Part III: Debtor-Creditor Relationships

Question 1

surety/guarantor

Answer 1

1. 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.

Question 2

When is the surety liable for the debt?

Answer 2

Only after the debtor defaults.

Question 3

Can there be more than one surety for a debt transaction?

Answer 3

Yes, there can be co-sureties.

Question 4

Can either co-surety be held liable for the entire debt?

Answer 4

1. No.

2. Once the debtor defaults, one cosurety can recover from the other cosurety the excess of their share they paid.

Question 5

If the creditor releases cosurety 1, what is cosurety 2’s liability?

Answer 5

Cosurety 2 is still only liable for half the debt.

Question 6

guaranty of collection

Answer 6

Surety is only liable if collection against primary debtor fails first.

Question 7

Must the creditor disclose any known material facts to sureties before they sign the loan agreement?

Answer 7

Yes. If this is not done, the surety can use this a defense to repayment.

Question 8

A surety cannot compel the creditor to either:

Answer 8

1. collect from the principal debtor.

2. OR, proceed against the principal debtor’s collateral.

Question 9

If a surety loses capacity…

Answer 9

he/she is no longer liable for the debt.

Question 10

Must suretyship contracts be in writing?

Answer 10

According to the Statue of Frauds, yes.

Question 11

types of estates

Answer 11

1. fee simple
2. fee simple defeasible
3. life estate

Question 12

fee simple

Answer 12

owner of estate has complete ownership for an unlimited duration

Question 13

fee simple defeasible

Answer 13

ownership terminates upon the happening of a certain event and ownership goes back to a grantor or 3rd party

Question 14

life estate

Answer 14

ownership is granted by a grantor subject to the tenant’s life, or the life of another party

Question 15

tenancy in common

Answer 15

1. Ownership held by 2+ people. Can be 50/50 or 33/67.

2. Tenants in common can sell, will, or mortgage their interests.

Question 16

joint tenancy

Answer 16

1. Ownership is held in equal shares by 2+ people.
2. Joint tenancy requires unity in time, title, interest, and possession.
3. Right of survivorship.
4. If once tenant transfers an interest, they become tenants in common.

Question 17

right of survivorship (joint tenancy)

Answer 17

When one tenant dies, their shares vests in the remaining tenants.

Question 18

easement

Answer 18

right of a person to make limited use of another’s realty w/out taking anything from it or taking possession of it.

Question 19

unrecorded easement

Answer 19

defect in marketable title to real property

Question 20

fixture

Answer 20

1. initially personal property.

2. Trade fixtures remain personal property.

Question 21

personal property and fixutres

Answer 21

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.

Question 22

For a deed to be valid…

Answer 22

a description of the property must be included.

1. The price does not need to be included.

Question 23

For a lease agreement to be valid…

Answer 23

A description of the property must be included.

1. The price does not need to be included.

Question 24

Chapter 7 Bankruptcy

Answer 24

1. liquidation bankruptcy.
2. Allows voluntary or involuntary petitions.
3. Means test for determining a debtor’s ability to pay back debts, as well as bankruptcy abuse.

Question 25

bankruptcy abuse

Answer 25

trying to jet get out of paying off debts through declaring bankruptcy

Question 26

If there is bankruptcy abuse...

Answer 26

1. the consumer and the consumer's lawyer can be held liable for costs. 2. A trustee is appointed.

Question 27

Does a debtor need to be insolvent or have a certain number of creditors to file chapter 7?

Answer 27

No and No, but there is a test for bankruptcy abuse.

Question 28

bankruptcy challenge

Answer 28

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.

Question 29

Denial of the debtor's discharge will occur:

Answer 29

1. If the debtor fails to attend (unless excused) the creditor's meeting, it's considered a failure to co-operate. 2. If a debtor fails to reasonably explain a loss of assets.

Question 30

Can corps. and partnerships go through Chapter 7?

Answer 30

Yes, but they don't qualify for a general discharge of debts like a regular person does.

Question 31

Chapter 11 Bankruptcy

Answer 31

1. Reorganization 2. Allows voluntary and involuntary petitions. 3. No trustee.

Question 32

Chapter 13 Bankruptcy

Answer 32

1. allows for the adjustment of debts of an individual w/regular income. 2. Allows voluntary petitions. 3. Always a trustee. 4. A 3-5 yr. plan is made as a result of the bankruptcy.

Question 33

artisan's lien

Answer 33

1. 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. 2. Anything above the payment is returned to the owner.

Question 34

Can the debtor prefer one creditor over another?

Answer 34

No.

Question 35

debtor's estate in bankruptcy

Answer 35

1. Considered to be all tangible and intangible property the debtor help at the beginning of the bankruptcy proceedings. 2. Also includes income generated from such property after beg. of bank. proceedings. 3. Includes appreciation in property value. 4. Includes any gifts received w/in 180 days of filing of bank petition.

Question 36

Are payments such as alimony and soc. sec. received after the filing considered part of the debtor's estate in bankruptcy?

Answer 36

No.

Question 37

Order of priority claims for debtor's estate in bankruptcy: (Know this list!!!! It is often tested.)

Answer 37

1. Perfected secured parties. 2. Claims for domestic support: child support and alimony. 3. Admin costs 4. Employee wages 5. Contributions to employee benefit plans 6. Claims of farm producers and fisherman 7. Consumer creditors 8. Claims of govt. units for taxes. 9. Claims for death or personal injury 10. All general unsecured creditors. 11. Anything left goes back to the debtor.

Question 38

admin costs

Answer 38

attorney and acct. fees, appraisals, and trustee fees.

Question 39

employee wages

Answer 39

1. limited to those earned w/in 90 days of the filing up to a max. of $12,475. 2. Anything above the $12,475 is put in the 10. general unsecured creditors category.

Question 40

contributions to employee benefit plans

Answer 40

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.

Question 41

claims of farm producers and fisherman

Answer 41

up to $6,150 per creditor.

Question 42

consumer creditors

Answer 42

1. up to $2,775 per creditor. | 2. Anything above the $2,775 is put in the 10. general unsecured creditors category.

Question 43

items not discharged in bankruptcy:

Answer 43

1. claims arising from alimony or child support 2. student loans 3. fed. tax liens (unpaid taxes) 4. debt acquired through false representations