Surety and Creditor's Right

Question 1

Right Surety’s DONT have against Creditors /Lenders

Answer 1

NO right of notice

No right to compel collection

No right to compel creditor to apply security held

Cuz Both of SURETY and DEBTOR are DIRECT and PRIMARY Liable if Debtor doesnt pay

Question 2

Rights Surety have against principle Debtor

Answer 2

EXONERATION (suit to compel payment)

+ Surety know debtor can pay for debt but REFUSE to pay Then Surety may bring a Suit for Exoneration in equity to compel the principle to pay

Question 3

After SURETY pay for the Debtor’s debt, he can

Answer 3

SUBROGATION ( enforcement of Creditor’s right against principal)

REIMBURSEMENT ( suit against principal after payment) Indemnification

Question 4

Co-sureties of same obligation

Answer 4

EXONERATION: sureties pay to creditors, one surety may compel his co-surety by a suit in equity for exoneration to pay their PRo rata share of their debt

Question 5

If Co-surety’s obligation is discharged in Bankruptcy

Answer 5

His agreed share should not be considered

Question 6

Defenses of SURETY

CPR B

Answer 6

Creditor act in Bad faith
+ Defrauded principal
+ Duress upon principal
+ Illegal obligation

PAYMENT by DEBTOR or 3rd party
+ Debtor/3rd party pay the obligation, SURETY is Discharged

Release of Principle Debtor: creditor release debtor, Surety is discharged

Bankruptcy or Adj Insane and Infancy of SURETY

Question 7

Why Creditor want a Surety?

Answer 7

Principal’s fraud or Duress upon Surety

Incapacity of principal

Bankruptcy of principal: debtor file bankruptcy

Question 8

Surety vs Guarantor

Answer 8

SURETY : Directly liable-primary liable on debtor contract
+ involve 3parties: Creditors, Principle & Surety

GUARANTOR: Not Directly liable to creditor

Question 9

Judicial Liens

Answer 9

A lien when the property is in the hands of the debtor and creditor want to seize that-> Writ of Attachment

Question 10

A writ of Garnishment

Answer 10

When you want property that belongs to the debtor but currently it is in the hands of 3rd party

Question 11

Mechanic and Artisan’s liens

Answer 11

Mechanic who works on property with either improves or repair it, automatic has alien on the property for the price of the repair as long as the property is in the Lienor’s possession

Question 12

Prohited by Collection Agencies under Fair Debt collection practice act (FDCPA)

Federal law- prohibits abuses by collection agencies

Answer 12

Restricted to call debtor for collection from 9pm-8am -no unusual & inconvenient times

Cant call debtor once debtor hires an attorney

Never use harassing or abusive language

Cant make false or misleading claims

NOTE: FDCPA prohibits Debt collection agencies for consumer debts & NOT APPLY to Creditors to collect their own debts

Question 13

Surety released entirely from liability when

Answer 13

Creditor refuses to accept the principle debtor’s tender pmt

Question 14

Co-surety seek the remedy of

Answer 14

Before pay debt: Exoneration

After pay debt:
+Indemnification
+Subrogation
+Contribution

Question 15

Release a non-compensated surety from liability to creditor

Answer 15

If creditor fails to notify the surety of a partial surrender of the debtor’s collateral and it increases the risk of the surety