Debt Flashcards
what is a security right?
a right against the debtor to ensure payment of debt which is a different right to that of the debtors personal obligation to pay back the debt.
what is a personal security?
i have a right against you for the payment of debt and if you do not pay the debt then i can go after someone else.
what does a security right grant you?
gives you a right to be paid before the other un-secured creditors.
how do un-secured creditors rank?
they all rank equally.
why do we have securities?
we have securities because they benefit both parties. the debtor can take out loans more easily and the creditor’s risk is decreased witht the knowledge that if he is not paid back through the debt then he can claim money by other means.
what is security divided into?
real security and personal security
what types of security can you find under real security?
you can find proper and improper security
proper security is where you have ownership of the property. then if the debt is not paid then the debtor can take this for the debt and sell it off. this is like a Personal Liability.
improper security is where the creditor retains ownership of the property through the debtor giving ownership to the creditor and if the debt is not paid then the creditor retains possession and sells it off. if the debt is paid then ownership is given back to the debtor. this is Real Liability.
what are the three general types of security?
tacit security- this is where the creditor retains posession of the object till the debtor has paid off the debt.
judicial enforcement- diligence
voluntary security- like proper or improper security.
why do we have the publicity principle?
so that everyone can see who owns the property
what are the different types of voluntary security rights?
pledge
standard security
floating charge
assignation in security
talk about everything you know about a pledge
a pledge is a voluntary security. the debtor takes a personal right in the debtors property. This is a possessory security right.
this only applies to corporeal movables. there must be a delivery of the property to the creditor however physially giving it is not necessary.
tell me all about standard securities
non posessory security over immovable property. created in the land register.
conveyancing and feudal reform (scotland) act 1970. subordinate real right.
tell me everything about Assignation in security
transferring ownership of Rights through intimation. like your right from the bank of your money. transferring the right is called intimation.
tell me everything about floating charges
this floats over all of the debtors assets in the business. it allows for the businessman to continue with their normal line of business as assets come in and out. it can float above a certain class of assets. once an event happens and the company goes under, the floating charge freezes and all the assets are now owned by the creditor. seen in the companies act 2006.
floating charge is created upon execution of the charge instrument. there needs to be a signature and delivery to the other party. only at the point of attachment does the security create a real right. there is an appointment of a receiver.
floating charge case of sharp v Thomson
couple sought to buy a property. still owned by company, companies assets were frozen over floating charge. held that there was beneficial interest which had passed and the couple were allowed to keep the house.
the receiver is appointed an they sell all the property in the floating charge to pay the creditors.
ranking, where is the legislation?
this is seen in the companies act 1985. s464
usually standard securities come before the floating charges in terms of ranking as they are fixed at a later date.
however, if the floating charge has a negative pledge, then the floating charge ranks at the date of creation.
in order for any securities to be valid what do we need?
we need Registration of charges. this is a requirement or else the charge will not be enforceable. these ony include standard secutities, assignation in security and floating charges.
diligence, what are the four different types?
attatchment, arrestment, inhibition and adjudication.
how does diligence work? and what right does it give you?
apply to the court to get repaid. gives you a real security right in favor of the creditor appart from inhibition and is used by un-secured creditors.
how can diligence be carried out?
can be carried out through execution where a debt has not been paid and you seek to enforce it. you get a court order and then execute diligence
dependence is where there is a court procedure going on and you are worried that the company may be giving away their assets in the process so if you win you have that protection in place but if you loose then you loose all your protection
what is Attachment diligence?
seen in the debt arrangement and attachment (scotland) act 2002
this is around corporeal movable property for money owed to the debtor. so the creditor can go to the debtors house and take expensive stuff that bellongs to them. however certain things are excluded like toys, medicine, their traid equipment etc. you protect the debtor but at the same time are taking things which are owed to you so you can sell them off.
what is Arrestment diligence?
seen in the Debtors (scotland) act 1987 73J
this applies to incorporeal movable property
there are three people involved. the creditor, the debtor and the third party (Arestee) who owes the obligation to the debtor. so for example if there is £300 owed to the debtor then you can go after the person who owes £300 to the debtor and claim it for yourself. the debtor has a right to the money but now you have the right. the third party is called the arestee.
There are personal rights owed to the debtor.
what is Inhibition diligence?
this is a restriction on all the debtors heritable property (land)
any transaction that the debtor enters into with third parties will be struck down concerning immovables.
what ranking does diligence have?
diligence will be given priority over floating charges even if it is a negative pledge.
what is Adjudication diligence?
this deals with heritable property (land).
done through court action
you identify property of the debtor, you then enter it into the land register. you can then lease this property out for example like a land lord and this will pay off the debt for you.
after 10 years have passed, you are then granted ownership of the property.
however, any profit you make from this you must give back to the debtor if you sell it. hull v campbell.
alternatives to debt?
agreement with the creditor. talking it out.
