Business Law Today Study Set 1

Business

Quiz 23 :

Creditors Rights and Bankruptcy

Quiz 23 :

Creditors Rights and Bankruptcy

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Rights of the Surety. Meredith, a fanner, borrowed $5,000 from Farmer's Bank and gave the bank $4,000 in bearer bonds to hold as collateral for the loam Meredith's neighbor Peterson, who had known Meredith for years, signed as a surety on the note. Because of a drought, Meredith's harvest that year was only a fraction of what it normally was, and he was forced to default on his payments to Farmer's Bank. The bank did not immediately sell the bonds but instead requested S5,000 from Peterson. Peterson paid the $5,000 and then demanded that the bank give him the $4,000 in securities. Can Peterson enforce this demand? Explain.
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M borrowed $5,000 from the bank and gave $4,000 bearer bonds as collateral. P signed on the surety note promising to pay the debt if M defaults.
img , P can enforce the demand for securities held by the bank.
This is known as the right to get securities. The surety has made the payment to bank. Thus, surety has the right to get all securities into his possession from creditor.

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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is the difference between an exception to discharge and an objection to discharge?
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Difference between an exception to discharge and an objection to discharge:
Under exceptions to discharge, the creditor may deny the debtor of a discharge of his debt. However, he allows discharge of all other debts of the debtor debts so that the creditor has no other creditors to compete to collect his own debt. An exception to discharge takes place when debtor has shown any misconduct towards a particular creditor.
Under objections to discharge, on the other hand, the creditor may deny the debtor of a discharge of his debt. An objection to discharge takes place when debtor has shown misconduct towards all his creditors, in general.
Thus, the main difference between an exception to discharge and an objection to discharge is that the former involves a debtor's misconduct towards a particular creditor while objections to discharge may involve deception in the context of the bankruptcy case.

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Java Jive, Inc., is a small chain of coffee shops. Adam is Java live's president. Java Jive borrows $20,000 from Ace Loan Company to make physical improvements to the Java Jive stores. Java Jive gives the money to Jones Construction, a contractor, to do the work. The amount represents only half of the cost, but when Jones finishes the work, Java Jive fails to pay the rest. Java Jive also does not repay Ace for the loan. What can Jones do to collect what it is owed? What can Ace do?
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Company J can put Artisan's lien and make claim for the amount invested for development of the property. It can file lien on the house in which work has been done and hold it till the payment has been achieved.
Company A can file Mechanic's lien for collecting the amount given by it for improving the property. It can make claim over the property which has been developed and sell it of for gathering its payment.

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ECONOMIC DIMENSIONS. How might the result in this case affect a state's decision to grant or deny credit to potential debtors?
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What did the majority conclude in. this case? What was the majority's reasoning in support of this conclusion?
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The following multiple-choice question is representative of the types of questions available in one of the four sections of ThoMsonNOW for Business Law Today. ThomsonNOW also provides feedback for each response option, whether correct or incorrect, and refers to the location within the chapter where the correct answer can be found. A debt that is dischargeable in a liquidation bankruptcy is a. the full amount of back taxes. B) a loan taken out to pay federal taxes. C) a loan taken out to pay for home repairs. D) child-support obligations.
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ETHICS. From an ethical perspective, why should a trustee be allowed to recover a debtor's transfer of property or a payment of money to a creditor over the creditor's objection? What might be an ethical basis for permitting the creditor to keep the property or the money transferred?
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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. In a bankruptcy proceeding, what constitutes the debtor's estate in property? What property is exempt from the state under federal bankruptcy law?
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Java Jive, Inc., is a small chain of coffee shops. Adam is Java live's president. Java Jive wants to borrow $40,000 from First National Bank to buy equipment. To secure the loan, First National could accept Java Jive's equipment as collateral. If so, how would First National let other potential creditors know of it interest? If First National secures its loan with the equipment and Java Jive fails to repay the loan, what are First National's alternatives with respect to collecting the amount due?
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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is a prejudgment attachment? What is a writ of execution? How does a creditor use these remedies?
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Creditors Rights and Bankruptcy Three months ago, Janet Hart's husband of twenty years died of cancer. Although he had medical insurance, he left Janet with outstanding medical bills of more than S50,000. Janet has worked at the local library for the past ten years, earning $1,500 per month. Since her husband's death, Janet also has received $1,500 in Social Security benefits and $1,100 in life insurance proceeds every month, giving her a monthly income of $4,300. After she pays the mortgage payment of 51,500 and the amounts due on other debts each month, Janet barely has enough left over to buy groceries for her family (she has two teenage daughters at home)- She decides to file for Chapter 7 bankruptcy, hoping for a fresh start. Using the information provided in the chapter, answer the following questions. *I Under the Bankruptcy Code after the 2005 act, what must Janet do prior to filing a petition for relief under Chapter 7? How much time does Janet have after filing the bankruptcy petition to submit the required schedules? What happens if Janet does not meet the deadline? 3 Assume that Janet files a petition under Chapter 7. Further assume that the median family income in the state in which Janet lives is $49,300. What steps would a court take to determine whether Janet's petition is presumed to be "substantial abuse" under the means test? 4 Suppose that the court determines that no presumption of substantial abuse applies in Janet's case. Nevertheless, the court finds that Janet does have the ability to pay at least a portion of the medical bills out of her disposable income. What would the court likely order in that situation?
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Discharge in Bankruptcy. Jon Goulet attended the University of Wisconsin in Eau Claire and Regis University in Denver, Colorado, from which he earned a bachelor's degree in his-tory in 1972. Over the next ten years, he worked as a bar-tender and a restaurant manager. In 1984, he became a life insurance agent, and his income ranged from $20,000 to $30,000. In 1989, however, his agent's license was revoked for insurance fraud, and he was arrested for cocaine possession. From 1991 to 1995, Goulet was again at the University of Wisconsin, working toward, but failing to obtain, a master's degree in psychology. To pay for his studies, he took out student loans totaling $76,000. Goulet then returned to bar-tending and restaurant management and tried real estate sales. His income for the year 2000 was $1,490, and his expenses, excluding a child-support obligation, were $5,904. When the student loans came due, Goulet filed a petition for bankruptcy. On what ground might the loans be dis-chargeable? Should the court grant a discharge on this ground? Why or why not? [Goulet v. Educational Credit Management Corp., 284 F.3d 773 (7th Cir. 2002)]
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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. In reorganization, what is the role of the debtor in possession?
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Automatic Stay. On January 22, 2001, Marlene Moffett bought a used 1998 Honda Accord from Hendrick Honda in Woodbridge, Virginia. Moffett agreed to pay $20,024.25, with interest, in sixty monthly installments, and Hendrick retained a security interest in the car. (As discussed in Chapter 22, Hendrick thus had the right to repossess the car in the event of default, subject to Moffett's right of redemption.) Hendrick assigned its rights under the sales agreement to Tidewater Finance Co., which perfected its security inter-est. The car was Moffett's only means of traveling the forty miles from her home to her workplace. In March and April 2002, Moffett missed two monthly payments. On April 25, Tidewater repossessed the car. On the same day, Moffett filed a Chapter 13 plan in a federal bankruptcy court. Moffett asked that the car be returned to her, in part, under the Bankruptcy Code's automatic-stay provision. Tidewater asked the court to terminate the automatic stay so that it could sell the ear. How can the interests of both the debtor and the creditor be fully protected in this case? What should the court rule? Explain. [In re Moffett, 356 F.3d 518 (4th Cir. 2004)]
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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is garnishment? When might a creditor undertake a garnishment proceeding?
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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is garnishment? When might a creditor undertake a garnishment proceeding?
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Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is a writ of execution? What is a prejudgment attachment? How does a creditor use these remedies?
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What was the dissent's argument? On what points did the dissent base its contention?
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Java Jive, Inc., is a small chain of coffee shops. Adam is Java live's president. Ultimately, Java Jive is unable to pay its employees or to repay its creditors. The creditors include First National, whose loan is secured by Java Jive's equipment and fixtures; Eagle, which loaned funds to Java Jive to pay its employees without Adam's promise to repay the loan on Java Jive's default; Ace, which was not repaid for its loan to Java Jive to make physical improvements to its stores; and Jones Construction, the contractor that was not fully paid for its work. Java Jive, which also owes unpaid taxes, files a petition to declare bankruptcy. If the court grants the petition, will the creditors be paid? In what order?
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Java Jive, Inc., is a small chain of coffee shops. Adam is Java live's president. Java Jive wants to borrow $30,000 from Eagle Credit Corp. to pay Java Jive employees. Java Jive believes that it will be able to repay the loan by the end of the month, which is when Macro Manufacturing Company has agreed to pay Java Jive for providing catering services at Macro's facilities. Eagle agrees to make the loan if Adam will sign a promise that if Java Jive defaults on the loan, Adam will be personally liable for the amount. Under these circumstances, is Adam a guarantor, a surety, or neither? If Adam orally promises to assume personal liability if Java Jive defaults, but he does not actually in anything, can Eagle enforce the promise?
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