Debtor-Creditor Relationships

Question 1

Assignment for the benefit of Creditors

Answer 1

• possible alternative to bankruptcy
• debtor assigns assets to a third party who uses them to pay creditors
• does not release debtor from the debt, unless paid in full

Question 2

Bond

Answer 2

contract involving a compensated surety

Question 3

Composition

Answer 3

• possible alternative to bankruptcy
• debtor will repay a portion of debt owed
• releases debtor from obligations with creditors who are part of the compisition
• based in contract law so new consideration is needed to be enforceable

Question 4

Contribution

Answer 4

When a cosurety pays more than its proporitante share of the debt, it can demand payment from other cosureties

Question 5

Cosurety

Answer 5

Two or more sureties guaranteeing the same debt

Question 6

Guarantor

Answer 6

secondarily liable to creditor

Question 7

Reimbursement

Answer 7

If the surety pays the debt, the surety is entitiled to receive whatever it paid to the creditor from the debtor

Question 8

Subrogation

Answer 8

After the surety has paid the debt, it acquires the rights of a creditor

Question 9

Surety

Answer 9

Party who promises to pay the debts of another party

• primarily liable to the creditor
  (a) compensated: modification by debtor and creditor will release surety if modification was material
  (b) noncompensated: modification by debtor and creditor will release surety regardless of materiality

*Fraud by inducement by the debtor on the surety will not release surety if creditor has extended credit in good faith

Question 10

Lein

Answer 10

creditors’ claims on real or personal property

• Mechanic’s / Materialman’s lean: statutory lien on real property
• Artisan’s lein: when creditor repairs/improves personal property and maintains possession of property until paid
• Inkeeper’s lein
• Tax liein

Question 11

Attachment

Answer 11

court-ordered seizure of property

-writ of attachment allows creditor to to take possession of property

Question 12

Writ of execution

Answer 12

court order directs sheriff to seize debtor’s property

Question 13

Homestead exemption

Answer 13

Unsecured creditors and trustees in bankruptcy may not satisfy debts from equity in debtor’s home

-mortgage liens and IRS tax liens take priority over homestead exemption

Question 14

Truth-in-Lending Act

Answer 14

requires lenders and sellers to disclose credit terms on loans to consumer-debtors

A. additional requirements for credit card statements: (a) disclosre of minimum payments, late fees, introductory rates (b) toll-free number that provides an estimate of time required to repay the balance making minimum payments

B. disclosures on tax consequences of home equity loans and Internet-based credit card solicitations

C. preserves defencses and claims of consumers against predatory loans sold by bankruptcy trustees

Question 15

Exoneration

Answer 15

surety requires debtor to pay obligation (if debtor is able) before surety has paid

Question 16

Federal Fair Debt Collection Practices Act

Answer 16

prevents debt collectors from using unfair or abusive collection methods