Chapter 20: Causes of Preferences and Securities

Question 1

Limited vs Unlimited liability of debtors

Answer 1

Debtors are subject to unlimited liability for the fulfillment of obligations. The only cases in which debtors are subject to limited liability is in the case of succession (i.e. the estate of the heir is separate to the deceased) and in the case of separate legal entities.

Question 2

Preferences (definition)

Answer 2

Each creditor has equal rights to satisfaction except in the case of preferences (e.g. bankruptcy).

Question 3

Securities (definition)

Answer 3

Securities are how creditors may enforce obligations: they include personal surety (a guarantor, third parties, estate is given as collateral) and collateral (power to seize assets).

Question 4

Privileges (causes for preference)

Answer 4

Preferential treatment (“preferred creditors”) which may be special (upon specific property) or general (all movable property). This applies in the case of a company. Italian tax authorities are also granted privileges.

Question 5

The pledge (causes for preference)(hint: down payment)

Answer 5

Kind of like a down payment, but can also be a “thing”, and the pledgee is allowed to enjoy/dispose of it (“secured creditors”).

Question 6

The mortgage (causes for preference)(hint: loans)

Answer 6

Like a loan, they can seize your property or what you got with the mortgage (e.g. used it to buy a car, can seize the car) (“secured creditors”).

Question 7

Ways for protection of the creditor

Answer 7

Subrogation (exercise rights against third parties where debtor fails to perform)

Claw-back action (if debtor sells/transfers property, you can revoke the action)

Attachment of property (can “attach” property to prevent debtor from disposing of it).