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Debtor-Creditor Outline Final

Debtor-Creditor Outline Final

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Published by Jefff Petty
Debtor/Creditor law outline, includes Bankruptcy

Keyed to Warren & Westbrook
Debtor/Creditor law outline, includes Bankruptcy

Keyed to Warren & Westbrook

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Published by: Jefff Petty on Feb 16, 2011
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03/26/2013

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THE STATE REMEDIES SYSTEM1.
 
Introductiona.
 
 Nonjudicial Collection Methodsi.
 
Leveraging1.
 
Debtor/creditor payment process is best viewed as a constant balancing ± aweighing and leveraging system. The debtor weighs which bills to pay, not pay,or sue. The creditor weighs which bills to collect on, whether he should threatento sue, whether to stop furnishing credit or stop supplying it in the future, or whether to file a bad credit report.2.
 
Secured creditors have much more leverage in the collateral ± it provides amode of leverage, control over the security interest, and a way to prevent totalloss on the credit transaction.ii.
 
Indirect Leveraging in the legal system1.
 
Creditor can always sue, but the process is expensive and fraught with possibility of mistake.2.
 
Government occasionally shifts leverage of parties in debt collection:a.
 
Cal. Statute that authorizes a temporary restraining order to be issued toclose down any company that twice in ten years either violates theduties to pay its employees or fails to satisfy an employee¶s judgmentfor nonpayment of wages. Cal. Labor Code §243.iii.
 
The credit information process ± system set up among creditors to track risk of debtors.1.
 
Services are usually privately owned reporting companies. They charge creditorsan annual or per-use fee. The report keeps track of number of credit accountsdebtor has, delinquency in repayment, and more.2.
 
Fair Credit Reporting Act (FCRA) has two themes:a.
 
Giving the debtor access to the credit report information, AND b.
 
Prescribing procedures to ensure the accuracy of the information in thefile. b.
 
Restrictions on Nonjudicial Collectioni.
 
Usury laws1.
 
If a creditor charged more than a pre-determined rate of interest, the loan would be deemed usurious, and the interest, and under some statutes the principalitself, would be deemed uncollectible.2.
 
Generally interest rates are now unregulable.ii.
 
Fair Debt Collection Practices Act (highlights) (p. 15)1.
 
§803 ± Definitions2.
 
§804 ± Acquisition of Location Information3.
 
§805 ± Communication in Connection with Debt Collection4.
 
§807 ± False or Misleading Representations5.
 
§808 ± Unfair Practices2.
 
Post-Judgment Remediesa.
 
Enforcement/Collection of Judgmentsi.
 
Execution1.
 
Judgment creates no actual interest and no priority of creditor in debtor¶s property or income; merely makes them a judgment creditor a.
 
Judgment creditor remains an unsecured creditor until ³execution´2.
 
Judgment debt is now indisputable between debtor and creditor a.
 
Creditor takes judgment and gets a writ
 
i.
 
Writ of attachment, writ of execution, writ fi. Fa. b.
 
Writ is delivered to sheriff who then levies the property by taking physical possession of it, or some other form of ritual action.c.
 
After levy, the judgment creditor becomes a judicial lien creditor to that property.i.
 
Sheriff will advertise the property for public sale, auction it,remove administrative costs, and distribute proceeds to judicial lien creditors in order of priority.ii.
 
Anything left over will be reimbursed to the debtor.ii.
 
Turnover orders1.
 
Turnover statute permits examination of the debtor under oath so that assets can be determined.2.
 
Once assets are found, debtor can be ordered to produce the property, againunder pain of contempt.iii.
 
Other writs1.
 
Various other writs exist in jurisdictionsa.
 
i.e. writ of sequestration that allows seizure of specific property thatwill then be held.iv.
 
Judgment liens by recordation1.
 
Process that allows a creditor to obtain a lien on a debtor¶s property quickly andsimply, without going through full execution process.a.
 
In most jurisdictions, process is limited to encumbering the debtor¶sreal estate. b.
 
Recordation is effective as to the debtor¶s propertyc.
 
For a nominal fee, creditor effectively ties up the debtor¶s property,often preventing resale or transfer because no purchaser would buy property with a title clouded by an earlier judgment lien.i.
 
Works as pressure to cause debtor to ³voluntarily´ settle debt.v.
 
Dormancy and limitations1.
 
A judgment that has not been the subject of enforcement efforts for a long period of time faces disability, either through dormancy or expiration2.
 
Dormancy (usually 1 yr) requires the claim to be revived/renewed in order to acton it.3.
 
Expiration (usually 10 yrs) of the statute of limitations is terminal for a claimvi.
 
Debt collection by the Federal Government1.
 
Federal Debt Collection Procedures Act 104 Stat. 993, 28 USC 3001-3308a.
 
Procedures generally similar to those described in this section for collection of debts under state law. b.
 
BUT, does not apply to enforcement of all judgments in federal courts,only those asserted by the federal government.vii.
 
Family debts1.
 
Alimony and Child Support are among the most difficult debts to collect.2.
 
Specialized rules regarding collection of these debts.a.
 
Imprisonment has been retained for failure to make family support payments. b.
 
Child Support Recovery Act of 1992 give ex-spouses more extensivetools to collect support.viii.
 
Voluntary liens
 
1.
 
Many creditors make themselves secured creditors by obtaining voluntary liensfrom their debtors. Written into the agreement, the creditor has a legallyenforceable remedy for nonpayment.2.
 
Generally taken on the property for which the creditor is approving credit, thelienholder may force the sale of the collateral in order to satisfy the outstandingdebt of the agreement.3.
 
Consensual liens restrict the debtor¶s ability to dispose of the collateral, therebyensuring to some extent its availability to the creditor ix.
 
Statutory liens and trust funds1.
 
Artisan¶s lien ± a possessory lien on personal property of the debtor.2.
 
Charging lien ± a lien with respect to the proceeds of a successful litigation.3.
 
Trust fund statutes ± make the debtor a trustee of certain property for the favoredcreditors, who, as beneficiaries of the statutory trust, effectively get a priority inthat property.x.
 
Collections in other jurisdictions ± state law judgments can be enforced in other  jurisdictions because of common law doctrine and the full faith and credit clause of theConstitution, which requires states to recognize the judgments of other states, subject tocertain caveats. b.
 
Priorities among Competing Creditorsi.
 
First in time, first in right1.
 
The first creditor to levy on a particular piece of property will have the right to be paid in full from the sale proceeds of the property before any other creditor gets anything from the sale.2.
 
Judgment liens by recordation mark a creditor¶s position with respect to particular property.ii.
 
Unsecured creditor v. unsecured creditor 1.
 
A levy perfects the judgment for an unsecured creditor, so it¶s a race to levy first2.
 
In most states the race is to delivery of the execution process to the sheriff.iii.
 
Unsecured judgment creditor v. secured creditor 1.
 
The first to perfect wins, but it depends on what qualifies as perfection in a particular jurisdictioniv.
 
Judgment creditors and secured creditors v. buyers1.
 
If buyer purchases property before the creditor records their security interest inthe property, the buyer wins.v.
 
Unsecured judgment creditor and secured party v. the TIB1.
 
TIB is the ultimate foe of the unsecured judgment creditors because of the powers of avoidance.c.
 
Garnishmenti.
 
Garnishment writ is used to attach property owed to the debtor by another creditor beforeit gets to the debtor in question.1.
 
Two parts to a writ of garnishment:a.
 
Set of questions designed to determine whether the garnishee (partyserved with writ) owes any money to the debtor or has any property belonging to the debtor. b.
 
A command to the garnishee to withhold payment or return of thedebtor¶s property until further instruction from the court.ii.
 
Restrictions on Wage Garnishment1.
 
Consumer Credit Protections Act restricted access of all creditors to the wagesof any debtor.

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