Chapter 16: Creditor-Debtor Relations and Bankruptcy

Question 1

When a debtor fails to pay as promised.

Answer 1

Defaults

Question 2

A claim against property to satisfy a debt or protect a claim for the payment of a debt.

Answer 2

Lien

Question 3

Creates a special type of debtor-creditor relationship in which the real estate itself becomes security for the debt.

Answer 3

Mechanic’s lien

Question 4

These are put into place when a debtor fails to pay for labor and materials furnished for the repair or improvement of personal property, so that a creditor can recover payment.

Answer 4

Artisan’s lien

Question 5

A court-ordered seizure and taking into custody of property before a judgement is obtained on a past-due date.

Answer 5

Attachment

Question 6

When the court is satisfied that all the requirements have been met, it issues a __________ , which directs the sheriff or other officer to seize the debtor’s nonexempt property.

Answer 6

Writ of Attachment

Question 7

An order that directs the sheriff to seize and sell an of the debtor’s nonexempt real or personal property.

Answer 7

Writ of Execution

Question 8

Permits a creditor to collect a debt by seizing property of the debtor (such as wages or funds in a bank account) that is being held by a third party.

Answer 8

Garnishment

Question 9

Agreements between creditors and debtors for discharge of the debtor’s liquidated debts on payment of a sum less than that owed.

Answer 9

Creditors’ composition agreements

Question 10

A written instrument that gives the creditor an interest in, or lien on, the debtor’s real property as security for payment of a debt.

Answer 10

Mortgage

Question 11

Requires the borrower to pay a penalty if the mortgage is repaid in full within a certain period.

Answer 11

Prepayment penalty

Question 12

The legal process by which the lender repossesses and auctions off the property that has secured the loan.

Answer 12

Foreclosure

Question 13

A postponement of part or all of the payments on a loan for a limited time.

Answer 13

Forbearance

Question 14

A contract that describes their respective rights and responsibilities as they try to resolve the default with proceeding to foreclosure.

Answer 14

Workout agreement

Question 15

The right of a defaulting borrower to redeem the property before the foreclosure sale by paying the full amount of the debt, plus any interests and costs that have accrued.

Answer 15

Right of redemption

Question 16

A promise made by a third person to be responsible for the debtor’s obligation.

Answer 16

Suretyship

Question 17

The third-party in a “Suretyship”

Answer 17

Surety

Question 18

The third-party making a “Guaranty”

Answer 18

Guarantor

Question 19

Means that any right that the creditor had against the debtor now becomes the right of the surety.

Answer 19

Right of subrogation

Question 20

The surety is entitled to receive from the debtor all outlays made on behalf of the suretyship arrangement.

Answer 20

Right of reimbursement

Question 21

A co-surety’s liability either is determined by agreement or, in the absence of agreement, is set at the maximum liability under the suretyship contract.

Answer 21

Right of contribution