Surety And Creditor's Right Flashcards
What is the difference between surety vs guarantor?
A surety in the narrow sense of the term “directly liable” on his contract and is distinguished from
a guarantor who is liable to the creditor only if the debtor does not perform his duty to the creditor.
When a debt can be collected from a guarantor?
When a creditor exhaust all remedies against the debtor first.
What’s a surety?
Is one who is liable for the debt or obligation of another.
When the debtor defaults in a suretyship situation, what should the creditor do?
Immediately demand payment from the surety
immediate demand payment from the debtor
immediately go after collateral, if there is any
the surety does not have the right to require the creditor to take any of the above mentioned sanction.
A guarantor of collectibility would have the right to require a creditor to first proceed against the debtor or against available collateral.
What action against the principal debtor is available to the surety prior to payment to creditor?
Exoneration
The principal owes his surety a duty to perform. If the principal fails to pay the creditor, the surety may bring a suit for exoneration in equity to compel the principal to pay.
What action against the principal debtor is available to the surety after paying the creditor?
Subrogation and reimbursement
Subrogation - the surety may enforce any right that the creditor had against the debtor. If the creditor was a secured creditor, the surety would gain the rights of a secured creditor upon payment.
Reimbursement - The surety is entitled to reimbursement from the debtor for any amounts that the surety paid. This is also called the right of indemnification.
What are the defenses of surety?
Creditor act in bad faith (fraud, duress, Illegally by the creditor)
Payment and tender of payment
Release of principle debtor
Surety’s incapacity or bankruptcy
What is a fraudulent conveyance?
A fraudulent conveyance occurs when a debtor transfers property with the intent to hinder, delay, or defraud any of her creditors.
What is the FDCB a fair debt collection practices act and what does it stipulate?
The act severely restricts collection agencies’ ability to call third parties, such as relatives of the debtor, to indirectly pressure the debtor.
A collection agency can contact third parties to discover a debtor’s whereabouts, but may not disclose that is a collection agency or that the debtor owes a debt.
What are the prohibited acts under the FDCPA?
Non-disclosure to third parties regarding the debt.
No phone calls at inconvenient or usual hours ( normal hours 8:00am - 9:00pm)
Contacting the debtor directly if the debtor is represented by an attorney
Using harassing or abusive language
Making false or misleading claims
Contacting the debtor at place of employment if the employer objects.
What are the remedies under the FDCPA act?
The debtor has power to terminate contacts (cease communication)
right to sue for actual damages caused by the collection agency’s misconduct
provides $1,000 damage award
Federal Trade Commission can bring administrative enforcement actions under the act to force a collection agency to comply with the Act’s provision.
