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Chapter 33 Creditors, Debtors, and Bankruptcy

Chapter 33 Creditors, Debtors, and Bankruptcy. 33—1 Legal Protection of Creditors Pages 593-596. Laws That Protect Creditors. Primary concern of a typical creditor is that the loan be paid promptly when due.

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Chapter 33 Creditors, Debtors, and Bankruptcy

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  1. Chapter 33Creditors, Debtors, and Bankruptcy 33—1 Legal Protection of Creditors Pages 593-596

  2. Laws That Protect Creditors • Primary concern of a typical creditor is that the loan be paid promptly when due. • Secure debts-personal property or real property are common ways the law allows creditors to protect themselves(sell or process) • Pledges-Have procession of the property until the debt is paid (stocks) • Pawn- Collateral for this type of pledge (jewelry, camera, musical instrument)- pawn ticket

  3. Involuntary Liens • Lien- a claim, encumbrance, or charge against property that give the creditor the right, in case of default on a payment that is due, to sell the property and to use the proceeds from the sale to pay the dept. • Mechanic’s Lien- allows a person who had not been paid for labor or materials furnished to build a home, building or other real property improvement to file a legal claim against the property. If the debt is not paid, the realty may be sold • Artisan’s Lien- allows persons who have not been paid for service, such as repairing a car or watch to retain possession of the serviced items until the service charges are paid.

  4. Laws Involving Third Parties • Suretyship– Creditor who wishes assurance beyond the debtor’s promise to pay may demand that a creditworthy third party assumes the liability. A contractual relation in which a third party agrees to be primarily liable for the debt or obligation if payment or performance becomes overdue. Three parties are involved: • PRINCIPAL DEBTOR • CREDITOR • SURETY- 3rd party promises to be liable for debt • Guarnety- Protects the creditor-guarantor agrees to pay if the principal debtor fails to do so. The guarantor is only secondarily liable. Laws Concerning Unsecured Debts • Unsecured Debts-debt based only on the oral or written promise of the debtor. Must sue the debtor for breach of contract. Laws Allowing Garnishment of Wages • Once a creditor's claim is shown to be legally valid and fair in a court hearing the creditor may receive a portion of the debtors wages directly from the debtors employer- 25% of take home pay- Consumer Credit Protection Act

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