Personal Property Security Act

Types of Property Personal Property –Tangible items of moveable property (chattels) –Intangible items Intellectual property Choses in action (rights, like negotiable instruments) Real Property –Land and anything permanently affixed to the land (buildings, structures, etc.)

Personal Property Security Act An admininistrative act, created to streamline the process of registering different kinds of interests in personal property Created the Personal Property Security Registry Method of registration and collection now common to all forms of security

Types of Security Conditional Sales Contract –Seller is financing, retains title until last payment is made –Two-step transaction, first possession passes, then title Chattel Mortgage –Third party financed –Charge registered against title to good Assignment of Book Debts –Right to collect accounts receivable

How do you secure your interest under the PPSA? Enter into contract –Chattel mortgage, whatever the agreement is Secured interest attaches to collateral –Parties perform or at least partially perform the contract –Usually indicated by a transfer of possession, money Interest is perfected –Register contract at PPSR – gives you priority –May take physical possession of goods, but must establish priority

Priority First to register, has first priority over other registered creditor Each creditor in line gets paid out in full, before next in line Registered creditors have priority over unregistered creditors for the items specified in the security agreement

Collection In case of default, creditor may EITHER seize the goods OR sue under the contract Cannot do both in B.C. Creditor can personally seize in any way that does not break the law May hire private bailiff, but same restrictions If debtor being difficult, may get a court order for seizure – sheriff executes and may use necessary force In B.C., if debt is personal, and debtor has paid off 2/3 or more, MUST get court order before seizing

Options Once Seized Retain goods in full satisfaction OR –Serve notice to retain on debtor/registered creditors –If no objection filed within 15 days, creditor keeps goods. If objection, must … Sell goods –20 days notice of sale unless perishable goods –Serve debtor and “interested parties with notice –Debtor can redeem during this period, if pays total debt, costs of collection and interest –Whatever the creditor does, they MUST follow Act –If creditor breaches Act, debtor may sue for return of interest, part of principal of debt

Fraudulent Transfer/Preferences Fraudulent Conveyance or Transfer –Transferring title to assets to a friend, family member, corporation in an attempt to avoid creditors Fraudulent Preference –Paying off one or more creditors in preference to others

Bankruptcy and Insolvency Act –Determines process by which debtors convey their assets to a trustee in bankruptcy who distributes them to the creditors –Provides alternative to bankruptcy Allows debtor to propose alternative method of satisfying claims –Discharge removes impossible burden of debt, allowing debtors to restructure lives

Bankruptcy Bankruptcy v. Insolvency - define Voluntary v. Involuntary Assignment - turn your assets over to a trustee -creditors assign you into bankruptcy must owe > $1000 and committed act of bankruptcy Trustee Distributes assets according to the priority of their security

Creditors Secured –Have priority to the asset they hold security on Preferred – s. 136 BIA –Page 633 of text – funeral, bakruptcy costs, wages, maintenance/alimony etc. Unsecured –Share on a pro rata basis

Discharge Individual debtor discharged from most claims – student loans. maintenance/alimony Automatic after 9 mths if first bankruuptcy Trustee/creditors may oppose May order conditional discharge –Payment schedule, etc.

Corporations May use Div. I proposal under BIA to avoid bankruptcy Large corporations may use Companies’ Creditors Arrangements Act May be personal liability for directors Receivership triggered by terms of security agreement with creditor