Scenario 3 – Secured Transactions and Bankruptcy Bayside Restaurant Supplies agr

Question

Scenario 3 – Secured Transactions and Bankruptcy Bayside Restaurant Supplies agreed to sell 10 new commercial coffee makers and 5 freezers to [Restaurant Name] for $27,500. Bayside retained a security interest in the equipment. [Restaurant Name] agreed to pay for the equipment in equal installments over 48 months.

Evaluate Bayside’s rights as a creditor if [Restaurant Name] files bankruptcy 18 months after purchasing the equipment.

Discuss Bayside’s rights as a creditor if [Restaurant Name] sold the 2 refrigerators and 5 coffee makers for $750 approximately 30 days prior to filing bankruptcy.

Explain how a failure by Bayside to file a financing statement might impact the outcome of both scenarios.

Explanation / Answer

*Lets assume restaurants name as Seaside for ease ( please change it as per your needs)

1 - As per the above-given case Bayside had sold the said equipment to seaside restaurant, and agreed to get payment in 48 instalments, 18 months after supply the Seaside restaurant files for the bankruptcy. Here the Goods are sold for 18 months, hence according to the Bankruptcy Code, the bankruptcy trustee can recover the debtor's money only 90 days prior to filing the bankruptcy. Hence here nothing can be done, the above is NPA for Bayside.

2 - Here the Goods are sold 30 days before filing bankruptcy, hence according to the Bankruptcy Code, the bankruptcy trustee can recover the debtor's money only 90 days prior to filing the bankruptcy, Here Bayside can ask for the money or the equipment back.

3 - The Financial statements show the value of the company which it carries financially. This would help us to determine the health of the company financially, here if Bayside fails to file the financial statements, the sale of the equipment won't officially register and it would create impact on recovery, plus in scenario one, if the loss is to be written as bad debts, it should be officially registered in the books. this might also impact the future opportunities if the Bayside wants to borrow.

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