Claims of secured creditors may be allowed to enable such creditors to participate in the proceedings but shall be allowed for such sums only as shall be proved to be due, over and above the value of the securities, and dividends shall be paid only upon the excess of the claim over the value of the security at the time of the commencement of the proceedings.
History: 1983 a. 219
; 1997 a. 253
Judicial Council Note, 1983: The last sentence of sub. (1), providing an appeal deadline of 30 days after entry of order, is repealed for greater uniformity. An appeal must be initiated within the time specified in s. 808.04 (1), stats. [Bill 151-S]
Under this section, a secured creditor may become a party by general appearance or by filing a claim for a deficiency on a secured claim and thus be allowed to participate. The creditor's security cannot be taken away without consent, and the court adjudicating a ch. 128 proceeding can do no more than value the security for the purpose of allowing the unsecured part of the claim. Wisconsin Brick & Block Corp. v. Vogel, 54 Wis. 2d 321
, 195 N.W.2d 664
The trial court erred in subordinating a shareholder's claim on the grounds that the shareholder's advance to the corporation was a capital contribution rather than a debt when the court did not evaluate the sufficiency of the corporation's stated capital and relied entirely on the corporation's inability to obtain commercial financing. Gelatt v. DeDakis, 77 Wis. 2d 578
, 254 N.W.2d 171
Under Wisconsin Brick & Block
a secured creditor's participation in the receivership proceeding is necessary to establish consent. That case does not suggest that the secured creditor's participation is sufficient, by itself, to establish consent nor does it suggest that the creditor's participation in the proceedings trumps the secured creditor's express objection to the sale of its collateral. BNP Paribas v. Olsen's Mill, Inc., 2011 WI 61
, 335 Wis. 2d 427
, 799 N.W.2d 792
The court may compel the debtor to discover any property alleged to belong or to have belonged to him or her, the disposition of the property and the consideration and all the circumstances of the disposition. Every officer, agent or stockholder of a corporation, every manager or member of a limited liability company and every person to whom it shall be alleged that any transfer of property has been made, or in whose possession or control the property is alleged to be, may be compelled to testify in relation to the property and to the transfer or possession of the property; but the witness shall not be liable to criminal prosecution or proceeding for or on account of his or her testimony.
The immunity provided under sub. (1)
is subject to the restrictions under s. 972.085
A debtor who is compelled to answer an interrogatory may be granted immunity without a request from the district attorney. A refusal to answer the interrogatory without an order under this section was sufficient invocation of the privilege against self-incrimination. State v. Worgull, 128 Wis. 2d 1
, 381 N.W.2d 547
Order of distribution. 128.17(1)(1)
The order of distribution out of the debtor's estate shall be as follows:
The actual and necessary costs of preserving the estate subsequent to the commencement of the proceedings.
Costs of administration including a reasonable attorney's fee for the representation of the debtor.
Wages, including pension, welfare and vacation benefits, due to workmen, clerks, traveling or city salespersons or servants, which have been earned within 3 months before the date of the commencement of the proceedings, not to exceed $600 to each claimant.
Taxes, assessments and debts due the United States, this state or any county, district or municipality.
Debts due to creditors generally, in proportion to the amount of their claims, as allowed.
After payment of the foregoing, the surplus, if any, shall be returned to the debtor.
Debts to become due as well as debts due may be proved, but a lessor's claim shall be limited to past due rent, and to any actual damage caused the lessor by a rejection of the lease on the part of the debtor or by its termination by force of its provisions. The lessor shall be entitled to payment in full, at the rate specified in the lease, for the period of any actual occupancy by the receiver or assignee.
The receiver or assignee may pay or the court may order a dividend to be paid at any time, making such provision as shall be necessary for the protection of claims in dispute.
The receiver or assignee shall, as soon as practicable, report to the court the amount due the employees of the debtor and the court shall order the receiver or assignee to promptly pay, if practicable, such wage claims as have priority under this chapter.
Claims which for want of record or for other reasons would not have been valid liens as against creditors of the debtor armed with process, pursuant to which such property has been attached or levied upon, shall not be liens against the estate.
Whenever a creditor is prevented from enforcing his or her rights as against a lien created or attempted to be created by his or her debtor, the receiver or assignee shall be subrogated to and may enforce such rights of such creditors for the benefit of the estate.
A lien created by, or obtained in or pursuant to any action that was begun against, a person within 4 months before the commencement of proceedings for the appointment of a receiver or the filing of an assignment under this chapter shall be dissolved by the appointment of a receiver or the qualification of the assignee, and the receiver or assignee shall be subrogated to the rights of the holder of the lien for the benefit of all creditors, if:
It appears that said lien was obtained and permitted while the debtor was insolvent, and that its existence or enforcement will work a preference, or
That such lien was sought and permitted in fraud of the provisions of this chapter.
Liens given or accepted in good faith and for a present consideration which have been properly recorded or filed shall, to the extent of such present consideration only, not be affected by the provisions of this chapter.
All conveyances, transfers, assignments or encumbrances of a debtor's property, or any part of a debtor's property, made or given by the debtor within 4 months prior to the filing of a petition or assignment under this chapter with the intent and purpose on the debtor's part to hinder, delay or defraud any of the debtor's creditors shall be void as against the debtor's creditors except as to purchasers in good faith and for a present fair consideration.
All property which is the subject of a conveyance, transfer, assignment or encumbrance rendered null and void under sub. (5)
shall, if the property is not exempt from execution, be and remain a part of the assets and estate of the debtor and shall pass to the debtor's receiver or assignee, whose duty it shall be to recover and retain the same for the benefit of the creditors.
All conveyances, transfers or encumbrances of a debtor's property made by the debtor at any time within 4 months prior to the filing of a petition or assignment hereunder, and while insolvent, which are null and void as against creditors by the laws of this state, shall pass to the receiver or assignee and be by him or her recovered for the benefit of the creditors.
All levies, judgments, attachments or other liens obtained through legal proceedings against a person who is insolvent at any time within 4 months prior to the filing of a petition or assignment under this chapter are void in case a receiver is appointed or an assignee qualifies. The property affected by the levy, judgment, attachment or other lien shall be wholly discharged and released from the levy, judgment, attachment or lien, and shall pass to the receiver or assignee as a part of the estate of the debtor unless the court shall, on due notice, order that the right under the levy, judgment, attachment or lien shall be preserved for the benefit of the estate. In that case, the right under the levy, judgment, attachment or lien may pass to and shall be preserved by the receiver or assignee for the benefit of the estate.
Title to property. 128.19(1)(1)
The receiver or assignee upon qualifying shall be vested by operation of law with the title of the debtor as of the date of the filing of the petition or assignment hereunder, except so far as it is property which is exempt, including:
Property transferred by the debtor in fraud of the debtor's creditors.
Property which prior to the filing of the petition or assignment the debtor could by any means have transferred or which might have been levied upon and sold under judicial process against the debtor.
Rights of action arising upon contracts or from the unlawful taking or detention of or injury to the debtor's property.
The receiver or assignee may avoid any transfer by the debtor of the debtor's property which any creditor might have avoided and may recover the property so transferred or its value from the person to whom it was transferred unless the transferee was a bona fide holder for value prior to the filing of the petition or assignment hereunder.
History: 1993 a. 492
; 1995 a. 225
Settlement of receiver's or assignee's accounts. 128.20(1)(a)
Every receiver or assignee shall, within 6 months after the time limited for filing claims or within any further time that the court allows, file with the clerk of circuit court a full and itemized statement, verified by the receiver's or assignee's oath, showing all of the following in regard to the receivership or assignment:
The manner of the receiver's or assignee's dealing with the property received.
The amount of money realized by the receiver or assignee.
The condition of the property and funds in the receiver's or assignee's possession.
The receiver's or assignee's receipts and disbursements.
The receiver's or assignee's claim for compensation and administration expenses.
If any receiver or assignee neglects to apply promptly for a settlement of his or her account, the court may, upon application of any creditor, compel the making and filing of the account or settlement of the account and in that case the receiver or assignee may be denied compensation.
Upon filing the report described in sub. (1) (a)
, the receiver or assignee may apply to the court upon not less than 10 days' notice by mail to the respective creditors named in the report, for a final settlement of the account. The court shall fix a time and place for the hearing of objections or taking of evidence and by order settle and adjust the accounts and the compensation and expenses of the receiver or assignee, regardless of whether objection is made. The order shall be conclusive upon all parties including the sureties of the receiver or assignee. The receiver or assignee or any creditor may appeal from the order in the manner prescribed for appeals in civil actions except that the receiver or assignee may file a notice and undertaking with the clerk without other service of the notice and undertaking. The receiver or assignee shall be discharged of the trust and the bond canceled upon compliance with the final order of the court.
Judicial Council Note, 1983: Sub. (2) is amended by repealing the appeal deadline of 30 days from entry for greater uniformity. An appeal must be initiated within the time specified in s. 808.04 (1), stats. [Bill 151-S]
Voluntary proceedings by wage earners for amortization of debts. 128.21(1)(1)
Any person whose principal source of income consists of wages or salary may file a verified petition with the circuit court in the county of his or her residence stating that the person is unable to meet current debts as they mature, but is able to make regular future payments on account sufficient to amortize the debts over a period of not more than 3 years, and that he or she desires the aid of the court to effectuate the amortization. The petition shall also set forth the names and addresses of any creditors who have levied any executions, attachments or garnishments, and of any garnishees, and the court shall forthwith, by order, require that proceedings for the enforcement of the executions, attachments or garnishments be stayed during the pendency of proceedings under this section. The petition shall be accompanied by the fee prescribed in s. 814.62 (2)
After the filing of a petition under this section and until the dismissal of the proceedings, no execution, attachment or garnishment may be levied or enforced by any creditor seeking the collection of any claim which arose prior to the proceedings, unless such claim is not included by the debtor in the claims to be amortized pursuant to sub. (3r)
. With respect to the claims to be amortized the time between the filing of the petition and the dismissal of the proceedings shall not be counted as a part of the period of any statute of limitation.
On the filing of the petition the court shall appoint a disinterested trustee. The trustee shall forthwith meet with the debtor; make a list of the debtor's creditors, with their addresses and the amounts owing to each, which the debtor shall sign and verify; and send notices to each of the amount claimed to be due that creditor, and of a meeting to be held in the trustee's office not less than 5 nor more than 10 days thereafter, for the purpose of considering an amortization plan and of determining the claims to be covered by the plan. Upon conclusion of the meeting the trustee shall do either of the following:
Report to the court that no equitable plan of amortization is feasible or needed in which case the court may forthwith dismiss the proceedings.
Recommend to the court a plan of amortization calculated by weekly or monthly payments, to discharge in full the claims of the creditors listed in the plan within a period of not exceeding 3 years.
The trustee shall attach to a plan recommended under sub. (3) (b)
the written consents and objections, if any, of the creditors present or represented at the meeting, and an analysis, with the trustee's recommendations regarding the disposition, of any claim whose amount is in dispute or appears to be uncertain.
The court shall forthwith enter an order approving the plan recommended under sub. (3) (b)
and determining, for the purposes of the plan, the amounts of the claims, unless in any such written objection included under sub. (3g)
a creditor asks for a hearing respecting the plan or the amount of the creditor's claim, or the person to be trustee, in which case the court shall set a date for a hearing as soon as may be, on notice of the debtor, the trustee and creditors. At the hearing the court shall enter an order either approving the plan, if satisfied that it is feasible and equitable, and determining, for the purposes of the plan, the amounts of the claims, or dismissing the proceedings, or modifying and approving the plan as the court considers just; and the court may appoint a different trustee if the one appointed is objected to.
If the plan recommended under sub. (3) (b)
or a modification of the plan is approved under sub. (3r)
, the debtor shall make the periodic payments provided for in the plan to the trustee, and may make additional payments from time to time to the trustee, and the trustee shall distribute the payments proportionally among the creditors listed in the plan, less all of the following:
A deduction for the trustee's compensation to be fixed by the court at the time of approving the plan in an amount not exceeding 7 percent of each distribution, if the payments are made through an assignment to the trustee of a portion of the debtor's wages or salary, and not exceeding 10 percent if no such assignment is made.
A deduction equal to the amount of the postage necessary for the mailing of payments and of the notices of the meeting provided for in sub. (3)
, and of any correspondence with creditors.
If any payment under sub. (4)
is so small as to make its immediate distribution impractical or needlessly expensive, the trustee shall deposit it in a special trustee account, and may make additional deposits until the amount is large enough for distribution, but no payments shall remain undistributed for longer than 90 days.
If the debtor defaults in any payment provided for under the plan for a period of more than 30 days the trustee shall, and before the end of the 30-day period may, report the matter to the court with the trustee's recommendations. The court shall either dismiss the proceedings or, if satisfied from the trustee's report that the debtor is in good faith and should be able to make good the default, extend the period of grace for not to exceed 30 days. At the end of the grace period, the trustee shall again report to the court and if all defaults have not then been cured the court shall immediately dismiss the proceedings. If the debtor makes preferential payments to creditors during the pendency of the proceedings, or appears for any reason to be abusing the privileges of this section, the trustee shall promptly report the matter to the court and the court may dismiss the proceedings. If the claims of all creditors as listed in the plan are satisfied in full, the trustee shall, upon completion of the final distribution, report to the court and the court shall dismiss the proceedings.
Neither the determination of the amount of any claim for the purposes of the plan, nor the acceptance of payments under the plan, shall affect the right of any creditor to litigate the creditor's claim and obtain judgment on the claim, or the right of the debtor to dispute the claim. The amount of any judgment shall be substituted by the trustee for the amount fixed in the plan.
Any secured creditor who wishes to realize on his or her security shall give the trustee at least 5 days' notice in writing of the time, place and manner of the proposed realization, and shall notify the trustee of the amount realized, by which amount the creditor's claim as listed under the plan shall be reduced.
The supreme court may from time to time promulgate rules and forms, not inconsistent with this section, to carry out the intent of this section and to promote its effectiveness, and may cause forms of petitions to be printed and distributed to the clerks of the circuit courts who shall, upon request, and without charge, assist debtors in the preparation of their petitions.
The court in its discretion upon application, may amend or modify the plan of amortization and may make such other orders relating to the proceedings or the plan of amortization as are required.
Personal Receivership: An Alternative to Bankruptcy. Johnson. Wis. Law. Sept. 1990.
Uniform act governing secured creditor's dividends in liquidation proceedings. 128.25(1)(1)
As used in this section, unless the context or subject matter requires otherwise:
“Creditor's sale" includes any sale effected by the secured creditor by judicial process or otherwise under the terms of his or her contract or the applicable law for the purpose of realizing upon his or her security.
“Liquidation proceeding" includes all assignments for the benefit of creditors, whether voluntary or by operation of law; administration of insolvent decedents' estates; liquidations of insolvent banks; equity receiverships where the subject under receivership is insolvent; and any other proceedings for distribution of assets of any insolvent debtor, whether a person, decedent's estate, partnership, corporation or business association.
“Liquidator" means any person administering assets in any liquidation proceeding as defined in this section.
“Insolvent debtor" means any insolvent person, decedent's estate, partnership, corporation or business association involved in a liquidation proceeding as defined in this section.
“Secured creditor" means a creditor who has either legal or equitable security for his or her debt upon any property of the insolvent debtor of a nature to be liquidated and distributed in a liquidation proceeding, or a creditor to whom is owed a debt for which such security is possessed by some endorser, surety, or other person secondarily liable.
Secured creditor's claim must disclose security.
In a liquidation proceeding every secured creditor's claim against the general assets shall disclose the nature of the security. When a decedent's estate already in the course of administration is judicially declared insolvent or when in an equity receivership it is determined that the subject under receivership is insolvent, secured creditors having claims on file which do not comply with this subsection shall make disclosure within a time to be fixed by the court.
Effect of concealment.
Any secured creditor who with intent to evade the provisions of this section fails to disclose the existence of the security shall not be entitled to receive or retain dividends out of the general assets, unless the creditor thereafter releases or surrenders to the liquidator the security which the creditor has failed to disclose, or unless the creditor procures such release or surrender if the security is in the possession of an endorser, surety, or other person secondarily liable for the insolvent debtor.
Value of security credited upon claims.
Dividends paid to secured creditors shall be computed only upon the balance due after the value of all security not exempt from the claims of unsecured creditors and not released or surrendered to the liquidator, is determined and credited upon the claim secured by it.