NORTON CREDITORS' RIGHTS HANDBOOK
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TABLE OF CONTENTS
Part I Creation of the Creditor-Debtor Relationship
Chapter 1 Structuring the Credit Transaction
Sec 1:1 Creditor's objectives
Sec 1:2 Debtor's objectives
Sec 1:3 Collateral
Sec 1:4 Guaranties and letters of credit — Guaranties
Sec 1:5 Guaranties and letters of credit — Letters of credit
Sec 1:6 Preferences and fraudulent transfers — Overview
Sec 1:7 Preferences and fraudulent transfers — Preferences
Sec 1:8 Preferences and fraudulent transfers — Fraudulent transfers
Sec 1:9 Regulatory considerations
Chapter 2 Documenting the Credit Transaction
Sec 2:1 The loan agreement — Overview
Sec 2:2 The loan agreement — Representations and warranties
Sec 2:3 The loan agreement — Covenants
Sec 2:4 The loan agreement — Events of default
Sec 2:5 The Guaranty — Overview
Sec 2:6 The Guaranty — Types of guaranties
Sec 2:7 The Guaranty — Suretyship defenses
Sec 2:8 The Guaranty — Bankruptcy
Sec 2:9 The Guaranty — Rights of guarantor
Sec 2:10 The Guaranty — Comfort letters
Sec 2:11 The Guaranty — Fraudulent transfers
Sec 2:12 The Guaranty — Spousal guaranties
Sec 2:13 Letters of credit — Overview
Sec 2:14 Letters of credit — Mechanics
Sec 2:15 Letters of credit — Bankruptcy
Sec 2:16 The subordination agreement — Overview
Sec 2:17 The subordination agreement — Bankruptcy
Sec 2:18 Loan Participations
Sec 2:19 Loan Participations — Avoiding potential problems — Overview
Sec 2:20 Loan Participations — Avoiding potential problems — Interest rates
Sec 2:21 Loan Participations — Avoiding potential problems — Insolvency of lead bank
Sec 2:22 Loan Participations — Avoiding potential problems — Sharing of setoffs
Sec 2:23 Loan Participations — Avoiding potential problems — Disclosure requirements
Sec 2:24 Loan Participations — Avoiding potential problems — Lender liability
Sec 2:25 Loan Participations — Avoiding potential problems — Documentation
APPENDIX 2A Loan Agreement Form
APPENDIX 2B Unconditional [Continuing/Nonrecourse] Guaranty Form
APPENDIX 2C Subordination Agreement Form
APPENDIX 2D Participation Agreement Form
Chapter 3 Personal Property Collateral
Sec 3:1 Introduction
Sec 3:2 Scope of Article 9 — Overview
Sec 3:3 Scope of Article 9 — Preemption
Sec 3:4 Scope of Article 9 — Excluded transactions
Sec 3:5 Scope of Article 9 — True leases
Sec 3:6 Scope of Article 9 — Consignment
Sec 3:7 Types of collateral — Overview
Sec 3:8 Types of collateral — Goods, inventory, and equipment
Sec 3:9 Types of collateral — Accounts
Sec 3:10 Types of collateral — Instruments
Sec 3:11 Types of collateral — Promissory notes
Sec 3:12 Types of collateral — Chattel paper
Sec 3:13 Types of collateral — Letter-of-credit rights
Sec 3:14 Types of collateral — Supporting obligations
Sec 3:15 Types of collateral — Health-care-insurance receivables
Sec 3:16 Types of collateral — General intangibles
Sec 3:17 Types of collateral — Payment intangibles
Sec 3:18 Types of collateral — Software
Sec 3:19 Types of collateral — Deposit accounts
Sec 3:20 Types of collateral — Investment property
Sec 3:21 Types of collateral — Commercial tort claims
Sec 3:22 Types of collateral — Attachment
Sec 3:23 Perfection — Overview
Sec 3:24 Perfection — Perfection by filing — What to file
Sec 3:25 Perfection — Perfection by filing — Where to file
Sec 3:26 Perfection — Perfection by possession
Sec 3:27 Perfection — Perfection by control
Sec 3:28 Priority — Overview
Sec 3:29 Priority — Purchase money security interests
Sec 3:30 Priority — Purchasers
Sec 3:31 Priority — Fixtures
Sec 3:32 Priority — Unpaid sellers
Sec 3:33 Transition rules — Enforceability
APPENDIX 3A Security Agreement Form
Chapter 4 Real Property Collateral
Sec 4:1 Introduction — Overview
Sec 4:2 Determination of debtor's (mortgagor's) interest — Survey
Sec 4:3 Determination of debtor's (mortgagor's) interest — Title insurance
Sec 4:4 Identifying encumbrances
Sec 4:5 Identifying encumbrances — Competing liens
Sec 4:6 Identifying encumbrances — Easements
Sec 4:7 Identifying encumbrances — Restrictive covenants
Sec 4:8 Identifying encumbrances — Zoning and other land use controls
Sec 4:9 Identifying encumbrances — Encroachments and access
Sec 4:10 Leases
Sec 4:11 Contracts and options
Sec 4:12 Creation of a valid mortgage — Execution and recording
Sec 4:13 Creation of a valid mortgage — Consideration
Sec 4:14 Creation of a valid mortgage — Purchase money mortgages
Sec 4:15 Creation of a valid mortgage — Refinancing
Sec 4:16 Creation of a valid mortgage — Future advances
Sec 4:17 Creation of a valid mortgage — Property encumbered
Sec 4:18 Creation of a valid mortgage — Rents
Sec 4:19 Creation of a valid mortgage — Due on sale or encumbrance
Sec 4:20 Creation of a valid mortgage — Warranties and covenants
Sec 4:21 Creation of a valid mortgage — Release
Sec 4:22 Creation of a valid mortgage — Contracts and licenses
Sec 4:23 Environmental liability
Sec 4:24 Environmental liability — EPA Interpretative Rule
Sec 4:25 Environmental liability — Statutory validation of EPA Rule
Sec 4:26 Environmental liability — State lender liability issues
Sec 4:27 Securitizations and other developments in real estate finance — Securitized loans
Sec 4:28 Securitizations and other developments in real estate finance — Participating loans
Sec 4:29 Securitizations and other developments in real estate finance — Mezzanine loans
Sec 4:30 Securitizations and other developments in real estate finance — Synthetic leases
Chapter 5 Special Problems Relating To The Consumer Debtor
Sec 5:1 Introduction
Sec 5:2 Equal Credit Opportunity Act and Regulation B — Overview
Sec 5:3 Equal Credit Opportunity Act and Regulation B —Credit application
Sec 5:4 Equal Credit Opportunity Act and Regulation B — Evaluation process
Sec 5:5 Equal Credit Opportunity Act and Regulation B — Acting on the credit application
Sec 5:6 Equal Credit Opportunity Act and Regulation B — Records retention
Sec 5:7 Truth in Lending Act and Regulation Z — Overview
Sec 5:8 Truth in Lending Act and Regulation Z — Credit transactions covered
Sec 5:9 Truth in Lending Act and Regulation Z — Excluded credit transactions
Sec 5:10 Truth in Lending Act and Regulation Z — Disclosure requirements
Sec 5:11 Truth in Lending Act and Regulation Z — Right of rescission
Sec 5:12 Truth in Lending Act and Regulation Z — Consequences of failure to comply
Sec 5:13 Consumer Leasing Act and Regulation M — Overview
Sec 5:14 Consumer Leasing Act and Regulation M — Transactions covered
Sec 5:15 Consumer Leasing Act and Regulation M — Disclosure requirements
Sec 5:16 Consumer Leasing Act and Regulation M — Coverage for advertising
Sec 5:17 Consumer Leasing Act and Regulation M — Consequences of failure to comply
Sec 5:18 Credit Practices Rules — Overview
Sec 5:19 Credit Practices Rules — Unfair acts and practices
Sec 5:20 Credit Practices Rules — Cosigners of consumer debt
Sec 5:21 Credit Practices Rules — Pyramiding
Sec 5:22 Credit Practices Rules — Civil liability
Sec 5:23 Fair Credit Reporting Act — Overview
Sec 5:24 Fair Credit Reporting Act — Regulation of consumer reporting agencies
Sec 5:25 Fair Credit Reporting Act — Regulation of users of credit reports
Sec 5:26 Fair Credit Reporting Act — Consequences of failure to comply
Sec 5:27 Fair Debt Collection Practices Act — Application
Sec 5:28 Fair Debt Collection Practices Act — Consequences of failure to comply
Sec 5:29 Federal Trade Commission Holder in Due Course Rule —Overview
Sec 5:30 Federal Trade Commission Holder in Due Course Rule — Application of the Rule
Sec 5:31 Federal Trade Commission Holder in Due Course Rule — Effect of rule on creditors
Part II The Distressed Debtor
Chapter 6 The Workout
Sec 6:1 Introduction
Sec 6:2 The troubled debtor — Danger signs
Sec 6:3 The troubled debtor — Sources of information
Sec 6:4 The troubled debtor — Initial steps
Sec 6:5 The troubled debtor — Alternatives available
Sec 6:6 Working with the debtor — Introduction
Sec 6:7 Working with the debtor — The forbearance agreement
Sec 6:8 Working with the debtor — Restructuring in and out of bankruptcy
Sec 6:9 Working with the debtor — Feasibility of restructure out of bankruptcy
Sec 6:10 Working with the debtor — The restructure out of bankruptcy
Sec 6:11 Working with the debtor — Creditor representative concerns
Sec 6:12 Working with the debtor — Specific provisions of restructure out of bankruptcy
APPENDIX 6A Pre-Workout Agreement Form
APPENDIX 6B Forbearance Agreement Form
APPENDIX 6C Debt Settlement Agreement Form
Chapter 7 Remedies
Sec 7:1 Introduction
Sec 7:2 Remedies of the unsecured creditor — Overview
Sec 7:3 Remedies of the unsecured creditor — Prejudgment garnishment and attachment
Sec 7:4 Remedies of the unsecured creditor — Insolvency proceedings
Sec 7:5 Remedies of the unsecured creditor — Involuntary bankruptcy
Sec 7:6 Remedies of the unsecured creditor — Fraudulent transfers
Sec 7:7 Remedies of the unsecured creditor — The reclaiming seller
Sec 7:8 Remedies of the secured creditor — Overview
Sec 7:9 Remedies of the secured creditor — Personal property foreclosures — Repossession
of collateral
Sec 7:10 Remedies of the secured creditor — Personal property foreclosures — Disposition of collateral
Sec 7:11 Remedies of the secured creditor — Personal property foreclosures — Notice
Sec 7:12 Remedies of the secured creditor — Personal property foreclosures — Commercial
reasonableness
Sec 7:13 Remedies of the secured creditor — Personal property foreclosures — Collection of accounts
and general intangibles
Sec 7:14 Remedies of the secured creditor — Retention of collateral
Sec 7:15 Remedies of the secured creditor — Real estate foreclosures
Sec 7:16 Remedies of the secured creditor — Foreclosures as fraudulent transfers
Chapter 8 Lender Liability
Sec 8:1 Introduction
Sec 8:2 Theories of lender liability — Common law fraud
Sec 8:3 Theories of lender liability — Duress
Sec 8:4 Theories of lender liability — Tortious interference with contractual rights and
business relations
Sec 8:5 Theories of lender liability — Implied covenant of good faith and fair dealing
Sec 8:6 Theories of lender liability — Other common law theories of lender liability
Sec 8:7 Theories of lender liability — Deepening insolvency
Sec 8:8 Theories of lender liability — Statutory causes of action
Sec 8:9 Theories of lender liability — Excessive control of the debtor and its consequences
Sec 8:10 Theories of lender liability — Liability for taxes of the debtor
Sec 8:11 Theories of lender liability — Liability under securities laws
Sec 8:12 Theories of lender liability — "Insider" under Bankruptcy Code
Sec 8:13 Avoiding lender liability — Overview
Sec 8:14 Avoiding lender liability — Course of conduct
Sec 8:15 Avoiding lender liability — Understanding legal rights
Sec 8:16 Avoiding lender liability — Written communications
Sec 8:17 Avoiding lender liability — File maintenance
Sec 8:18 Avoiding lender liability — Attitude
Sec 8:19 Avoiding lender liability —Control
The Debtor in Bankruptcy
Chapter 9 An Overview of the Bankruptcy Alternative
Sec 9:1 Introduction
Sec 9:2 The Bankruptcy Code — Structure
Sec 9:3 The Bankruptcy Code — Types of relief
Sec 9:4 The Bankruptcy Code — Types of claims
Sec 9:5 Bankruptcy court jurisdiction — The court structure
Sec 9:6 Bankruptcy court jurisdiction — Core vs. non-core proceedings
Sec 9:7 Bankruptcy court jurisdiction — Jurisdiction over international transactions
Sec 9:8 Bankruptcy court jurisdiction — Foreign creditors' remedies
Sec 9:9 Principal parties in a bankruptcy case — Debtor
Sec 9:10 Principal parties in a bankruptcy case — Trustees and examiners
Sec 9:11 Principal parties in a bankruptcy case — U.S. Trustee
Sec 9:12 Principal parties in a bankruptcy case — Committees
Sec 9:13 Principal parties in a bankruptcy case — Attorneys,accountants, and other professionals
Sec 9:14 Principal parties in a bankruptcy case — Other principal parties in interest
Sec 9:15 Principal parties in a bankruptcy case — Individual creditors
Sec 9:16 Definitions
Sec 9:17 Sequence of events in a bankruptcy case — Chapter 7 case
Sec 9:18 Sequence of events in a bankruptcy case — Chapter 11 case
Sec 9:19 Sequence of events in a bankruptcy case — Chapters 12 and 13 cases
Sec 9:20 Sequence of events in a bankruptcy case — Involuntary case
Chapter 10 Maintenance of the Status Quo
Sec 10:1 Introduction
Sec 10:2 The automatic stay — Section 362(a)
Sec 10:3 The automatic stay — Section 552
Sec 10:4 Restraints on the debtor or trustee
Sec 10:5 Adequate protection
Sec 10:6 Conclusion
Chapter 11 Bankruptcy Causes of Action
Sec 11:1 Introduction
Sec 11:2 Turnover of property
Sec 11:3 The trustee's strong-arm clause
Sec 11:4 Statutory liens
Sec 11:5 Preferences
Sec 11:6 Fraudulent transfers and obligations
Sec 11:7 Equitable subordination
Sec 11:8 Postpetition transfers
Sec 11:9 Offsets
Sec 11:10 Limitations on bankruptcy causes of action
Chapter 12 Operations of Debtor in Bankruptcy
Sec 12:1 Introduction
Sec 12:2 Ordinary course of business and diminution of the estate
Sec 12:3 Impact of a Chapter 11 filing on general conduct of the business — Insurance
Sec 12:4 Impact of a Chapter 11 filing on general conduct of the business — Maintenance
Sec 12:5 Impact of a Chapter 11 filing on general conduct of the business — Cost-cutting
Sec 12:6 Impact of a Chapter 11 filing on general conduct of the business — Purchase of assets
Sec 12:7 Impact of a Chapter 11 filing on general conduct of the business — Selling assets
Sec 12:8 Impact of a Chapter 11 filing on general conduct of the business — Abandonment of assets
Sec 12:9 Impact of a Chapter 11 filing on general conduct of the business — Foreign assets
Sec 12:10 Impact of a Chapter 11 filing on general conduct of the business — Related entities
Sec 12:11 Impact of a Chapter 11 filing on general conduct of the business — Doing business
Sec 12:12 Impact of a Chapter 11 filing on general conduct of the business — Regulatory powers
Sec 12:13 Contracts and leases
Sec 12:14 Personnel and professionals
Sec 12:15 Handling money
Sec 12:16 Reporting
Sec 12:17 Bankruptcy fees
Sec 12:18 Conclusion
Chapter 13 Appointment of Committees
Sec 13:1 Introduction
Sec 13:2 Types of committees
Sec 13:3 Membership on a committee
Sec 13:4 Fiduciary duties of committees and their members
Sec 13:5 Structuring a committee
APPENDIX 13A Sample Bylaws for Unsecured Creditors' Committee Form
Chapter 14 Duties and Powers of Committees
Sec 14:1 Introduction
Sec 14:2 The role of a committee in administration and operation
Sec 14:3 Investigations by a committee
Sec 14:4 Committee participation in negotiation and confirmation of a plan
Sec 14:5 Request by a committee for the appointment of a trustee or examiner
Sec 14:6 Other duties
Sec 14:7 Conclusion
APPENDIX 14A Sample Letter Soliciting Acceptances of Reorganization Plan Form
Chapter 15 The Indenture Trustee
Sec 15:1 Introduction
Sec 15:2 Historical perspective
Sec 15:3 The structure of the TIA
Sec 15:4 Powers of the indenture trustee
Sec 15:5 Instructing the indenture trustee
Sec 15:6 The Bankruptcy Code and the indenture trustee
Sec 15:7 Role of the indenture trustee on a creditors' committee
Sec 15:8 Construction of the indenture
Sec 15:9 Payment of the indenture trustee
Sec 15:10 Conclusion
Chapter 16 Working With a Debtor in a Reorganization
Sec 16:1 Introduction
Sec 16:2 Dealing with the involuntary debtor
Sec 16:3 Trade creditors dealing with a Chapter 11 debtor
Sec 16:4 Cooperation by a secured creditor
Sec 16:5 Cooperation by a secured creditor — Installment lender
Sec 16:6 Cooperation by a secured creditor — Real estate lender
Sec 16:7 Cooperation by a secured creditor — Principal lender
Sec 16:8 Cooperation by a secured creditor — Advantages of moderate demands
Sec 16:9 Cash collateral and financing orders
Sec 16:10 Procedural guidelines
Sec 16:11 Conclusion
Chapter 17 Creditor Remedies
Sec 17:1 Introduction
Sec 17:2 Proof of claim
Sec 17:3 Relief from the automatic stay
Sec 17:4 Conversion and dismissal
Sec 17:5 Appointment of trustee or examiner
Sec 17:6 Limitations on authority of the debtor in possession or trustee
Sec 17:7 Proposing a plan of reorganization
Sec 17:8 Additional remedies
Sec 17:9 Conclusion
APPENDIX 17A Official Bankruptcy Form 10: Proof of Claim
Chapter 18 The Plan of Reorganization
Sec 18:1 Introduction
Sec 18:2 Types of reorganization plans — Overview
Sec 18:3 Types of reorganization plans — Compromise
Sec 18:4 Types of reorganization plans — Extension
Sec 18:5 Types of reorganization plans — Pro rata participation
Sec 18:6 Types of reorganization plans — Conversion to equity
Sec 18:7 Types of reorganization plans — Transfer of assets
Sec 18:8 Types of reorganization plans — Combination plans
Sec 18:9 Types of reorganization plans — Pros and cons
Sec 18:10 General considerations in negotiating the plan — Advantages of simplicity
Sec 18:11 General considerations in negotiating the plan — Provision for creditor representative
to oversee postconfirmation implementation
Sec 18:12 General considerations in negotiating the plan — Third party proponent
Sec 18:13 General considerations in negotiating the plan —Parties involved in the negotiations
Sec 18:14 General considerations in negotiating the plan — Deferral of immediate cash return
Sec 18:15 General considerations in negotiating the plan — Allocation of returns between
secured and unsecured creditors
Sec 18:16 General considerations in negotiating the plan — Evaluation of liquidation option and plan's feasibility
Sec 18:17 General considerations in negotiating the plan — Management and ownership
Sec 18:18 General considerations in negotiating the plan — Cooperation required from
secured and unsecured creditors
Sec 18:19 Internal versus external plans of reorganization
Sec 18:20 Internal versus external plans of reorganization — Contents of a plan of
reorganization — Overview
Sec 18:21 Internal versus external plans of reorganization — Classification
Sec 18:22 Internal versus external plans of reorganization — Impairment
Sec 18:23 Internal versus external plans of reorganization — Implementation
Sec 18:24 Internal versus external plans of reorganization — Contracts, suits, and settlements
Sec 18:25 Internal versus external plans of reorganization — Sale and liquidation
Sec 18:26 Internal versus external plans of reorganization — Retention of bankruptcy
court jurisdiction
Sec 18:27 Internal versus external plans of reorganization — Creditor options
Sec 18:28 Internal versus external plans of reorganization — Consolidation of multiple related debtors
Sec 18:29 Internal versus external plans of reorganization — Time schedules
Sec 18:30 Internal versus external plans of reorganization — Priority claims
Sec 18:31 Internal versus external plans of reorganization — Additional provisions
Sec 18:32 Disclosure statements
Sec 18:33 How to read a plan and disclosure statement
Sec 18:34 Events prior to the confirmation hearing — Hearing on disclosure statement
Sec 18:35 Events prior to the confirmation hearing — Mailing of documents
Sec 18:36 Events prior to the confirmation hearing — Solicitation of acceptances or rejections
Sec 18:37 Events prior to the confirmation hearing — Voting
Sec 18:38 The confirmation hearing — Notice
Sec 18:39 The confirmation hearing — Types of confirmation
Sec 18:40 The confirmation hearing — Criteria for confirmation — Overview
Sec 18:41 The confirmation hearing — Criteria for confirmation — Compliance,
solicitation, and disclosure
Sec 18:42 The confirmation hearing — Criteria for confirmation — Regulated industries
Sec 18:43 The confirmation hearing — Criteria for confirmation — Return to creditors
Sec 18:44 The confirmation hearing — Criteria for confirmation — Acceptance by creditors
Sec 18:45 The confirmation hearing — Criteria for confirmation — Priority creditors
Sec 18:46 The confirmation hearing — Criteria for confirmation — Retiree benefits
Sec 18:47 The confirmation hearing — Criteria for confirmation — Feasibility
Sec 18:48 The confirmation hearing — "Cram down"
Sec 18:49 Postconfirmation concerns — Overview
Sec 18:50 Postconfirmation concerns — Modification
Sec 18:51 Postconfirmation concerns — Revocation
Sec 18:52 Postconfirmation concerns — Dismissal and conversion to liquidation
Sec 18:53 Postconfirmation concerns — Preservation of interest
Sec 18:54 Postconfirmation concerns — Enforcement orders
Sec 18:55 Postconfirmation concerns — Disputed claims
Sec 18:56 Postconfirmation concerns — Delays in distribution
APPENDIX 18A Sample Plan of Reorganization Form
APPENDIX 18B Sample Disclosure Statement Form
Chapter 19 The Individual Debtor
Sec 19:1 Introduction
Sec 19:2 Types of relief
Sec 19:3 Chapter 7
Sec 19:4 Chapter 13
Sec 19:5 Chapter 11
Sec 19:6 Creditor concerns — General
Sec 19:7 Creditor concerns — Discharge
Sec 19:8 Creditor concerns — Reaffirmations
Sec 19:9 Creditor concerns — Exempt property
Sec 19:10 Conclusion
APPENDIX 19A Sample Reaffirmation Agreement Form
Chapter 20 Mass Tort Claims
Sec 20:1 Introduction
Sec 20:2 When does a tort victim have a claim?
Sec 20:3 Notice
Sec 20:4 Parity treatment
Sec 20:5 Claims disposition
Sec 20:6 Environmental claims
Sec 20:7 Conclusion
