Chapter 28

Business Administration 391 with Zickuhr at University of Wisconsin - Milwaukee

About this deck

By: Alicia Bartosic
Textbook:

Business Law: Text and Cases - Legal, Ethical, Global, and Corporate Environment

Study Guide for Clarkson/Jentz/Cross/Miller's Business Law: Text and Cases, 11th

West's Business Law, Alternate Edition (with Online Legal Research Guide)
Created: 2011-04-14
Size: 43 flashcards
Views: 92

About StudyBlue

STUDYBLUE makes things that make you better at school. Things like online flashcards with photos and audio. Things like personalized quizzes and friendly reminders about when (and what) to study next. Think of it as a digital backpack™: access to all of your study materials online and on your phone. STUDYBLUE exists to make studying efficient and effective for every student, for free. Join us.

“Simply amazing. The flash cards are smooth, there are many different types of studying tools, and there is a great search engine. I praise you on the awesomeness.”
Dennis

Sign up (free) to study this.

Creditor's rights

Basic laws that assist the debtor and creditor in resolving collection disputes

must be clear of what happens when someone doesn't pay

Judicial collection techniques

Repossession
Bankruptcy
Levy on property

Repossession

Property is held as collateral

if debtor misses payments, repossession and sale of property to get $ back to creditor

Bankruptcy

Debtor declares it for a chance of financial rebirth

creditor gets nothing

Levy on property

Real estate or personal

Writ of Attachment (before judgement)
Writ of Execution (after judgement)

Lien

A claim against a debtor's property that must be satisfied before the property is available to satisfy the claims of other creditors.

may arise under common law or statutory law

Statutory liens include mechanic's liens

Common law liens include artisan's liens

Artisan's lien

A device created at common law through which a creditor can recover payment from a debtor for labor and materials furnished in the repair of personal property.

possessory: the lienholder ordinarily must have retained possession of the property and have agreed to provide the services on a cash basis

Mechanic's liens

When a person contracts for labor, services or materials to be furnished for the purpose of making improvements on real property but does not immediately pay for the improvements, creditor can place a mechanic's lien.

Creates a special type of creditor-debtor relationship in which the real estate itself becomes security for the debt.

Judicial liens

Those that represent a creditor's efforts to collect on a debt before or after a judgement is entered by a court.

Writ of Attachment (before judgement)

Refers to a court-ordered seizure and taking into custody of property prior to the securing of a judgement for a past-due debt.

creditor requests if they believe monies will be diluted
must have a lot of proof and meet court's requirements
if creditor prevails, property can be sold to satisfy the judgement

Writ of Execution (after judgement)

An order that directs the sheriff to seize and sell any of the debtor's nonexempt real or personal property that is within the court's geographic jurisdiction (usually the county where the courthouse is)

proceeds of sale used to pay creditor, interest, and cost of sale

CLICKER QUESTION: Larry borrows money from Joan. If Larry defaults, to use a writ of execution as a remedy, Joan must first:

Answer: Commence a suit against Larry, succeed in suit, be unable to collect the amount of a judgement against Larry

CLICKER QUESTION: Ace Credit believes that Kathy may dispose of assets that Ace expects to get. Before judgement, Ace wants to secure the assets in question. He must get a..

Answer: Writ of attachment.

Docketing

Form of writ of execution, step of property protection

After you receive payment, pay $5 to have the court record on their docket
Doesn't prevent taking out debt on property

Garnishment

An order for garnishment permits a creditor to collect a debt by seizing property of the debtor that is being held by a third party.

Many times an employer is the garnishee, who will then take a portion of the debtor employee's paycheck as payment

Terms of a garnishment

Almost all types of property can be garnished (tax refunds, pensions, trust funds)
Garnishee only gets paid after federal taxes, child support
Garnishment will go away in the case of a bankruptcy

Supplementary hearing

Part of the discovery process to see the debtor's ability to make payments

search for additional funds

Contempt hearing

Held if court feels it's authority or court order has been violated. Judge can choose to:

Force party involved to follow it
Purge of party: removal from court

Remedies of contempt

Jail
Fines
Work release jail

Defense against contempt: inablity to pay

Body attachment

Court issues a warrant for one of the parties involved in contempt

Makes the party's presence in court mandatory

CLICKER QUESTION: Eve borrows $1,000 from a credit company. She defaults. The credit company obtains a garnishment order from the court. To satisfy the judgement, the order will likely be served on who?

ANSWER: Eve's employer

Suretyship

Contract made by a third party to be responsible for the debtor's obligation.

An express contract made between the surety (3rd party) and the creditor

Suretyship contracts

Must have elements of a contract

offer, acceptance, consideration, capacity, legal contract

Statute of frauds

written OR oral suretyship contract enforceable

Capacity

surety must have capacity to make contract agreement
if principal debtor becomes incapacitated, surety doesn't get out of the debt

Guaranty

Contract including a third party promise to answer for the debt or default of another.

Required to pay debtors obligation only after default
Must be in writing to be enforceable

Surety vs. Guarantor

Surety: primarily liable for debt of the principal

3rd party who agrees to be responsible for the debt even if the primary debtor does not default

Guarantor: secondarily liable for debt of the principal

3rd party who agrees to be responsible for debt only if primary debtor defaults

CAN'T BE A CONSIDERED BOTH A SURETY AND A GUARANTOR

Creditor's rights and remedies

Rights against principal debtor

principal debtor does not have to default

Rights against the surety

same rights against principal debtor

Surety's rights and remedies

Exoneration
Reimbursement
Subrogation
Collateral

Exoneration: Surety's rights and remedies

Principal debtor required to pay back surety in full

Reimbursement: Surety's rights and remedies

Surety is entitled to receive from the debtor all expenses incurred on behalf of the suretyship arrangement as well as the actual about of debt paid to the creditor.

Subrogation: Surety's rights and remedies

Any right the creditor had against the debtor now becomes the right of the surety.

creditor's rights in bankruptcy
rights to judgments obtained by the creditor

Collateral: Surety's rights and remedies

Surety has the right to take collateral from principal debtor as form of repayment

Surety's defenses

Defenses derived from the debtor

Whatever defenses debtor has for not paying, surety has
Exceptions: bankruptcy, capacity, statutes of limitations

Surety's contractual defenses

Any defenses that surety has are limited to what's written in contract

Release of debtor

If principal debtor is released, surety is released

must notify & get approval from surety

Release of surety

If surety released, principal debtor is released

must notify & get approval from debtor

Actions releasing a surety from obligation of debt

if principal debtor pays the debt
any change or damage to collateral property without surety approval
any material modification to the contract between the principal debtor and the creditor without surety's consent

Co-sureties

Two or more sureties on the same obligation owed by the debtor

Liability of co-surety determined by agreement or set at lawful maximum
if one surety is released, all parties must be notified

Right of contribution

Usually jointly liable

A surety who pays more than his/her portion on a debtor's default is entitled to recover the excess amount from the co-sureties

CLICKER QUESTION: Doug & John are brothers. They agree to act as guarantors on a loan made by sister Barb. Barb defaults on payments. John pays debt; Doug refuses to pay. John is entitled to recover payment from:

ANSWER: From Barb under the right of subrogation, and from Doug under the right of contribution.

Protection for Debtors

Homestead exemption
Exempted personal property

Homestead exemption

Each state permits the debtor to retain the primary residence, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy.

CLICKER QUESTION: A owes B $30,000. A home is sold at an auction for $40,000. Homestead exemption in A's state is $15,000 How much does B recover?

ANSWER: $25,000

(40,000-15,000)

CLICKER QUESTION: Since B received $25,000 but was owed $30,000, how can B recover the difference?

ANSWER: The difference can be recovered through the sale of any other nonexempt property owned by A.

Exempted personal property

Personal property that is most often found exempt from satisfaction of judgement debts include:

household furniture up to a certain dollar amount
clothing and personal possessions (family pictures, Bible)
vehicle(s) up to a certain dollar amount
pets or livestock
business equipment up to a certain dollar amount