Debtor-Creditor & Bankruptcy

Uniform Commercial Code (UCC) Article 9

• Attachment: value + debtor's rights + authenticated security agreement (or possession).
• Perfection: filing (5 years), possession, control, or automatic for a purchase money security interest (PMSI) in consumer goods.
• Priority: first to file or perfect. PMSI in equipment: perfect within 20 days. PMSI in inventory: perfect before delivery + notify.
• Buyer in ordinary course takes free of the seller's security interest.

Suretyship

• Surety primarily liable; rights: exoneration, reimbursement, subrogation, contribution.
• Not defenses: debtor's bankruptcy, death, incapacity, minority.

Bankruptcy

• Chapter 7 liquidation · Chapter 11 reorganization (debtor in possession) · Chapter 13 individual plan.
• Involuntary: 12+ creditors → 3 petitioners; fewer → 1.
• Automatic stay on filing.
• Preferences: 90 days (1 year insiders). Fraudulent transfers: 2 years.
• Order: secured → domestic support → administrative → wages → taxes → general unsecured.
• Not discharged: recent taxes, support, student loans, fraud, fines.

Exam traps

• A filed financing statement lapses after 5 years unless a continuation statement is filed within the 6 months before lapse.
• A consumer who buys consumer goods from another consumer (a garage sale) takes free of an automatically perfected PMSI, unless a financing statement was filed.
• Secured creditors are paid from their collateral first; any shortfall becomes a general unsecured claim.
• The automatic stay doesn't stop criminal proceedings or the collection of domestic support.