Credit Instruments and Legal Documentation

CONTRACTS FOUR ESSENTIAL ELEMENTS: PARTIES TO A CONTRACT MUST BE LEGALLY COMPETENT SUBJECT MATTER MUST BE LEGAL AND PROPER MUST BE EVIDENCE OF AN OFFER AND AN ACCEPTANCE MUST BE CONSIDERATION

PROMISSORY NOTE THE PRIMARY LEGAL DOCUMENT IN A LOAN CONTRACT A WRITTEN PROMISE OF THE BORROWER TO REPAY A LOAN

NOTES CAN BE SECURED OR UNSECURED THE PURPOSE OF SECURITY OR COLLATERAL IS TO REDUCE THE DEFAULT RISK

REAL PROPERTY THE DEED OF TRUST IS THE INSTRUMENT USED TO ESTABLISH A SECURITY INTEREST IN REAL PROPERTY IT IS A THREE PARTY INSTRUMENT LENDER BORROWER TRUSTEE

WARRANTY DEED THE INSTRUMENT THAT TRANSFERS TITLE IN REAL PROPERTY THE SELLER IS GUARANTEEING THAT THE TITLE IS FREE AND CLEAR OF ENCUMBRANCES

QUITCLAIM DEED THE SELLER IS AGREEING ONLY TO CONVEY ANY INTEREST IN THE PROPERTY, BUT NOT GUARANTEEING THAT THE PROPERTY IS FREE OF ENCUMBRANCES BY OTHERS

UNIFORM COMMERCIAL CODE (UCC) ALL LAWS THAT GOVERN TANGIBLE AND INTANGIBLE PERSONAL PROPERTY TANGIBLE PERSONAL PROPERTY CONSUMER GOODS EQUIPMENT FARM PRODUCTS

INTANGIBLE PERSONAL PROPERTY NEGOTIABLE INSTRUMENTS DOCUMENTS OF TITLE ACCOUNTS CONTRACT RIGHTS

UNDER THE UCC THE PARTIES IN A SECURED TRANSACTION ARE THE DEBTOR (BORROWER) AND THE SECURED PARTY (LENDER OR SECURED SELLER)

THE SECURED PARTY OBTAINS A SECURITY INTEREST (LIEN) IN COLLATERAL (PERSONAL PROPERTY GIVEN AS SECURITY) BY ENTERING INTO A SECURITY AGREEMENT (CREATES A SECURITY INTEREST)

FINANCING STATEMENT SHOWS THE NAME AND MAILING ADDRESS OF THE BORROWER AND SECURED PARTY AND A DESCRIPTION OF THE COLLATERAL AND MUST BE SIGNED BY BOTH PARTIES.

OTHER CREDIT INSTRUMENTS ABSTRACT - ALL DEEDS, MORTGAGES, FORECLOSURES, AND OTHER PERTINENT FACTS THAT AFFECT TITLE TO LAND. TITLE INSURANCE - USED IN PLACE OF AN ABSTRACT.

A LIEN IS A CLAIM OR ENCUMBRANCE ON A PROPERTY. FORECLOSURE IS THE PROCESS UNDER WHICH LENDERS EXERCISE THEIR RIGHTS TO HAVE SECURITY SOLD AND THE PROCEEDS APPLIED TO THE OUTSTANDING LOAN BALANCE.

BANKRUPTCY CHAPTER 7 PROVIDES FOR LIQUIDATION OF ASSETS FOR THE SATISFACTION OF LEGALLY DISCHARGEABLE DEBTS CHAPTER 12 FOR FARMERS ONLY, ALLOWS REORGANIZATION OF THE BUSINESS TO MEET DEBT

CHAPTER 11 ALLOWS DEBT ADJUSTMENT AND REORGANIZATION AND IS COMMONLY USED FOR BUSINESS REORGANIZATION CHAPTER 13 INVOLVES REORGANIZATION OR ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH REGULAR INCOME.

CHAPTER 12 BANKRUPTCY ENACTED IN 1986 IN RESPONSE TO THE FARM FINANCIAL CRISIS OF THE 1980s MODIFIES THE NORMAL CHAPTER 11 PROCEDURE BY PERMITTING FARMERS TO SUBMIT A REORGANIZATION PLAN DIRECTLY TO THE BANKRUPTCY COURT, WITH NO REVIEW BY CREDITORS.

GIVES FARMERS CONSIDERABLE POWER TO DEMAND CONCESSIONS FROM LENDERS RELATIVE TO CHAPTER 11