1 secured transactions assignment 27 priority under bankruptcy law
TRANSCRIPT
![Page 1: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/1.jpg)
1
Secured TransactionsAssignment 27
Priority Under Bankruptcy Law
![Page 2: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/2.jpg)
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The Big Picture
Part Two: The Creditor Third Party Relationship
Chapter 6-7: Perfection
Chapter 8: Concept of Priority
Assignment 26: Priority Under State Law
Assignment 27: Priority Under Bankruptcy Law
Chapter 9: Specific Priority Rules
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State vs. Bankruptcy Protections
State Protections (26) Bankruptcy Protections (27)
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State vs. Bankruptcy Protections
State Protections (26)
1. The secured creditor can foreclose at any time after default
Bankruptcy Protections (27)
![Page 5: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/5.jpg)
5
State vs. Bankruptcy Protections
State Protections (26)
1. The secured creditor can foreclose at any time after default
Bankruptcy Protections (27)
1. The automatic stay prevents foreclosure unless (1) no adequate protection or (2) DIP has no bankruptcy purpose
![Page 6: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/6.jpg)
6
State vs. Bankruptcy Protections
State Protections (26)
1. The secured creditor can foreclose at any time after default
2. Debtor can’t dislodge secured creditor without payment in full
Bankruptcy Protections (27)
1. The automatic stay prevents foreclosure unless (1) no adequate protection or (2) DIP has no bankruptcy purpose
![Page 7: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/7.jpg)
7
State vs. Bankruptcy Protections
State Protections (26)
1. The secured creditor can foreclose at any time after default
2. Debtor can’t dislodge secured creditor without payment in full
Bankruptcy Protections (27)
1. The automatic stay prevents foreclosure unless (1) no adequate protection or (2) DIP has no bankruptcy purpose
2. DIP can force sale under §363(f)
![Page 8: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/8.jpg)
8
State vs. Bankruptcy Protections
State Protections (26)
1. The secured creditor can foreclose at any time after default
2. Debtor can’t dislodge secured creditor without payment in full
Bankruptcy Protections (27)
1. The automatic stay prevents foreclosure unless (1) no adequate protection or (2) DIP has no bankruptcy purpose
2. DIP can force sale under §363(f) and DIP can grant prior lien under §364(d)
![Page 9: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/9.jpg)
9
State vs. Bankruptcy Protections
State Protections (26)
1. The secured creditor can foreclose at any time after default
2. Debtor can’t dislodge secured creditor without payment in full
Bankruptcy Protections (27)
1. The automatic stay prevents foreclosure unless (1) no adequate protection or (2) DIP has no bankruptcy purpose
2. DIP can force sale under §363(f) and DIP can grant prior lien under §364(d)
![Page 10: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/10.jpg)
10
State vs. Bankruptcy Protections
State Protections (26)
1. The secured creditor can foreclose at any time after default
2. Debtor can’t dislodge secured creditor without payment in full
3. Prior perfected secured creditor is entitled to possession, Grocers Supply.
Bankruptcy Protections (27)
1. The automatic stay prevents foreclosure unless (1) no adequate protection or (2) DIP has no bankruptcy purpose
2. DIP can force sale under §363(f) and DIP can grant prior lien under §364(d)
![Page 11: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/11.jpg)
11
State vs. Bankruptcy Protections
State Protections (26)
1. The secured creditor can foreclose at any time after default
2. Debtor can’t dislodge secured creditor without payment in full
3. Prior perfected secured creditor is entitled to possession, Grocers Supply.
Bankruptcy Protections (27)
1. The automatic stay prevents foreclosure unless (1) no adequate protection or (2) DIP has no bankruptcy purpose
2. DIP can force sale under §363(f) and DIP can grant prior lien under §364(d)
3. DIP may use the collateral, §363
![Page 12: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/12.jpg)
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Bankruptcy Code §363(f)
(f) The trustee [DIP] may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 13: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/13.jpg)
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Bankruptcy Code §363(f)
(f) The trustee [DIP] may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 14: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/14.jpg)
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Bankruptcy Code §363(f)
(f) The trustee [DIP] may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 15: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/15.jpg)
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Bankruptcy Code §363(f)
(f) The trustee [DIP] may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 16: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/16.jpg)
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Bankruptcy Code §363(f)
(f) The trustee [DIP] may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 17: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/17.jpg)
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Bankruptcy Code §363(f)
(f) The trustee [DIP] may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 18: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/18.jpg)
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Bankruptcy Code §363(f)
(f) The trustee [DIP] may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 19: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/19.jpg)
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Bankruptcy Code §364(d)
(d)(1) The court . . . may authorize the obtaining of credit or the incurring of debt secured by a senior . . . lien on property of the estate that is subject to a lien
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Bankruptcy Code §364(d)
(d)(1) The court . . . may authorize the obtaining of credit or the incurring of debt secured by a senior . . . lien on property of the estate that is subject to a lien only if –
(A) The trustee is unable to obtain such credit otherwise; and
![Page 21: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/21.jpg)
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Bankruptcy Code §364(d)
(d)(1) The court . . . may authorize the obtaining of credit or the incurring of debt secured by a senior . . . lien on property of the estate that is subject to a lien only if –
(A) The trustee is unable to obtain such credit otherwise; and
![Page 22: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/22.jpg)
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Bankruptcy Code §364(d)
(d)(1) The court . . . may authorize the obtaining of credit or the incurring of debt secured by a senior . . . lien on property of the estate that is subject to a lien only if –
(A) The trustee is unable to obtain such credit otherwise; and
(B) There is adequate protection of the interest of the holder of the [already existing] lien
![Page 23: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/23.jpg)
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Problem 27.1, page 460
The Chapter 7 trustee is selling problem 26.1 property free and clear of liens
17K
10K
29K
25K
$200 sale expense
![Page 24: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/24.jpg)
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Problem 27.1, page 460
The Chapter 7 trustee is selling problem 26.1 property free and clear of liens
How much should Kinski bid?
17K
10K
29K
25K
$200 sale expense
![Page 25: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/25.jpg)
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Problem 27.1, page 460
17K
10K
29K
Before After
25K 25K
$200 sale expense
The Chapter 7 trustee is selling problem 26.1 property free and clear of liens
How much should Kinski bid? $25K
![Page 26: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/26.jpg)
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Problem 27.1, page 460
17K
10K
29K
Before After
25K 25K
$200 sale expense
The Chapter 7 trustee is selling problem 26.1 property free and clear of liens
How much should Kinski bid? $25K
Expenses of sale?
![Page 27: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/27.jpg)
27
Problem 27.1, page 460
17K
10K
29K
Before After
25K 25K
$200 sale expense
The Chapter 7 trustee is selling problem 26.1 property free and clear of liens
How much should Kinski bid? $25K
Expenses of sale? Paid from proceeds
![Page 28: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/28.jpg)
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Problem 27.2, page 460
First lien, $1.1 million; second lien $800,000
1.1M
800K
![Page 29: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/29.jpg)
29
Problem 27.2, page 460
First lien, $1.1 million; second lien $800,000
Former value $3 million.
1.1M
800K
![Page 30: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/30.jpg)
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Problem 27.2, page 460
1.1M1M
800K
First lien, $1.1 million; second lien $800,000
Former value $3 million.
If the cars are sold for $1 million during bankruptcy, who gets the money?
![Page 31: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/31.jpg)
31
Problem 27.2, page 460
First lien, $1.1 million; second lien $800,000
Former value $3 million.
If the cars are sold for $1 million during bankruptcy, who gets the money?
First. 1.1M1M
800K
![Page 32: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/32.jpg)
32
Problem 27.2, page 460
First lien, $1.1 million; second lien $800,000
Former value $3 million.
If the cars are sold for $1 million during bankruptcy, who gets the money?
First. Both liens are extinguished.
1M
![Page 33: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/33.jpg)
33
Problem 27.2, page 460
First lien, $1.1 million; second lien $800,000
Former value $3 million.
If the cars are sold for $1 million during bankruptcy, who gets the money?
First. Both liens are extinguished.
Can Bank prevent the sale?
1.1M1M
800K
![Page 34: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/34.jpg)
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Problem 27.2, page 460
First lien, $1.1 million; second lien $800,000
Former value $3 million.
If the cars are sold for $1 million during bankruptcy, who gets the money?
First. Both liens are extinguished.
Can Bank prevent the sale?
Objection: “No grounds under §363(f)”
1.1M1M
800K
![Page 35: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/35.jpg)
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What are the grounds for this sale?
(f) The trustee may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 36: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/36.jpg)
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What are the grounds for this sale?
(f) The trustee may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
![Page 37: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/37.jpg)
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What are the grounds for this sale?
(f) The trustee may sell property . . . free and clear of any interest in such property of an entity . . . only if . . .
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property
![Page 38: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/38.jpg)
38
What are the grounds for this sale?
(f) The trustee may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property
1.1M1M
800K
![Page 39: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/39.jpg)
39
What are the grounds for this sale?
(f) The trustee may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property
What is the “aggregate value of all liens”on this property?
1.1M1M
800K
![Page 40: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/40.jpg)
40
What are the grounds for this sale?
(f) The trustee may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property
What is the “aggregate value of all liens”on this property?
$1.9 million?
1.1M1M
800K
![Page 41: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/41.jpg)
41
What are the grounds for this sale?
(f) The trustee may sell property . . . free and clear of any interest in such property of an entity . . . only if –
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property
What is the “aggregate value of all liens”on this property?
$1.9 million?
$1 million? Oneida Lake 1.1M1M
800K
![Page 42: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/42.jpg)
42
Problem 27.2, page 460
First lien, $1.1 million; second lien $800 thousand
Former value $3 million.
If the cars are sold for $1 million during bankruptcy, who gets the money?
First
Can Bank prevent the sale?
Objection: “No grounds under §363(f)”
Assume the objection fails. Bank expects a future value of $3 million. What should Bank do if the sale goes forward? Bid at the sale, §363(k)
1.1M1M
800K
![Page 43: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/43.jpg)
43
Problem 27.2, page 460
First lien, $1.1 million; second lien $800 thousand
Former value $3 million.
If the cars are sold for $1 million during bankruptcy, who gets the money?
First
Can Bank prevent the sale?
Objection: “No grounds under §363(f)”
Assume the objection fails. Bank expects a future value of $3 million. What should Bank do if the sale goes forward? Bid at the sale, §363(k)
1.1M1M
800K
![Page 44: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/44.jpg)
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Problem 27.3, page 461
We represent debtor seeking to finance completion of office complex
![Page 45: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/45.jpg)
45
Problem 27.3, page 461
Now
4M
1M
2M
We represent debtor seeking to finance completion of office complex
![Page 46: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/46.jpg)
46
Problem 27.3, page 461
Now
4M
1M
2M
We represent debtor seeking to finance completion of office complex
First is $4M; second is mechanics liens for $1M; value is $2M
![Page 47: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/47.jpg)
47
Problem 27.3, page 461
Now
4M
1M
2M
We represent debtor seeking to finance completion of office complex
First is $4M; second is mechanics liens for $1M; value is $2M
Cost to complete is $1.5M, value complete is $4M
![Page 48: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/48.jpg)
48
Problem 27.3, page 461
Now Complete
4M
1M
2M
We represent debtor seeking to finance completion of office complex
First is $4M; second is mechanics liens for $1M; value is $2M
Cost to complete is $1.5M, value complete is $4M
4M
1M4M
![Page 49: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/49.jpg)
49
Problem 27.3, page 461
Now Complete
4M
1M
2M
We represent debtor seeking to finance completion of office complex
First is $4M; second is mechanics liens for $1M; value is $2M
Cost to complete is $1.5M, value complete is $4M
4M
1M4M
How do we get the money to finish it?
![Page 50: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/50.jpg)
50
Problem 27.3, page 461
Now Complete
4M
1M
2M
We represent debtor seeking to finance completion of office complex
First is $4M; second is mechanics liens for $1M; value is $2M
Cost to complete is $1.5M, value complete is $4M
4M
1M4M
How do we get the money to finish it?
File bankruptcy.
![Page 51: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/51.jpg)
51
Problem 27.3, page 461
Bky Complete
2M
1M
2M
We represent debtor seeking to finance completion of office complex
First is $4M; second is mechanics liens for $1M; value is $2M
Cost to complete is $1.5M, value complete is $4M
4M
How do we get the money to finish it?
File bankruptcy. Bifurcate $4M claim.
2M
2M
![Page 52: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/52.jpg)
52
Problem 27.3, page 461
Bky Complete
2M
We represent debtor seeking to finance completion of office complex
First is $4M; second is mechanics liens for $1M; value is $2M
Cost to complete is $1.5M, value complete is $4M
4M
1.5M
How do we get the money to finish it?
File bankruptcy. Bifurcate $4M claim.
Borrow $1.5 million; grant a first lien under §364(d)
1M
2M
2M
2M
![Page 53: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/53.jpg)
53
Problem 27.3, page 461
Complete
1M
2M
We represent debtor seeking to finance completion of office complex
First is $4M; second is mechanics liens for $1M; value is $2M
Cost to complete is $1.5M, value complete is $4M
4M
1.5M
How do we get the money to finish it?
File bankruptcy. Bifurcate $4M claim.
Borrow $1.5 million; grant a first lien under §364(d)
Is anyone injured by that borrowing?
2M
2M
2M
Bky
![Page 54: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/54.jpg)
54
Problem 27.4, page 461
In Problem 26.4 we loaned $10K on a second mortgage
80K
10K
120K
![Page 55: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/55.jpg)
55
Problem 27.4, page 461
In Problem 26.4 we loaned $10K on a second mortgage
Now the first forecloses. Where do we stand?
80K
10K
120K
![Page 56: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/56.jpg)
56
Problem 27.4, page 461
In Problem 26.4 we loaned $10K on a second mortgage
Now the first forecloses. Where do we stand?
We need $80K cash to protect our position.
80K
10K
120K
After
120K
Before
![Page 57: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/57.jpg)
57
Where do we stand if our friend files for bankruptcy?
Problem 27.4, page 461
In Problem 26.4 we loaned $10K on a second mortgage
Now the first forecloses. Where do we stand?
We need $80K cash to protect our position.
80K
10K
Before After
120K 120K
![Page 58: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/58.jpg)
58
Where do we stand if our friend files for bankruptcy?
Automatic stay; first can’t force sale
Problem 27.4, page 461
In Problem 26.4 we loaned $10K on a second mortgage
Now the first forecloses. Where do we stand?
We need $80K cash to protect our position.
80K
10K
Before After
120K 120K
![Page 59: 1 Secured Transactions Assignment 27 Priority Under Bankruptcy Law](https://reader036.vdocuments.mx/reader036/viewer/2022062407/56649e1b5503460f94b090d1/html5/thumbnails/59.jpg)
59
Where do we stand if our friend files for bankruptcy?
Automatic stay; first can’t force sale
Payment in full under Chapter 13 plan (cure and reinstate)
Problem 27.4, page 461
In Problem 26.4 we loaned $10K on a second mortgage
Now the first forecloses. Where do we stand?
We need $80K cash to protect our position.
80K
10K
Before After
120K 120K