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What is a prejudgment attachment? What is a writ of execution? How does a creditor use these remedies? What is a prejudgment attachment? What is a writ.

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Presentation on theme: "What is a prejudgment attachment? What is a writ of execution? How does a creditor use these remedies? What is a prejudgment attachment? What is a writ."— Presentation transcript:

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2 What is a prejudgment attachment? What is a writ of execution? How does a creditor use these remedies? What is a prejudgment attachment? What is a writ of execution? How does a creditor use these remedies? What is garnishment? When might a creditor undertake a garnishment proceeding?  What is garnishment? When might a creditor undertake a garnishment proceeding?  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2

3 In a mortgage foreclosure, what legal rights do mortgage holders have if the sale proceeds are insufficient to pay the underlying debt? In a mortgage foreclosure, what legal rights do mortgage holders have if the sale proceeds are insufficient to pay the underlying debt? What is a suretyship, and how does it differ from a guaranty?  What is a suretyship, and how does it differ from a guaranty?  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3

4 Can an unsecured creditor force a debtor to sell his or her home at a public auction? What is the homestead exemption, and how does it work? Can an unsecured creditor force a debtor to sell his or her home at a public auction? What is the homestead exemption, and how does it work? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4

5 Liens: encumbrance (claim upon) on property to satisfy a debt or protect a claim for the payment of debt. Liens: encumbrance (claim upon) on property to satisfy a debt or protect a claim for the payment of debt. – Mechanic’s Liens: security for labor, materials, or service on real estate. – Artisan’s Liens: labor and materials on personal property. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5

6 Liens (cont’d). Liens (cont’d). – Judicial Liens: arises out of a court decision. Writ of Attachment: court orders sheriff to seize non-exempt property. Writ of Execution: court order to seize and sell debtor’s non-exempt real and personal property to satisfy debt. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6

7 Garnishment. Garnishment. Permits a creditor to collect a debt by seizing property of the debtor held by a third party (garnishee). Typically the garnishee is the debtor’s employer. – Garnishment Proceedings governed by state law.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7

8 Garnishment (cont’d). Garnishment (cont’d). – Laws Limiting the Amount of Wages Subject to Garnishment. Both federal and state laws limit the amount that can be taken out of a debtor’s take home pay. Indiana Surgical Specialists v. Griffin CASE 25.1 Indiana Surgical Specialists v. Griffin (2007). Should some contractors be exempt from garnishment orders? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8

9 Creditors’ Composition Agreements. Creditors’ Composition Agreements. – Creditors take less than owed on a liquidated debt. – Binding on those who agree because consideration given by each depending on one another. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9

10 Mortgage Foreclosure. Mortgage Foreclosure. – Mortgage is a written instrument giving a creditor an interest in (lien on) the debtor’s real property as security for the payment of a debt. – Financial institutions grant mortgage loans for the purchase of property— usually a dwelling and the land. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10

11 Mortgage Foreclosure (cont’d). Mortgage Foreclosure (cont’d). – The mortgagee (the creditor-lender) can seek to recover the difference from other property owned by the mortgagor (the debtor) by obtaining a deficiency judgment (difference between the mortgaged debt and the amount received from the foreclosure proceeds). © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11

12 Suretyship: Promise by a third person to be primarily liable for the debtor’s obligation to the creditor. Suretyship: Promise by a third person to be primarily liable for the debtor’s obligation to the creditor. – Express contract between surety and the creditor. – Creditor can demand payment from surety at any time after debt is due.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12

13 Suretyship: (cont’d). Suretyship: (cont’d). – Creditor need not exhaust all legal remedies against the debtor before holding the surety responsible. Guaranty: third person making the guaranty is secondarily liable. Guaranty: third person making the guaranty is secondarily liable. – Guarantor is liable only after the principal debtor defaults.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13

14 © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14

15 Guaranty: (cont’d). Guaranty: (cont’d). – Statute of Frauds requires guaranty to be in writing, unless main purpose exception applies. Overseas Private Investment Corp. v. Kim – CASE 25.2 Overseas Private Investment Corp. v. Kim (2010). Can a guarantor claim ignorance to excuse her from liability? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15

16 Actions That Release the Surety and Guarantor: same as those that will discharge the guarantor. Actions That Release the Surety and Guarantor: same as those that will discharge the guarantor. Defenses: Surety can use any of the principal debtor’s defenses EXCEPT incapacity, bankruptcy, or statute of limitations.  Defenses: Surety can use any of the principal debtor’s defenses EXCEPT incapacity, bankruptcy, or statute of limitations.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16

17 Defenses: (cont’d). Defenses: (cont’d). – Surety can use his own defenses, EXCEPT fraud between debtor and surety that is unknown by creditor. – Material contract modification between debtor and creditor will release a gratuitous surety and a compensated surety to the extent he suffers a loss.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 17

18 Defenses: (cont’d). Defenses: (cont’d). – Surrender or impairment of the Debtor’s collateral releases surety to the extent he is damaged. – Release of a co-surety releases surety to the extent he is damaged. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18

19 Right of Subrogation. Right of Subrogation. Right of Reimbursement. Right of Reimbursement. Right of Contribution. Right of Contribution. – Sureties in equal amounts. – Sureties in equal amounts, one or more co-sureties missing or insolvent. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19

20 Exempted Real Property. Exempted Real Property. – Homestead: state laws permit entirely or up to a certain dollar amount. Exempted Personal Property. Exempted Personal Property. – Household furniture up to certain limit. – Clothing and personal possessions. – Vehicle for transportation.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20

21 Exempted Personal Property (cont’d). Exempted Personal Property (cont’d). – Certain classified animals. – Equipment debtor uses in a trade or business, up to certain dollar amount. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21


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