Thursday, November 29, 2012

Bankruptcy Law, The Law of Debtors and Creditors Problem Set Answers, Warren Westbrook Sixth Edition - Problem Set 4

Problem Set 4, p.91
  • 4.1
    • May be fraudulent under §5(a). Okay under §4(a).
    • Key question: is this a reasonable equivalent value?
    • Under §8(d), the transferee can get a lien.
  • 4.2
    • This would be fraud under §4(a)(2)(ii). Bonney knew that she would incur a debt beyond her ability to pay when it is due.
    • American Express as an after transaction creditor can make such a claim under §4.
    • Does the cousin have to know O’Hare’s situation to claim UFTA? Not necessary from the statute.
    • It can also claim §4(a)(1) combining the proofs of §4(b)
  • 4.3
    • The debtor can give the home away. It was exempt. The creditor cannot reach it.
  • 4.4
    • Creditor can avoid the transfer to the extent necessary to satisfy his claim under §7(a)(1). Here Lo-Cost’s claim is more than the property’s value, so it can avoid the entire transaction. It probably can get back the property itself.
    • But after the avoidance of the transaction, what kind of remedy can Lo-Cost recover? A monetary remedy or a property remedy? Lo-Cost can recover a monetary remedy under §8(b) or a property remedy under §7(a)(1). Is there any preference for the property remedy over the monetary remedy? If it is a monetary remedy, Lo-Cost can recover 6K from Sam. If it is a property remedy, Lo-Cost can keep the property that appreciated 20%. Generally the creditor has the right to choose the form of remedy and he will get the property back.
    • But §7 is subject to the limitation of §8. Under §8(a), good faith purchaser is protected and the transaction is not voidable under §4(a)(1). But under §8(b)(1), the good faith of the purchaser is not relevant.
    • Under §8(d), despite the voidability of a transaction, a good faith purchaser gets a lien for his interest in the amount given to the debtor. Here the lien is $30,000. But can Sam recover the 5K for the repair? Does this unjustly enrich the creditor? He probably can get the $5000 repair cost under §10.
  • 4.7
    • Is this a contract? Looks like it. Did the buyer breach by not selling it back?
    • Is this contract voidable? No creditor has tried to void it.
    • Might we let the conveyee keep the horse to discourage people from these fraudulent conveyances?
Problem Sets: Table of Contents

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