Part III: Debtor-Creditor Relationships Flashcards
surety/guarantor
- Someone who agrees to be liable for someone else’s debt.
2. It’s like co-signing, and gives creditors another form of backup for the debt.
When is the surety liable for the debt?
Only after the debtor defaults.
Can there be more than one surety for a debt transaction?
Yes, there can be co-sureties.
Can either co-surety be held liable for the entire debt?
- No.
2. Once the debtor defaults, one cosurety can recover from the other cosurety the excess of their share they paid.
If the creditor releases cosurety 1, what is cosurety 2’s liability?
Cosurety 2 is still only liable for half the debt.
guaranty of collection
Surety is only liable if collection against primary debtor fails first.
Must the creditor disclose any known material facts to sureties before they sign the loan agreement?
Yes. If this is not done, the surety can use this a defense to repayment.
A surety cannot compel the creditor to either:
- collect from the principal debtor.
2. OR, proceed against the principal debtor’s collateral.
If a surety loses capacity…
he/she is no longer liable for the debt.
Must suretyship contracts be in writing?
According to the Statue of Frauds, yes.
types of estates
- fee simple
- fee simple defeasible
- life estate
fee simple
owner of estate has complete ownership for an unlimited duration
fee simple defeasible
ownership terminates upon the happening of a certain event and ownership goes back to a grantor or 3rd party
life estate
ownership is granted by a grantor subject to the tenant’s life, or the life of another party
tenancy in common
- Ownership held by 2+ people. Can be 50/50 or 33/67.
2. Tenants in common can sell, will, or mortgage their interests.
joint tenancy
- Ownership is held in equal shares by 2+ people.
- Joint tenancy requires unity in time, title, interest, and possession.
- Right of survivorship.
- If once tenant transfers an interest, they become tenants in common.
right of survivorship (joint tenancy)
When one tenant dies, their shares vests in the remaining tenants.
easement
right of a person to make limited use of another’s realty w/out taking anything from it or taking possession of it.
unrecorded easement
defect in marketable title to real property
fixture
- initially personal property.
2. Trade fixtures remain personal property.
personal property and fixutres
In general, once personal property is attached to realty, it becomes part of the realty and a fixture if the person who attached it wants it to be a fixture.
For a deed to be valid…
a description of the property must be included.
1. The price does not need to be included.
For a lease agreement to be valid…
A description of the property must be included.
1. The price does not need to be included.
Chapter 7 Bankruptcy
- liquidation bankruptcy.
- Allows voluntary or involuntary petitions.
- Means test for determining a debtor’s ability to pay back debts, as well as bankruptcy abuse.
bankruptcy abuse
trying to jet get out of paying off debts through declaring bankruptcy
If there is bankruptcy abuse…
- the consumer and the consumer’s lawyer can be held liable for costs.
- A trustee is appointed.
Does a debtor need to be insolvent or have a certain number of creditors to file chapter 7?
No and No, but there is a test for bankruptcy abuse.
bankruptcy challenge
If a business is being petitioned into bankruptcy by a creditor, the business’s challenge will fail if the business has not been paying debts as they come due.
Denial of the debtor’s discharge will occur:
- If the debtor fails to attend (unless excused) the creditor’s meeting, it’s considered a failure to co-operate.
- If a debtor fails to reasonably explain a loss of assets.
Can corps. and partnerships go through Chapter 7?
Yes, but they don’t qualify for a general discharge of debts like a regular person does.
Chapter 11 Bankruptcy
- Reorganization
- Allows voluntary and involuntary petitions.
- No trustee.
Chapter 13 Bankruptcy
- allows for the adjustment of debts of an individual w/regular income.
- Allows voluntary petitions.
- Always a trustee.
- A 3-5 yr. plan is made as a result of the bankruptcy.
artisan’s lien
- Work done to improve or repair property can possess the property and sell it if they aren’t paid and take the sale proceeds to get the payment.
- Anything above the payment is returned to the owner.
Can the debtor prefer one creditor over another?
No.
debtor’s estate in bankruptcy
- Considered to be all tangible and intangible property the debtor help at the beginning of the bankruptcy proceedings.
- Also includes income generated from such property after beg. of bank. proceedings.
- Includes appreciation in property value.
- Includes any gifts received w/in 180 days of filing of bank petition.
Are payments such as alimony and soc. sec. received after the filing considered part of the debtor’s estate in bankruptcy?
No.
Order of priority claims for debtor’s estate in bankruptcy: (Know this list!!!! It is often tested.)
- Perfected secured parties.
- Claims for domestic support: child support and alimony.
- Admin costs
- Employee wages
- Contributions to employee benefit plans
- Claims of farm producers and fisherman
- Consumer creditors
- Claims of govt. units for taxes.
- Claims for death or personal injury
- All general unsecured creditors.
- Anything left goes back to the debtor.
admin costs
attorney and acct. fees, appraisals, and trustee fees.
employee wages
- limited to those earned w/in 90 days of the filing up to a max. of $12,475.
- Anything above the $12,475 is put in the 10. general unsecured creditors category.
contributions to employee benefit plans
any claims for contributions to an employee benefit plan from services performed w/in 180 days before the filing up to $12,475 per employee.
claims of farm producers and fisherman
up to $6,150 per creditor.
consumer creditors
- up to $2,775 per creditor.
2. Anything above the $2,775 is put in the 10. general unsecured creditors category.
items not discharged in bankruptcy:
- claims arising from alimony or child support
- student loans
- fed. tax liens (unpaid taxes)
- debt acquired through false representations
