Donald has declared chot 7 bankruptcy. Which of the following transactions (payment, sale or lien) would be considered preferential or fraudulent and as such can be invalidated by the bankruptcy trustee and returned to Donald's estate? 1. Donald purchases a lawn tractor from Sears for $3000, and Sears attaches a security interest to the lawn tractor. 60 days after the purchase, Donald files for bankruptcy. Can the lien (security interest) be invalidated? Explain why or why not. I would say yes that the lien could be invalidated because it is not within the lines of the ordinary course regarding the debtors' affairs. It is not a normal thing in the billing history to be out buying lawn tractors often. 2. Over a year ago, Donald had the engine in his car rebuilt, and Donald owes his mechanic $4600 for the repair work. His pay agreement requires him to pay $400 a month plus interest. 70 days before Donald files for bankruptcy, he pays his mechanic $2000 on the debt. Can payment to the mechanic be invalidated by the trustee? Explain why or why not. Thet would be considered a preferential payment. I say it would be that because he did have a stable payment that was set up way before he filed for the bankruptcy, and because he did pay him off before he filed. 3. Donald owes his uncle Joe $8,500 on a personal loan he took out to purchase an automobile. The loan requires that he pay his uncle $500 a month until the balance is paid off. Six months before filing bankruptcy, he makes a payment of $3000 on the loan. Can this payment be invalidated? Explain why or why not. I think this would be a fraudulent transfer. 4. Donald rents an apartment, and his monthly rent payment is $1200. He makes the rent payment in April, May and June. During the first week of July, Donald files for bankruptcy. Can his rent payments be invalidated by the trustee? Explain why or why not. I don't think that they could be invalidated, those payments are within the normal plan for the debtors affairs. 5 . Donald owes his attorney, Michael, $6000 for representing him in his divorce. Because he has been unable to collect the debt, Michael is threatening to sell the debt to the Kneecap Collection Agency. To reassure Michael that he will repay the debt, Donald gives Michael a security interest in Donald's Rolex watch. 82 days later Donald the files for bankruptcy. Can the trustee invalidate the lien (security interest) in the Rolex watch? Explain why or why not. This can be considered a preferential lien, and this can be invalidated. 6. Donald owns a painting by Edward Hopper that has an appraised value of $75,000. Nine months before he declares bankruptcy, Donald sells the painting to his business partner, Daphne for $25,000. Can the trustee invalidate this transaction? Explain why or why not. I think because he sold it and didn't buy it, I would assume then that the $25,000 would just go to the creditors, so technically then the trustee would probably be able to invalidate the order which would be in order to be able to distribute the debtor's estate. 7. Donald hires Greenworks Landscaping to install an automatic lawn irrigation system, and he pays Greenworks $2700 for the system. 28 days later Donald files for bankruptcy. Can the trustee invalidate the payment to Greenworks? Explain why or why not. I think that it would be invalidated because of the fact that that is not within the debtors' ordinary affairs