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Creditors Rights
University of Dayton School of Law
Morris, Jeffrey B.

Creditor’s Rights Outline – Prof. Morris

I. Introduction to Debtor and Creditor Law.. 2
a. Overview of Bankruptcy Law.. 2
b. Creditors and Their Liens. 3
c. Collection of Debts Outside of Bankruptcy. 4
II. Commencement of the Case and Eligibility for Relief. 5
a. Voluntary Proceedings. 5
b. Involuntary Cases. 7
c. Debtor’s Eligibility for Relief. 8
d. Limitations on Repeat Bankruptcy Filings. 8
III. The Bankruptcy Estate. 8
a. Property of Estate is defined in Bankruptcy Code § 541. 8
b. United States v Whiting Pools, Inc. 8
c. Notes. 8
d. In re Chris-Don, Inc. 8
e. Postpetition Earnings from Personal Services. 8
f. Limits on Property of the Estate. 8
g. Exclusions (Exemptions) and Lien Avoidance. 9
h. Claiming the Exemption. 9
i. Class Notes. 9
IV. The Automatic Stay – § 362. 9
a. The Nature of the Stay. 9
b. Lifting the Stay. 10
V. Claims. 11
a. Notes. 11
b. Allowance of Claims Generally. 11
c. Estimation of Claims. 12
d. Secured Claims. 12
e. Notes. 12
f. Priority Claims – § 507. 13
g. Future Claims. 13
VI. Discharge. 14
a. Introduction. 14
b. The Global Denial of Discharge – § 727. 14
c. Exceptions to Discharge – § 523. 15
d. Effect of Discharge. 16
e. Reaffirmation. 16
f. Redemption. 17
g. Protecting the Discharge. 17
VII. Avoidance Powers. 17
a. Lien-Stripping. 17
b. The Strong Arm Clause – § 544(a). 17
c. Preferences. 17
d. Setoff. 20
e. Statutory Liens. 21
f. Fraudulent Transfers. 21
g. Trustee as Successor to Actual Creditor. 22
h. Postpetition Transfers. 22
i. Avoidance and Postponement of Certain Liens. 22
VIII. Chapter 13 Cases. 22
a. Notes. 22
b. Eligibility for Relief. 22
c. The Codebtor Stay. 22
d. The Chapter 13 Plan. 23
e. The “Involuntary” Ch 13. 27
IX. Reorganization in Ch 11. 28
a. Getting Started. 28
b. Running the Show.. 29
c. The Plan of Reorganization. 30

I. Introduction to Debtor and Creditor Law
a. Overview of Bankruptcy Law
i. Article 1, Section 8, Clause 4 – “congress shall make uniform laws on the subject of bankruptcies throughout the United States”
ii. Bankruptcy Reform Act of 1978 – Bankruptcy Code, The Code
iii. Title 11 of the USC
iv. Bankruptcy Law has two primary goals
1. Orderly and equitable repayment of claims for the benefit of creditors
2. Offers a an economic fresh start to the proverbial “honest but unfortunate debtor”
v. Two forms of bankruptcy relief
1. Liquidation
2. Reorganization
b. Creditors and Their Liens
i. “Perfected” liens cannot be attacked by the trustee
ii. Consensual Liens
1. The debtor voluntarily nominates some of his or her property as collateral to secure a loan
a. Real property lien is called a mortgage
i. SOF requires mortgage to be in writing
ii. Mortgage lien is perfected by recording
b. Personal property (or fixture) lien is a security interest
i. Process is governed by Art 9 of UCC
1. Creditor is called the secured party
2. Steps to perfect a lien
a. Attachment – process that gives the creditor rights against the collateral that are valid between the creditor and the debtor. UCC §9-203.
i. Secured party must give value
ii. Debtor must have rights in the collateral
iii. Debtor must sign security agreement
b. Perfection – accomplished in a number of different ways
i. Physical possession of collateral
ii. Public notice altering others of interest
iii. Judicial Liens
1. Garnishment
a. If debtors property is in th

g the debt, the debt collector will obtain verification of the debt from the creditor and a copy of the verification will be mailed to the consumer
3. FDCPA doesn’t apply to a creditor collecting his own debt but does apply to any attorney collection debt on behalf of a client.
4. Case: Heintz v Jenkins
a. FDCPA applies to attorneys who “regularly” engage in consumer-debt-collection activity, even when that activity consists of litigation.
iii. Fraudulent Transfers[U1] 1. Badges of Fraud – suspicious circumstances that led a court to infer that requisite intent
a. Transfers to relatives/friends, transfers made in secret, transfers for no consideration, and transfers made when creditors commenced collection activity
2. Twyne’s Case
3. Uniform Fraudulent Transfers Act (UFTA)
a. See Statute Book
4. Bay Plastics, Inc v BT Commercial Corp.
a. Transfer is fraudulent if it is (1) an intentional fraudulent transfer; (2) a transfer that is constructively fraudulent because the debtor is in financial distress.
i. Financial distress that makes a transfer fraudulent: (1) transfer while debtor is insolvent or renders the debtor insolvent; (2) a transfer that leaves a debtor undercapitalized or nearly insolvent; (3) a transfer when the debtor intends to incur debts beyond its ability to pay

[U1]Is it possible for a transfer to be both fraudulent and a preferential transfer?