MODULE27 BANKRUPTCY 241
EXAMPLE: One year ago Herb purchased a car on credit from Ike. Thirty days before filing for
bankruptcy, Herb, while insolvent, makes a payment to Ike concerning the auto. This is a preferential
transfer. If Ike were Herb's brother, this preference could have been set aside ifit had occurred,for
example, 120 days before the filing of the petition while Herb was insolvent (insider preference).
(3) Exceptions to trustee's power to avoid preferential transfers
(a) A contemporaneous exchange between creditor and debtor whereby debtor receives new
value
EXAMPLE: Herb, while insolvent, purchases a car for cash from Ike within ninety days offiling a
petition in bankruptcy. The trustee could not avoid this transaction because Herb, the debtor, received
present (i.e., contemporaneous) value (the car) for the cash transferred to Ike, the creditor. This is not a
voidable preference. .
(b) Transfer made in the ordinary course of business is not a voidable preference, nor is the
perfected security interest that arises from it (if filed within forty-five days
of creation of
that debt)
EXAMPLE: Debtor pays the utility billf;r the business.
(C) A security interest given by debtor to acquire property that is perfected within ten days af-
ter such security interest attaches
(d) A consumer debtor's payment of $825 or less to any creditor
7. Trustee may be sued or sue on behalf of estate
6. Claims
7. Property rights-where .claimant has a property right, property is turned over to claimant, because
not
considered part of debtor's estate
a. Reclamation is a claim against specific property by a person claiming it to be his/hers
EXAMPLE: A person rented a truckfor a week and in the meantime he becomes bankrupt. The lessor will make a
reclamation.
b. Trust claim is made by beneficiary for trust property when the trustee is bankrupt
EXAMPLE: Trustee maintains a trust accountfor beneficiary under a trust set up in a will. Trustee becomes
bankrupt. The trust account is not part of trustee's estate. The beneficiary may claim the trust account as his
property.
8. Secured claim when creditor has a security interest (e.g., mortgage in property or security interest
underUCC)
(1) As long as trustee does not successfully attack the security-basically, security interest must
be without defects to prevail against trustee (i.e., perfected security interests)
(2) Secured status may be achieved by subrogation (e.g., surety is subrogated to creditor's collat-
eral)
9. Setoffs are allowed to the extent the bankrupt and creditor have mutual debts whether unsecured
ornot
10. Filing of claims
a. All claims must be filed within six months after the first creditors' meeting
11. Proof of claims
12. Timely claims are deemed allowed unless creditor
objects
(1) Contingent and unliquidated claims may be estimated
13. Claims below are not allowed if an objection is
made
(1) Unenforceable claims (by law or agreement)
(2) Unmatured interest as of date of filing bankruptcy petition
(3) Claims that may be offset
(4) Property tax claim in excess of the property value
(5) Insider or attorney claims in excess of reasonable value of services as determined by court
(6) Alimony, maintenance, and support claims for amounts due after bankruptcy petition is filed
(they are not dischargeable)
