#1 - Unsecured Creditors

Question 1

Amercement

Answer 1

when a creditor holds the sheriff liable for failure to execute the levy against D

Question 2

Unsecured Creditor

Answer 2

This is a creditor without a security interest, but having a claim against debtor for which no specific assets (collateral) are pledged.

Question 3

Judgment Creditor

Answer 3

unsecured creditor who has obtained court judgment to establish liability

Question 4

Secured Creditor

Answer 4

Creditor with a claim against debtor for which specific assets are pledged

Question 5

Debtor

Answer 5

one who owes a debt or the performance of an obligation to another

Question 6

Collateral

Answer 6

Collateral is property subject to a security interest.

Question 7

Landlord’s Lien (Example of Involuntary Lien)

Answer 7

in almost every state, all the personalty you have in your rented premises is subject to a security interest in favor of your landlord that secures your obligation to pay your rent. Your landlord has a sec interest because the legislatures have said landlords get lien on personalty. Hotels have a similar thing. The luggage you bring in is subject to a personal lien.

Question 8

Terminology: Lien, Security Right, Security Interest

Answer 8

Lien and security right are the same thing. But security interest means a lien or security right under Art 9. A mortgage is a lien or security right over real estate.

Question 9

Setoff

Answer 9

Setoff = common law right of creditor to balance mutual debts with a debtor. If debts are equal, creditor and debtor will not be owed anything from each other; if debts are unequal, the portion of larger debt will survive.

Example: Debtor owes bank for 300k loan, while debtor has 16k in account at bank. Bank takes the 16k and debtor still owes 284k to bank. Whoever owes more remains in debt.

Question 10

Execution

Answer 10

Execution = the judicial process that every state establishes to let you take your judgment and go get the stuff that is the object of the judgment)
1. File writ of execution with court
2. Clerk of court then issues the writ
3. Sheriff levies on property
4. Sheriff sells the property
5. Sheriff applies proceeds from sale to pay down the debt
6. Sheriff files a “return” which reduces judgment (the sheriff takes his cut)
7. Sheriff repeats until judgment satisfied or there is no property left to seize

Question 11

Exemptions from Execution: Things the Sheriff Can’t Seize

Answer 11

Generally, sheriff can’t seize “necessities of life” enumerated under state statutes and often limited based on usage or dollar amount.

If you seize property that’s exempt, it’s conversion. The sheriff is technically liable, but realistically the sheriff requires that you the judgment creditor will agree to indemnify the sheriff for any damages.

Question 12

Garnishment

Answer 12

Garnishing wages or a bank account is basically the best way to go as an unsecured creditor because you get cash. But every state exempts wages up to a certain amount.

Note: judicial interest runs on the judgment and it grows over time, so if you’re just garnishing a little bit you may never catch up. At some point you just give up.

Question 13

Levy

Answer 13

Levy means seizure of property pursuant to execution.

Majority Rule: sheriff must take physical possession of property

Sheriff follows creditors’ “instructions for levy”

Sheriff would be liable for trying to seize exempt assets. REMEMBER TO MENTION ONLY TO GO AFTER THE NON-EXEMPT ASSETS WHEN TELLING THE SHERIFF WHAT TO LEVY.

Question 14

Can unsecured creditors do self-help repossession?

Answer 14

NO, they can’t! To give unsecured creditors a stronger position, have them become a judgment creditor. Go to court, sue debtor, get court judgment. Become judgment creditor. Then get sheriff to seize property through levy.