LEGL 4400 EXAM 2: Ch. 37 & 38

What is a secured transaction?

An agreement where a creditor gets a security interest in personal property to secure a debt.

Key parties in a secured transaction?

Debtor = owes debt, Secured party = creditor, Collateral = property securing debt

What is a security interest?

A legal right in collateral to secure payment/performance.

What is a PMSI (Purchase Money Security Interest)?

A security interest in goods purchased using the creditor’s money.

Debtor’s key rights?

Redeem collateral, Retain ownership rights

Secured party’s key rights?

Collect debt, Use collateral upon default

Consumer goods?

Personal/household use items.

Inventory?

Goods for sale or used in business production.

Equipment?

Business goods not inventory.

Farm products?

Crops/livestock.

Fixtures?

Goods attached to real estate.

Accessions?

Goods attached to other personal property.

Chattel paper?

Record of debt + security interest.

Instruments?

Negotiable documents (e.g., checks).

Investment property?

Stocks, bonds, accounts.

Accounts?

Right to payment for goods/services.

General intangibles?

Catch

Proceeds?

What you get from selling collateral.

Deposit accounts?

Bank accounts.

What is attachment?

When a security interest becomes enforceable against debtor.

Requirements for attachment?

Value given, Debtor has rights in collateral, Security agreement (written or possession)

What must security agreement include?

Debtor authentication, Description of collateral

After

acquired property clause?

Future advances clause?

Covers future loans.

What is perfection?

Attachment + steps to protect against third parties.

Filing?

Financing statement filed (most common).

Possession?

Secured party holds collateral.

Automatic perfection?

PMSI in consumer goods.

Control?

Used for accounts, investments.

How long is filing effective?

5 years (renewable).

What can secured party do on default?

Repossess (no breach of peace), Sell collateral, Keep collateral (if debtor agrees)

What is a surety?

A person who agrees to pay if the debtor defaults.

Principal debtor?

Primary obligor.

Guarantor vs. guarantor of collection?

Guarantor = immediate liability, Guarantor of Collection = only after creditor tries to collect

Cosureties?

Multiple sureties on same debt.

Security Agreement Formation Requirement?

Must be a valid contract + in writing.

Surety’s duty?

Pay if debtor defaults.

Exoneration?

Force debtor to pay.

Reimbursement?

Get repaid after paying debt.

Subrogation?

Step into creditor’s shoes.

Contribution?

Collect from cosureties.

Types of defenses?

Principal only (e.g., bankruptcy), Surety

How does bankruptcy begin?

Filing a petition (voluntary or involuntary).

Who can file voluntarily?

Any eligible debtor (even solvent).

What is automatic stay?

Stops creditors from collecting.

Trustee’s role?

Collect and distribute assets.

Meeting of creditors?

Debtor is questioned about finances.

What is a claim?

Right to payment.

Secured vs. unsecured claim?

Secured = backed by collateral, Unsecured = no collateral

What is priority of claims?

Some creditors get paid before others.

Debtor’s duties?

File info, Cooperate, Turn over property

Debtor Exemptions?

Property protected from creditors.

Discharge?

Release from debt liability.

What is the estate?

All nonexempt debtor property.

Voidable preferences?

Payments favoring certain creditors before bankruptcy.

Fraudulent transfers?

Transfers made to avoid creditors.

Chapter 7 Purpose?

Sell assets + discharge debts.

Chapter 7 Order of payment? 1. Secured creditors 2. Priority creditors 2. Unsecured creditors 3. Debtor

Chapter 7: When denied?

Fraud or recent discharge.

Chapter 11 Purpose?

Keep business running + repay over time.

Chapter 11: Who runs business?

Usually debtor (debtor in possession).

Plan Requirements: What is needed for confirmation = Good faith, Feasibility, Creditor approval

Chapter 13: Who qualifies?

Individuals with regular income.

Chapter 13 Goal?

Repayment plan + discharge.

Chapter 13 Plan Key requirements?

Good faith, pay at least what Chapter 7 would, feasibility

Creditor Prejudgment remedies?

Attachment, garnishment.

Creditor Postjudgment remedies?

Execution, garnishment.

Debtor relief: Composition?

Creditors accept partial payment.

Assignment for benefit of creditors?

Debtor transfers assets to trustee.

Equity receivership?

Court appointed manager handles assets.