R8 - Surety Flashcards
Surety - Generals
- Difference between surety and guarantor
Surety = directly liable
Guarantor - liable to creditor ONLY IF the debtor does not perform his duty.
- guarantor of collectability - creditor cannot directly come to guarantor. Credit MUST exhaust ALL remedies against debtor.
- MYLEGS - Statute of frauds
Surety must be in writing. - Two types of surety
Gratuitous Surety - Not compensated
- release: any variation of surety’s risks
- consideration: Creditor’s performance to the principal. Binding -> Timing of promise: surety promise before making the loan.
Compensated Surety - Paid Surety
- release: Material change increasing risk in surety
- consideration: Compensation regardless the timing of the promise.
II. Surety’s rights
Against creditor
- no rights of notice
- no right to compel collection 无法强迫creditor向debtor要钱
- no right to compel creditor to apply security held
Against Debtor
- Exoneration （免责） -> suit to compel payment. (“Before” surety pays creditor; surety does not pay.)
- subrogation - enforcement of creditor’s right against principal (“After” surety pays creditor) 代位求偿
- Reimbursement/ indemnification (after the surety pays)
Against Co-Sureties (2+ sureties)
- Exoneration = compel payment before sureties make payment. (in Pro rata shares of debt)
- Contribution 3/18; 6/18; 9/18 pro rata
**if one sureties discharged, new pro rate
3/12 9/12
My payment * your ratio
III. Defenses of Surety (CPRS)
4 Defenses
4 Defenses (CRPS)
- C- creditor bad faith 都是creditor的错
* *the principal was induced to enter into contract by the creditor fraud.
* * Duress upon principal debtor + surety didnt know
* * illegal - P - Payment and tender of payment
- R - Release
creditor releases the principal -> release the surety - S - Surety incapacity or bankruptcy
III. Defenses of Surety
Risks of surety
- Alternation of contract
any change - release gratuitous surety
Material change that increase surety risk -> release compensated surety - Extension of time
Gratuitous surety - release (because the agreement was changed)
Compensated Surety - may be discharged if material - Loss of security
Surety release -> the release of security - Release of Co-surety (pro rata)
A and B co-surety 50,000 (loan = 50,000)
A released without B consent
B only liable for 25,000
III. Defenses of Surety
No Defense
the following are not defenses for surety.
- Principal’s fraud or duress upon surety
- Incapacity of Principal debtor
- Bankruptcy of principal debtor
IV. Creditors right OUTSIDE of Suretyship
if debtor does not have sufficient funds to pay, two options .
- Compensation = agreement between debtor and 2+ creditors that debtor pays the creditors less than their full claims in full satisfaction.
- Assignment
debtor transfer and sells its property
A composition of creditors is an agreement between a debtor and at least two creditors that the creditors will take less than full payment to discharge the debts owed by the debtor to the creditors who participate in the composition agreement. The agreement results in discharge of the debts in full because a contract is created by the cross-promises of the parties (i.e., the cross-promises serve as consideration, so the pre-existing duty rule is avoided). On the other hand, an assignment for the benefit of creditors is a transfer of some or all of a debtor’s property to a trustee who then uses the property to pay the creditors. There is no discharge of debts here because the creditors have not entered into any contract to take less than full payment.
V. Liens and Garnishment
Judicial Lien on property (lien on debtor’s hand) 链接
step 1 - credit request court to impose a lien
step 2 - credit issued a writ (writ of attachment)
step 3 - creditor can ask the court to provisionally attach a debtor’s property.
Garnishment (on third party’s hand)
Writ of garnishment 扣押
writ order 3 party to turn it over to the creditor.
**social security payments are not subject to garnishment.
EXEMPTIONS
“certain property” of debtor cannot be lien or garnishment.
- home stead
- protect personal injury awards from liens
- only limited portion of wages
VI. Mechanic and Artisan Lien
Automatically has a lien on the property - AS LONG AS in possession.
Lost the lien - AS SOON AS giving the property back to owner.
if mechanic/ artisan not paid, he my inform the debtor and sell his property. OR Foreclose on the property by filling suit.
If Materialman’s lien (work/ supplies for improvement on real property) -> ONLY Must file a notice with local recorder.
VII. Fraudulent Conveyances
Fraudulent Conveyances - when a debtor transfers property with the intent to hinder, delay or defraud any of her creditors.
VII. Fair debt collection practice act (FDCPA)
for collection agency
this is for collection agency.
- prohit
cannot call debtor’s relative to pressure;
can find where he lives but cannot identify as collector;
cannot call at unusual time;
cannot contact debtor if he has a attorney;
cannot harrsing or abusive language
cannot have false or misleading claim (i put you in jail) - Remedies by the debtor
- can notify the agency in writing that he will not pay the debt and stop further communication
- sue collector for misconducting damaging
