Contents: Introduction: 2 Voluntary sequestration: 2 Compulsory sequestration: 3 Friendly sequestration: 3 The requirement- Advantage to creditors: 4 Inadequate applications: 5 Solvent debtors seeking debt relief: 6 Inadequate valuation reports: 7 Disclosure of the debtor’s employment status: 7 The cost of sequestration versus the advantage to creditors: 8 The National Credit Act: 9 Conclusion: 11 Bibliography: 12 Introduction: Insolvency occurs when a debtor’s estate consists of more liabilities then assets and as a result, the debtor cannot pay his debts. There are two methods in which sequestration of a debtor’s estate can take place these are through voluntary sequestration and compulsory sequestration. One of the main requirements in both forms of sequestration is the requirement ‘advantage to creditors’, which entails that for an application of surrender to be accepted it must be to the advantage of the creditors. This requirement is the main focus with regards to the following discussion, as well as the challenges that have developed due to abuse of the sequestration process-specifically voluntary sequestration- by debtors. Some of these challenges are; debtors who aren’t insolvent who are looking for debt relief; inadequate compliance with the requirements of sequestration by the debtors; the cost of the sequestration being greater than the dividend the creditors will receive; and finally debtors seeking relief through sequestration rather than through application of other debt relief procedures. These challenges will be addressed specifically with regard to their impact on the requirement for an advantage to creditors. Voluntary sequestration: Voluntary sequestration occurs when a debtor willingly applies for his ... ... middle of paper ... ...e requirement of an advantage to creditors is complied with. Through strict formalities the court can ensure that based on the detailed evidence provided by the debtor, with regards to his assets, income, expenditure and detailed explanation as to why he or she is insolvent, the court can base its decision on more accurate evidence. The court needs to make sure that the advantage to creditors is the most important goal by ensuring that; the debtor is in fact insolvent and not attempting to escape from his financial obligations, which can also result in the cost of sequestration having a detrimental effect on the dividend that debtors would in fact receive. Finally if the Insolvency Act does not provide the best advantage to creditors and other procedures such as the National Credit Act, are more beneficial in the circumstances that the debtor be made aware of this.
The legislation is a complex in part because those creditors fall into so many categories-secured creditors, unsecured creditors, government creditors, and so on-each with its own special rights and interests in the bankruptcy process.
A Quistclose trust arises when money is paid to a recipient for a specific purpose, if that purpose fails the money is held on trust for the payer. It mostly arises in insolvency cases where the proprietary rights have to be established. However, this type of trust has been thought to be inconsistent with the traditional trust principle. Many have suggested the Quistclose trust must be treated as any other fully fledged security device taking into account the protection it offers the payer on insolvency and should therefore be registrable. This essay critically analyses the concept of Quistclose trust, whether it differs from the resulting trusts.
INTRODUCTION In Palgo Holdings v Gowans , the High Court considered the distinction between a security in the form of a pawn or pledge and a security in the form of a chattel mortgage. The question was whether section 6 of the Pawnbrokers and Second-hand Dealers Act 1996 (NSW) (‘the 1996 Pawnbrokers Act’) extended to a business that structured its loan agreements as chattel mortgages. In a four to one majority (Kirby J dissenting) the High Court found that chattel mortgages fell outside the ambit of section 6 of the 1996 Pawnbrokers Act. However, beyond the apparent simplicity of this decision, the reasoning of the majority raises a number of questions.
Empirical research suggests that the bankruptcy procedure in itself dramatically favors equity holders over creditors, particularly during a reorganization process. Additional legislation may be needed to ensure both fairness and economically efficient outcomes. Much of this is also due to disparate incentives, both natural and those inherent in bankruptcy process itself, among relevant parties along the APR scale. The costs of Chapter 11 versus Chapter 7 have been historically been mixed, although there is robust empirical evidence showing that, when self-selection is accounted for, Chapter 11 firms are less costly and more adept at retaining firm value.
debtor was unable to repay his loan to the creditor, the creditor would punish the debtor as
It relates to situations where a court of law finds one or more principal members or partners of a company guilty of fraud.
...is made sure that both were able to meet any financial obligations and both were responsible with the income they receive. This rule brought confidence to the banks knowing that they will not be losing money from people who borrow money because of investing it in the stock market without conforming to these rules.
Over the years, the process of declaring bankruptcy has become incredibly simple. Because of this change, the number of people declaring bankruptcy is at an all time high. Today, bankruptcy is a common thing among companies and individuals alike. The American bankruptcy law allows people to avoid paying their debts by offering the debtors a discharge without a harsh consequence. By not having repercussions for their actions, bankruptcy filers often plan future bankruptcies, allowing them to steal even more money from creditors with no punishment. There are 13 different chapters in the bankruptcy system with the principal chapters being 7,11, and 13. You can only file for bankruptcy under these three chapters, the others are there to explain how the system works. Under Chapter 7, a person’s debts are wiped away while under chapters 11 and 13, debts are frozen while the debtor figures out a way to repay them. The people filing Chapter 7 are stealing money from creditors who are trying to help them. It is one’s moral duty to pay back his debts and one should be disgraced and embarrassed if they borrowed money they cannot pay back. Over 1,400,000 people filed for bankruptcy in 1998 under Chapter 7, Chapter 11, and Chapter 13. 75% of them were under Chapter 7, leaving “retailers, bankers, and credit-card companies” with $40 billion in unpaid debts (Kopecki 5) (Pomykala 16). The use of different reforms could cut down on the number of Chapter 7 filings and put responsibility back on the debtor. Declaring Chapter 7 bankruptcy is ethically and morally wrong and through different reforms this current “right” would be considered a crime.
Timeline of this case should be clearly organized in order to better understanding this case. In 2009, Poor Son transferred Rich Grandson to Parent. In 2010, Poor Son filed a voluntary petition for reorganization under Chapter 11 of the US bankruptcy code, and Parent deconsolidated Poor Son from statements. In 2011, Poor Son filed an action against Parent seeking to void the transfer of Rich Grandson. In May 2012, the bankruptcy court held a selection meeting in which it considered competing plans of reorganization submitted by four bidders. In June 2012, OtherCo, an unrelated party, became the wining plan sponsor. In July 2012, OtherCo rescind its offer because the bad evonomic condition. In December 2014, the bankruptcy court recommended
...payment plan is created and approved, usually by the creditors and the court. Due to the Bankruptcy code treats creditors differentially and makes the debtor not make payments to just one creditor.
...f these financial problems is to read over the regulations and payment guidelines. It has become a necessity for all borrowers to research and be aware of what the credit card company’s want and will do as a consequence to late payments. By not educating themselves, borrowers will be scammed into spending more money then they originally intended to. As long as these consumers spend their money wisely and properly the credit card can work in their favor but until then people will continue to be in debt and spend their money in am unjust manner.
Player is required to give his property to others when he bankrupt or owes the player money.
A creditor who is not a party to the bankruptcy proceedings, but who has an interest in the proceedings, may file an ex parte application with the bankruptcy court. An insolvent debtor may file a debtor’s petition for voluntary bankruptcy. The insolvent debtor must provide to the court a summary of the debts and assets. An agreement between a debtor and creditor that the amount stated as being owed to the creditor is accurate is an account statement. However, an account that is open and unsettled is an account that is current.
of the debt may put the debt back to the company at any time, so