7.5 - Suretyship

Question 1

One who agrees to be liable of the debt or obligation of another:

Answer 1

Surety

Question 2

A surety transaction involves 3 parts:

Answer 2

Creditor (the oblige)
The principal debtor (obligor)
Surety

Question 3

Is directly liable on the contract and is distinguished:
Is liable to the creditor only if the debtor does not perform his order duty to the creditor:

Answer 3

Surety
Guarantor

Question 4

Requires written evidence of the promise to answer for the debt of another signed by the surety:

Answer 4

Statue of frauds

Question 5

When a debtor defaults in a suretyship situation, the creditor may do any of the following in any order:

Answer 5

1. Immediately demand payment from the surety
2. Immediately demand payment from the debtor
3. Immediately go after collateral if there is any

Question 6

The principal debtor owes the surety:

Answer 6

A duty to perform

Question 7

If the principal fails to pay the creditor, the surety may:

Answer 7

Bring a suit for exoneration in equity to compel the principal to pay

Question 8

After paying the principal debtors obligation, the surety may enforce:

Answer 8

Any rights that the creditor had against the principal debtor

Question 9

The surety is entitled to reimbursement from his principal debtor for any amount the surety paid on behalf of the debtor. This is also called:

Answer 9

Right to indemnification

Question 10

Two or more sureties of the same obligation. Jointly and severally liable.

Answer 10

Cosureties

Question 11

If a surety in a cosureties situation has paid more than their share, they are entitled to:

Answer 11

Contribution from the cosureties for their share of the payment

Question 12

If the contract does not specify the liability of each surety…

Answer 12

Each surety is liable for a pro rata share determined by the number of solvent sureties

Question 13

Where cosureties are obligated for varying amounts by their agreement…

Answer 13

Each surety remains liable for the original amount stated in the agreement

Question 14

There are 3 solvent and 2 insolvent sureties. How much is each surety responsible for?

Answer 14

Each solvent surety is liable for 1/3 of the debt

Question 15

C loans D 9,000. X, Y and Z agree to be cosureties. The maximum liability of each is: X = 6,000; Y = 3,000; and Z = 9,000. After making payments, D defaults and Z pays the entire balance of 6,000. How much can Z collect from X and Y?

Answer 15

X = 6/18 X 6,000 = 2,000
Y = 3/18 X 6,000 = 1,000

Question 16

If a cosurety’s obligation is discharged in bankruptcy, their share should:

Answer 16

Not be considered in determining the pro rata share of the remaining cosureties

Question 17

C loans D 9,000. X, Y, and Z agree to be cosureties. The maximum liability for each is: X = 6,000; Y = 3,000, and Z = 9,000. After makin payments, D defaults and Z pays the entire balance of 6,000. X’s debt, including their surety obligation, were previously discharged in bankruptcy. How much can Z collect from X and Y?

Answer 17

X = 0 due to default
Y = 3/12 X 6,000 = 1,500

Question 18

An unpaid surety is called:

Answer 18

Gratuitous surety

Question 19

A variation of a contract that changes a compensated surety’s risk will discharge the surety only if:

Answer 19

The change is material and increases the surety’s risk of loss

Question 20

When a debtor owes a creditor money and does not have sufficient funds to pay, besides filing a petition in bankruptcy, the debtor can:

Answer 20

Enter into a creditor’s composition OR make an assignment for the benefit of creditors

Question 21

An agreement between the debtor and at least two creditors that the debtor pays the creditors less than their full claims in full satisfaction of their claims:

Answer 21

Creditors composition

Question 22

In this, the debtor transfers some or all of their property to a trustee who disposes of the property and uses the proceeds to satisfy the debtors debts. The debtor is not discharged from unpaid debts by this procedure.

Answer 22

An assignment for the benefit of creditors

Question 23

Creditors without a security interest or mortgage in the debtor’s property can gain rights in the debtors property through:

Answer 23

Imposition of a judicial lien on the property in the debtor’s hand OR garnishment of property in the hands of a third party

Question 24

If the creditor has reason to believe that the debtor will not pay, the creditor can:

Answer 24

Ask the court to provisionally attach a piece of the debtors property

Question 25

This excluded items of a person’s household, up to a certain mount, from the liens of most creditors:

Answer 25

Homestead exemption

Question 26

If a debtor is adjusted to owe a creditor money and the judgement has gone unsatisfied, the creditor can request the court to impose this on specific property owned and possessed by the debtor:

Answer 26

Judicial lien

Question 27

Where a debtor is adjusted to owe a creditor money and the debtor has property in the hands of a third party, this may be sought:

Answer 27

Garnishment

Question 28

This orders the person holding the property to turn it over to the creditor. Social security payments are not subject to this. And states often limit the amount of an employee’s wages that may be subject to this.

Answer 28

Garnishment

Question 29

This occurs when a debtor transfers property with the intent to hinder, delay, or defraud any of their creditors:

Answer 29

Fraudulent conveyance

Question 30

Is a fraudulent conveyance void or voidable?

Answer 30

Both

Question 31

In determining if a fraudulent conveyance occurred, a court will consider whether:

Answer 31

1. The transfer was to an insider
2. The debtor retained possession or control of the property
3. The transfer was not disclosed or was concealed
4. The transfer was substantially all the debtors assets
5. The value received by the debtor for the asset was not reasonable
6. The debtor was insolvent or became insolvent shortly after

Question 32

This curbs abuses by collection agencies in collecting consumer credits:

Answer 32

The emerald fair debt collection practices act (FDCPA)

Question 33

The FDCPA restricts collection agencies ability to call third parties, such as relatives, to indirectly pressure the debtor. However, the collection agency can contact third parties to:

Answer 33

Discover a debtors whereabouts but may not disclose that it is a collection agency

Question 34

What other items does the FDCPA prohibit?

Answer 34

1. Contacting the debtor at inconvenient or unusual times
2. Contacting the debtor directly if represented by an attorney
3. Using harassing or abusive language
4. Making false or misleading claims
5. Contacting the debtor at their place of employment I the employer rejects

Question 35

A debtor has the power to terminate the collection agency’s contacts by:

Answer 35

Notifying the agency in writing that the debtor will not pay the debt and to stop further communication