Debtor-Creditor: Non-Bankruptcy

Question 1

artisan’s lien

Answer 1

lien on personal property imposed by law for nonpayment of a debt relating to an improvement on or repair to an item of personal property.

Question 2

garnishment

Answer 2

involves an involuntary lien on money (intangible personal property)

Question 3

judgment

Answer 3

order by a court indicating an amount owed and to whom it is owed

Question 4

Equal Credit Opportunity Act of 1974

Answer 4

1. prohibits businesses which regularly extend credit from discriminating on the basis of sex, race, national origin, age, or religion
2. Originally designed to eliminate the practice of lenders refusing to extend credit to women of child bearing age.

Question 5

Fair Debt Collections Practices Act

Answer 5

enacted to stop abusive and deceptive practices by debt collectors.

Question 6

Consumer Protection Act

Answer 6

early attempt to require disclosure of charges by lenders.

Question 7

Financial Services Modernization Act of 1999

Answer 7

law designed to protect privacy in connection with transmissions by financial institutions.

Question 8

According to the Fair Credit Reporting Act, what must the creditor do for the debtor?

Answer 8

1. If advised by a debtor that a file contains inaccurate information, a credit reporting agency must investigate the items by presenting to its information source all relevant evidence submitted by the debtor. 2. Corrections are only required if the information on file is incorrect or out of date. 3. If a dispute is not resolved, the debtor’s evidence may become a permanent component of the debtors credit record.

Question 9

Fair Credit Reporting Act

Answer 9

designed to promote accuracy, fairness, and privacy of information in the files of every “consumer reporting agency.”

Question 10

When are guarantors released from obligation?

Answer 10

1. In the refusal by a creditor of a principal debtor’s tender of payment.
2. Failure to promptly dispose of collateral or damage to some of the collateral may partially release the guarantor(s).

Question 11

Does granting an extension to principal debtor release a guarantor or surety?

Answer 11

Granting an extension to the principal debtor may release a surety from all or part of his/her obligation.

Question 12

When is a surety released fully or partially?

Answer 12

1. If the creditor releases of a portion of the collateral
2. OR, releases the principal debtor without reservation of rights against the sureties
3. OR, materially changes the contract which created the principal obligation (such as by granting payment extensions).

Question 13

Will negligence by creditor in securing the collateral release a guarantor?

Answer 13

Yes.

Question 14

Will negotiating the promissory note w/out debtor’s consent release a guarantor?

Answer 14

No.

Question 15

When a creditor releases a co-surety without reservation of rights against the remaining sureties…

Answer 15

he obligation of the remaining sureties is reduced by the amount their right of contribution has been adversely affected. Thus, if the debt which falls to the co-sureties ($500,000) is divided evenly, each of the 3 partners is liable for $167,000. When Grange released Dance after Dance paid $100,000, Gally lost rights against Dance to the extent of $67,000.

Question 16

When guarantors agree among themselves as to the division of liability…

Answer 16

1. Each guarantor is potentially liable for the entire obligation.
2. If one guarantor pays, s/he is subrogated to the rights of the creditor.

Question 17

contribution

Answer 17

refers to a co-surety’s right, after paying, to recover from other co-sureties

Question 18

subrogation

Answer 18

1. When a co-surety repays the principal obligation, in whole or in part, the co-surety is subrogated to the rights of the creditor against the principal debtor.
2. By virtue of subrogation, a surety, after paying, steps into the shoes of the creditor to asserts rights against collateral, against the principal debtor, or against other co-sureties.

Question 19

exoneration

Answer 19

refers to a surety’s right to force the principal debtor to pay

Question 20

indemnity

Answer 20

refers to protection from liability, usually after making full payment

Question 21

3-day cooling-off period (Truth-in-Lending Act)

Answer 21

Under the Truth in Lending Act, a consumer may rescind a consumer credit transaction involving a non-purchase-money security interest in the consumer’s principal dwelling within 3 business days if all disclosure requirements are met, or during an extended statutory period, due to disclosure violations such as failure to give adequate notice of right to rescind.

Question 22

The disclosure required under the Truth in Lending Act must be made:

Answer 22

1. “Clearly and conspicuously,”
2. in meaningful sequence,
3. in writing,
4. AND in a form that the consumer may keep.

Question 23

Under the Truth-in-Lending Act, what disclosures must creditors make to debtors?

Answer 23

1. APR
2. Statement of billing rights
3. Method of determining finance charges and balances
4. Amount or method of determining any membership or participation fees,
5. Security interests (if applicable),
6. Periodic statement of the account,
7. AND, a statement regarding billing error resolution.

Question 24

It may be legally proper for a creditor to seize a debtor’s property prior to obtaining a judgment against the debtor, but ONLY if…

Answer 24

the creditor does not breach the peace.

Question 25

Are certain federal payments exempt from creditor garnishment?

Answer 25

Soc. Sec. is.

Question 26

Do state laws exempt certain personal property from seizure by creditors?

Answer 26

Yes, this typically includes items such as provisions for consumption, apparel, and tools or equipment used in trade.

Question 27

homestead exemption

Answer 27

protects debtors from satisfaction of debt against equity in the debtor’s primary residence, with the exceptions of mortgage liens and IRS tax liens.

Question 28

Are there are limitations set by federal and state law on the percentage of wages that can be garnished by creditors?

Answer 28

Yes.