Personal Property Security Act

1. Personal Property Security Act

2. 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.)

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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.

14. Corporations • May use Div. Iproposal 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