Business Scenarios 15–1.
Liens. Nabil is the owner of a relatively old home valued at $105,000. The home’s electrical system is failing, and the wiring needs to be replaced. Nabil contracts with Kandhari Electrical to replace the electrical system. Kandhari performs the repairs, and on June 1 submits a bill of $10,000 to Nabil. Because of financial difficulties, Nabil does not pay the bill. Nabil’s only asset is his home, but his state’s homestead exemption is $60,000. Discuss fully Kandhari’s remedies in this situation. (See Laws Assisting Creditors.) 15–2. Voluntary versus Involuntary Bankruptcy. Burke has been a rancher all her life, raising cattle and crops. Her ranch is valued at $500,000, almost all of which is exempt under state law. Burke has eight creditors and a total indebtedness of $70,000. Two of her largest creditors are Oman ($30,000 owed) and Sneed ($25,000 owed). The other six creditors have claims of less than $5,000 each. A drought has ruined all of Burke’s crops and forced her to sell many of her cattle at a loss. She cannot pay off her creditors. (See Liquidation Proceedings.)
(a) Under the Bankruptcy Code, can Burke, with a $500,000 ranch, voluntarily petition herself into bankruptcy? Explain.
(b) Could either Oman or Sneed force Burke into involuntary bankruptcy? Explain.
follow the iRac
Issue:What are the key facts and issues?
Rule:What rule of law applies to the case?
Application:How does the rule of law apply to the particular facts and circumstances of this case?
Conclusion: What conclusion should be drawn?