Secured Transaction Flashcards
Credit
transaction in which goods are sold, services are rendered, or money is loaned in exchange for a promise to repay the debt at some future date
Unsecured Credit
a service was rendered or good sold and the consumer or debtor promises to pay for the service or good later
Examples of Unsecured Credit
ordering food at a restaurant
If debtor doesn’t pay what can the creditor do?
send notices to pay
Can the creditor just go pick up the property for which debtor still owes money?
No, that’s criminal and civil conversion
Instead, sue debtor for breach of contract, then what?
once an unsecured creditor has a judgement, the creditor may seek judicial remedies such as, attachment or garnishment
Attachment
seize debtor’s stuff (assets, bank accounts)
Garnishment
make employer pay creditor part of debtor’s wages
A debt is secured if it is backed either:
- by a pledge of another persons to pay OR
- by a putting something up to collateral
Secured Credit Transaction
the creditor makes some contract to give the creditor some security that the debt will actually be repaid
Surety/Guarantor
a person who agrees to be liable for the debt of someone else (must be written)
Artisan’s Lien
if you fix something for a customer, and your customer didn’t pay, you can hold onto it until they do
Two Elements of Artisan’s Lien
- possession: by provider of services or goods
- a debt created by the improvement to goods or provision of services concerning the goods
Foreclosing the Lien
allow the lienholder to take/sell the collateral to satisfy the debt after a period of time is debtor fails to pay
Security Interest
an interest in personal property obtained by a creditor to secure payment or performance of obligation
Collateral
the property that secures the loan anything
Creditor Claims
to participate in the estate of a bankruptcy debtor, credits must file a proof of claim within a certain, usually 90 days after first meeting
Secured Claim
the collateral is worth the same as the amount of debt owed
Undersecured Claim
the collateral is worth less than the amount of debt owed, the the debt is reduced by the amount of collateral exchanged
*what is left is unsecured debt
Oversecured Claim
the collateral is worth more than the debt owed
Waterfall System
secured creditors, then priority unsecured creditors, then unsecured creditors, etc
*only when all the secured creditors are paid in full, then priority unsecured creditors get paid.
- Secured Creditors
creditors who have a lien on some form of the debtor’s property. they either get the collateral itself or value of collateral in cash
- Priority unsecured claims
debt that isn’t backed by collateral, but policy has decided some claims are more important than others
Priority unsecured claims
- Domestic support obligations
- Unpaid contributions to employee benefit plains
- claims for death or personal injury from a DUI
- Unsecured Creditors
paid pro rata (as a percent), they share what is leftover
What if there is something left over after everyone has been paid?
it goes back to the debtor
Discharge from bankruptcy
the debtor’s fresh start following bankruptcy
Discharge is available to ____ but not ___
individuals but not businesses
Discharge is not available to anyone who has been discharged from bankruptcy in the previous….
8 years
Some debts are not dischargeable
- tax debts
- fraud
- property settlements
- cash advances in excess of $925
- educational loans
Types of Bankruptcy
- Chapter 7
- Chapter 11
- Chapter 12
- Chapter 13
Chapter 7 Bankruptcy
liquidation, the business is over and does not plan to continue operations after
Chapter 11 Bankruptcy
business is planning to reorganize their debts and continue operations after bankruptcy
Chapter 12 Bankruptcy
special bankruptcy as it pertains to family farms & commercial finishing operations
Chapter 13
consumer debt adjustments (chaopter 11 but for individuals)
