Ch 15 Creditor/Debtor Relations

Question 1

Encumbrance

Answer 1

Claim upon something

Question 2

Lien

Answer 2

Encumbrance on property to satisfy the debt or protect a claim for payment of debts

Question 3

Mechanic’s Lien

Answer 3

Security for labor, materials or service on real estate (which secures the debt) - Doing work on someone’s property and they don’t pay you, place a lien on property

Question 4

Artisan’s Lien

Answer 4

Personal property, have a right to sell. Lost if property is voluntarily given to someone.

Question 5

Judicial Lien

Answer 5

Arise out of court decisions

Question 6

Judicial Lien: Writ of Attachment

Answer 6

Court can seize personal property BEFORE judgement is entered, very rare

Question 7

Judicial Lien: Writ of Execution

Answer 7

Court order to seize debtor’s personal stuff AFTER court ruling

Question 8

Garnishment

Answer 8

Permits a creditor to collect a debt by seizing property of debtor held by third party (garnish wages from employer)

Question 9

Settlement/Composition Agreement

Answer 9

Creditors take less than is owed on a liquidated debt, binding for those who agree

Question 10

Motgages

Answer 10

Written; give creditor interest in property as security for the debt’s payment

Question 11

Fixed rate

Answer 11

You want this; standard rate remains the same throughout the duration of a loan

Question 12

Adjustable rate

Answer 12

Stay away; the rate changes periodically (balloon mortgage)

Question 13

Foreclosure default

Answer 13

If homeowner fails to pay, the lender can foreclose

Question 14

Foreclose

Answer 14

Lender repossesses and auctions off the property that has secured the loan

Question 15

Avoiding Foreclosure

Answer 15

• Forbearance/Postpone Payments (lost job, need more time)
• Workout Agreement (owe $250k, pay $200k)
• Short Sale (selling property for balance of mortgage loan)

Question 16

Foreclosure Procedure

Answer 16

• Extinguishes borrower’s equitable right of redemption

- Bank must have standing to sue

Question 17

Redemption Rights

Answer 17

Buyer can pay full amount and exercise equitable rights of redemption; can be done 10 days after foreclosure

Question 18

Suretyship

Answer 18

Promise by third party to be primarily liable for debt (parents paying for an apartment if the child can’t)