Chapter 29 Flashcards
Defaults
Failure to pay
Secured creditors
Those whose loans are backed by collateral
Collateral
Specific property that the borrower pledges to ensure repayment
Lien
A claim against a specific property to satisfy a debt
Mechanic’s lien
A statutory lien on the real property of another created to ensure payment for work performed and materials furnished in the repair or improvement of real property
- the real estate itself can become security of the debt
- governed by state law
When must the lien holder file written notice of lien
Within 60-120 days
artisan’s lien
A possessory lien given to a person who has made improvements and added value to another persons personal property as security for payment for services performed
- usually take priority
When is an artisan lien terminated
Once possession is voluntarily surrender unless the surrender is temporary
writ of attachment
A courts order to seize the debtors property prior to securing a judgment for a past due debt
when does attachment occur
Either at the time a lawsuit is filed or immediately after
Procedure for attachment
- Creditor files an affidavit stating failed to pay
- Creditor must post a bond to cover the court costs, value of property attached and value of the loss of use of that property suffered by the debtor
- Court will issue a writ of attachment
writ of execution
An order that directs the sheriff to seize and sell any of the debtors nonexempt real or personal property (within the jurisdiction)
Garnishment
A legal process used by a creditor to collect a debt by seizing the property of the debtor (such as wages) that is being held by a third party (such as the debtors employer)
- often a postjudgment remedy (but can be pre)
Can an employer fire an employee bc their wages are being garnished?
No
Creditors composition agreements
An agreement formed between a debtor and his or her creditors in which the creditors agree to accept a lesser sum than that owed by the debtor in full satisfaction of the debt
Mortgage
A written instrument that gives a creditor an interest in, or lien on, the debtor’s real property as security for the debt
Down payment
The part of the purchase price of real property that is paid in cash up front, reducing the amount of the loan or mortgage
Fixed rate mortgage
Has a fixed or unchanging rate of interest, payment remain the same
- monthly payments not exceed 28% of the persons monthly income
Adjustable rate mortgage
Interest rate changes periodically
- first set relatively low for a few years and then will adjust
- lower initial payments
- adjustment is calculated by adding a certain number of percentage points (margin) to an index rate (of gov interest rates)
Creditor protection
- Requiring mortgage insurance (if down payment is not at least 20% of purchase price)
- Recording the mortgage
- Including contract provisions
Prepayment penalty
A provision in a mortgage loan contract that requires the borrower to pay a penalty if the mortgage is repaid in full within a certain period
Foreclosure
A proceeding in which a mortgagee either takes title to or forces the sale of the mortgagors property in satisfaction of a debt
Mortgagee
The creditor
Mortgagtor
The borrower
Forbearance
A postponement of part or all of the loan payments
Workout agreement
A formal contract a debtor and his or her creditors in which the parties agree to negotiate a payment plan for the amount due on the loan instead of proceeding to foreclosure
Short sale
A sale of real property for an amount that is less than the balance owed on the mortgage loan, usually due to financial hardship. Both the lender and borrower must consent. Following a short sale, the borrower still owes the balance of the mortgage debt to the lender unless the lender agrees to forgive the debt
Right of redemption
The right of a defaulting borrower to redeem property before a foreclosure sale by paying the full amount of the debt, plus any interest and costs that have accrued
Suretyship and guaranty
When a third party promises to pay a debt owed by another in the event that the debtor does not pay
Suretyship
An express contract in which a third party to a debtor-creditor relationship (the surety) promises to be primarily responsible for the debtors obligation
- some states require to be in writing, others do not
Surety
A person such as a cosigner on a note, who agrees to be primarily responsible for the debt of another
Guarantor
A person who agrees to satisfy the debt or another only after the principal debtor defaults
- contract must be in writing
Actions that release the surety and the guarantor
Material modification (without consent)
Surrender of property
Payment or tender of payment
Defenses for the surety and guarantor (to not pay)
Incapacity and bankruptcy
Statute of limitations
Fraud
Right of subrogation
The right of a person to stand in the place of (be substituted for) another, giving the substituted party the same legal rights that the original party had
Right of reimbursement
The legal right of a person to be restored, repaid, or indemnified for costs, expenses, or losses incurred or expended on behalf of another
Co-sureties
A joint surety. One who assumes liability jointly with another surety
Right of contribution
The right of a co-surety who pays more than his or her proportionate share on a debtors default to recover the excess paid from other co-sureties
Homestead exemption
A law permitting a debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy
Exempted personal property
- Household furniture up to a specified dollar amount
- Clothing and certain personal possessions
- A vehicle for transportation (up to a certain dollar amount)
- Certain classified animals (livestock, pets)
- Equipment the debtor uses in a business or trade
