(b)(1) – the modern BOF’s list

I.164. Debtor did not have Actual Intent § 4(a)(2)

I.bbb. This is a narrow version of the constructive fraud idea

I.ccc. Elements:

I.ix. Transfer made by debtor

I.x. Creditor’s claim arose before or after the

transfer

I.xi. Debtor did not receive reasonably

equivalent value (”REV”) in exchange, and

I.xii. Either the debtor:

VII.2. was engaged in an

undercapitalized business (§ 4(a)(2)(i)), or

VII.3. intended to incur, or believed or

reasonably should have believed that she would incur, debts beyond her ability to pay a they came due. (§ 4(a)(2)(ii)).

I.165. This section allows future creditors to collect E.g. the day after a

transfer, that person uses an AmEx card to purchase $25k in new furnishings.

I.166. LBO’s

I.ddd. If the court collapses the transaction, often

constructive fraud will be found under § 4(a)(2)(i).

I.eee. Typically, you can find a debtor insolvent under § 2(b)

cash flows

I.cxi. § 5 – Transfers Fraudulent as to Present Creditors

I.167. § 5(a) Elements

I.xiii. Creditor’s claim arose before the transfer

I.xiv. Debtor did not receive REV, and

means that if the property has decreased in value, the court may make an equitable adjustment.

I.179. § 8(d) Protects good faith transferees. They are entitled to:

I.ttt. (1) a lien on or a right to retain any interest in the

asset,

I.uuu. (2) enforcement of any obligation incurred, or

I.vvv. (3) a reduction in the amount of the liability on the

judgment.

I.180. § 8(e) Protects enforcements of security interests

I.181. § 8(f) Protects insiders under certain circumstances (gave new value,

made in the ordinary course of business, or good-faith effort to rehabilitate)

I.cxvi. Charitable Contributions of up to 15% of gross income are not avoidable as

fraudulent transfers.

I.cxvii. UFTA does not protect Debtors

I.182. UFTA is for creditors

I.183. A transferor cannot avoid a fraudulent transfer.

I.184. See 4.7, p. 99

I.cxviii. §4 and 5(a) transfers have a 4 year SOL while § 5(b) transfers have only a 1

year SOL (compare with bankruptcy code 548 which is years; recall 544 incorporates state law however into the code!)

VIII. State Collective Remedies

I.oo. Advantages to these remedies over Bankruptcy:

I.cxix. Faster and less expensive thank bankruptcy proceedings

I.cxx. Make sense if the special powers and controls of bankruptcy are

unnecessary.

I.cxxi. Generally can be done quietly, without court proceedings.

I.pp. Assignment for the Benefit of Creditors (C/L)

I.cxxii. Debtor assigns all non-exempt property to an assignee (lawyer), who

liquidates it, and distributes the proceeds pro rata to claimants.

I.cxxiii. Usually operates under supervision of the ct

I.cxxiv. Debtor is not discharged from the unpaid portion of the outstanding debt.

I.cxxv. Purpose: to calm things down for the debtor, to stop the phone calls

I.cxxvi. Generally, people don’t do this because no discharge is provided (People

prefer Ch. 7)

I.cxxvii. Corps like this because it’s cheaper than bankruptcy

I.cxxviii. Fl has a sophisticated statute for ABC’s

I.qq. Composition and Extension (C/L)

I.cxxix. Composition = an agreement between the debtor and all of the creditors

that the creditors will accept a stated partial payment in full satisfaction of their debts.

I.cxxx. Extension = general agreement to give the debtor more time to pay the

outstanding debts in full.

I.cxxxi. In practice, these 2 will often be combined

I.rr. Receiverships (C/L)

I.cxxxii. The receiver, appointed by the court, becomes the person in legal control of

the property of a debtor, with the power to manage debtor’s financial affairs.

I.cxxxiii. Purposes:

I.185. Often financial

I.186. Prevent further violations

I.187. Permit a complete investigation of debtor’s conduct.

I.cxxxiv. Receivership important in banking and insurance b/c neither can file for

bankruptcy.

I.cxxxv. FL – no receivership statute. The powers the receiver gets are the powers

given to the receiver by the court case by case.

CONSUMER BANKRUPTCY

I. Introduction to Bankruptcy

I.a. Bankruptcy Courts (b-cts)

I.i. Bankruptcies are filed in federal district court, which will refer the case to a federal

b-ct.

I.ii. 2 Kinds of Proceedings:

I.1. Core Proceedings the b-ct has the authority to decide these

I.2. Non-core proceedings b-ct does not have the authority to decide

these, just makes recommendations.

Bankruptcy Outline, Study notes of Law

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INTRODUCTION

I. The Federal Bankruptcy Statute

I.a. Prior to 1978, known as the “Act”

I.b. Since 1978, known as the “Code”

I.c. The Code’s main chapters:

I.i. Consumer Bankruptcy / Individual Bankruptcy

I.1. Chapter 7

I.a. Involves filing, handing over all non-exempt assets to get a discharge

I.b. A discharge of debts is unique on the earth to the US

I.c. 2005, cr. card companies lobbied to make this harder to get. Which

I.d. 2008 – Bankruptcies are back up.

I.2. Chapter 11

I.e. Involves committing future income to a plan

I.f. Not often used by individuals

I.3. Chapter 13

I.g. Payments are made over 5 years, and all debts are discharged

I.h. You keep your stuff, but commit your income to payments

I.i. Harder to get chap 13 than chap 7.

I.ii. Business Bankruptcy

I.4. Chapter 7 - Businesses can do the same as consumers (see above)

I.5. Chapter 11

I.j. Business can go forward, committing future income to a plan

I.k. Corporations are likely to use this.

I.d. “Creditors remedies” – refers to the state debt collection process.

I.e. B-judges are only bound by Circuit Court and Supreme Court opinions.

STATE REMEDIES

I. Introduction to Judgment Collection

I.a. How to Collect on a Debt

I.i. (1) Ask to get paid

I.ii. (2) Get a judgment

I.1. This declares that the money is owed

I.2. This is not an order to pay

I.3. Does not give an interest or any priority in any of the debtors

I.4. Unsecured.

I.iii. (3) Locate the Property of the Debtor

I.5. Need to get an interest in the property of the debtor

I.6. Several ways to do this:

I.a. Execution

I.b. Garnishment

I.iv. (4) Levy = the process of seizure.

I.7. The Sheriff takes possession of the debtor’s property

I.8. Custodia legis = once the Sheriff has seized the property, actually or

I.9. Return = the document describing Sheriff’s efforts to find the

I.v. (5) Sheriff sells the property to pay the debt.

I.b.

I.vi. Execution = The whole process from writ issuance to seizure.

I.vii. Execution Writ – aka Writ fieri facias (writ fi. fa. ) – aka writ of attachment =

I.viii. After you have a judgment, you take it to the clerk of court, who issues the

I.10. To do this, you need to find the property.

I.c. State allows you to do discovery:

I.i. Deposition in aid of execution

I.ii. Process in aid of execution – the debtor goes

I.d. Also can use: investigators, ex-spouse, etc.

I.ix. Execution Lien = you obtain this when you levy the property.

I.x. General Levy

I.11. Does not exist

I.12. You can only get a lien on a specific piece of property.

I.c. Turnover Orders

I.xi. Turnover statutes = permits examination of the debtor under oath so assets

I.xii. Debtor can be ordered to produce the property

I.xiii. Generally relates to intangible assets that cannot be levied.

I.d. Kinds of Liens

I.xiv. Judicial Liens

I.13. Execution Lien

I.14. Attachment Lien

I.15. Garnishment

I.xv. Judgment Liens by Recordation

I.16. Obtained by filing a certified copy of the judgment in the real estate

I.17. Applies to existing and future real estate.

I.18. FL – you can get a judgment lien on personal property by recording.

I.xvi. Statutory Liens

I.19. C/L – artisans lien – someone did work on the property

I.20. State laws also create liens by operation of law in favor of certain

I.21. Eg:

I.e. Lawyers – get one on judgments they get for fees

I.f. Banks – lien on anything deposited