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Debtor-Creditor Law

Holder in Due Course

Holder in Due Course

A Holder in Due Course is a commercial law which facilitates a transfer of debt or another financial obligation that must be paid to parties that are connected to the original transaction. The Due Course Doctrine formally insulates the final buyer of the debt obligation from challenges by either party of the original agreement or transaction. Typically, this clause is enacted and performed when there is a non-performance issue by one of the parties involved in the original contract. 
To clarify, if party X promised to pay a lump sum to party Y and Y then transferred that obligation of payment to Z, then Z would be classified as insulated or protected from any conflict which arises between the original members of the contractual agreement (parties X and Y.) As a result of the Due Course Statute, party X may then sue party Y for non-performance, but is still required to pay the original obligation to party Z.

Legal Remedies for Creditors

Legal Remedies for Creditors

The creation of a lien against a particular property of
the debtor’s can be a potent safeguard against delinquent payments and
defaulting on a loan or extension of credit
. Some processes guaranteed by statute may be used either
as a preemptive remedy or reactive judgment in favor of creditor rights. One
such example is the legal provision of attachment.

 

Attachment is a strategy that basically amounts to lawful
seizure of a debtor’s property to satisfy a debt. As a preventive measure,
attachment keeps debtors from getting rid of assets to avoid collection or
transferring them to an international account whereby creditors will have
little to no access to them.

 

As noted, wage garnishment may also stand as a symbol of
the importance of creditor’s rights within debtor-creditor law. In fairness,
those who have debts to satisfy to a lender or to an estranged former spouse or
child may own up to their responsibilities and submit to a voluntary
garnishment of their take-home pay. Nonetheless, it is often a court order
granted to the party who extended the credit that will make any attempt to
subtract from a person’s income enforceable. Again, though, as national
standards dictate, there are limits to this insurance of creditor rights.
Unless the employee owes back taxes or domestic support, only 25% of each
paycheck may be taken out pursuant to these interests.

Priority of Claims in Bankruptcy

Priority of Claims in Bankruptcy

Debtor-creditor law does not only concern itself with
bankruptcy proceedings, but of course, this does not mean that it excludes them
from consideration either. As veterans of bankruptcy law understand, not every
legitimate bankruptcy claim made by creditors may be evaded on the
part of the debt
or. Some debts are, by law, nondischargeable
debts, and thus, must be included with all payments to be made in a
rehabilitation/reorganization plan.

In attaching a priority to bankruptcy claims, it
would make sense that these types of debts would be highest up on the list.
Indeed, first on this list is the need of the debtor to cover all monthly
domestic support charges. Following th
at are administrative expenses incurred in legal appeals for bankruptcy
and claims related to
the debtor’s normal business operations.

As with the policy on dischargeability of debts,
bankruptcy claim priority is spelled out in Subchapter 5 of the
 Bankruptcy Code. The next category of bankruptcy
claims that one would be able to assign in the Section 507 priority
compendium revolves around a realization of the person’s livelihood. One
such bankruptcy claim is that of wages and sales commissions for regular
income earners, but only to a maximum of $10,000. Another governs planned
contributions to an “employee benefit plan.”
 

As for the remaining claims on the priority list, they
are harder to categorize, but they still have their place in the grand scheme
of things. The seventh claim named in Section 507 is monies intended for use in
securing a piece of real estate. Bankruptcy claims of the eighth and ninth
order invoke the
Federal Government
as creditor, in particular, certain kinds of taxes and commitments to “a
Federal depository institution
s regulatory agency (or predecessor to such
agency) to maintain the capital of an insured depository institution.” The
final bankruptcy claim echelon is restitution for damages incurred in operating
a land or sea vehicle while intoxicated. 

Ultimate Debtor Creditor Law Guide

Ultimate Debtor Creditor Law Guide

Debtor-creditor law, like bankruptcy law, is distinguished from criminal law as court proceedings whose adjudication are not dependent on the state prosecution of a criminal act. Rather, this branch of the law is invoked when the terms of a contractual agreement between a debtor and creditor/borrower and lender are not adhered to and attempts to settle disputes out of court have proven fruitless. More commonly, it is the debtor’s failure to compensate the creditor for products delivered or services rendered.
Debtor-creditor law does not solely exist for the purposes of credit collection, however. While the results of debtor-creditor litigation along those lines are undoubtedly important, they are usually of a purely financial nature. Arguably more importantly, though, sometimes the debtor will be a victim aside from his or her delinquency in paying the creditor.
There are a myriad number of offenses for which a creditor may be charged for improper business practices. Oftentimes, debtor-creditor law as invoked by the debtor will be a response to the creditor failing to uphold the terms of service or being derelict in their duties as a professional/professional organization. Furthermore, it may also be implemented when a creditor uses deception, intimidation, defamation or some other way of improperly treating the customer in aims of getting back what is owed. 

Governing Laws
Bankruptcy and bankruptcy law in the United States are just part of debtor-creditor law. Outside of bankruptcy law, however, there is not a wealth of legislation on the federal level that pertains to the debtor-creditor relationship. Moreover, it is not as if bankruptcy law can be simply applied to cases of credit and loan disputes so liberally.
Thus, while uniform laws on debt collection, credit reporting and loan contracts have been created, it is the individual states who must incorporate these provisions into their own codes. Moreover, these uniform law policies would realistically only be a supplement to state statutes and the decisions of local judges that form the basis of common law.
Said statutory and judicial elements truly make up the bedrock of debtor-creditor law. As discussed above, they cover the major intents of the law in protecting both the best interests of creditors (e.g. returning property rights to them, dispersing monies recovered from sale of a debtor’s possessions upon default) and debtors (e.g. compensating them for services not received and/or damages done). Moreover, they outline ways by which a court judgment may serve to settle any disputes and to bring about a speedy administration of the judge’s decision. 

Consumer Protection Laws

In the efforts to right the “wrongs” of debtors in failing to meet their financial obligations, creditors may err in their own right by being too aggressive with debtors. Though Federal legislation is not the primary mediator of debtor-creditor law as a whole, in terms of the consumer protection laws inherent in this subset of civil law, it is of decidedly large value.
Debt collection practices in the United States, for one, have had their fair share of abuses over time, and thus, must be continually guarded against. Consequently, the Fair Debt Collection Practices Act was enacted to address these types of situations. Other pieces of Federal legislation may not be as well known as the Fair Debt Collection Practices Act, but still have their function and are nevertheless sponsored by prominent consumer protection agencies like the FTC and FDIC.
The Truth in Lending Act (TILA), for one, narrows the more general focus of equity in debt collection specifically to fairness in offering loans to average people. TILA puts the onus on the lender to clearly communicate all terms of a loan contract to the borrower, including fees, the risks of taking out a loan, and the role that interest rate charges will play in the overall balance.

Liens
Indeed, sometimes debtors are the ones that need protection. Just as well, though, it may be creditors’ rights to their property and money that are in need of protection. One branch of debtor-creditor law that is of noted significance to many debtors is lien law.
A lien is essentially insurance for the bank or other lender that they will be able to recoup an asset if a debtor doesn’t make his or her payments. Often, this manifests itself in a lien secured against a house, which borrowers can willingly agree to in the form of the common mortgage. Just as virtually any loan or extension of credit may be a basis for debt, so too may any secured loan.
Legal Remedies for Creditors
Even in the absence of a lien, creditors may still seek relief from the court as per State statute and their very rights as creditors to their money/assets in the event debtors refuse to pay the agreed compensation. Granted, these remedies are largely similar to one another, but have their important differences just the same.
Attachment and replevin, for example, both involve the seizure of the debtor’s goods as a means of covering his or her debt. However, replevin seems more interested in giving back stolen or illegally withheld possessions to creditors. Attachment is a more general process by which monies or assets are secured from the debtor with evidence they are owed a certain amount.
Other remedies, meanwhile, are slightly more specialized in how they operate. For instance, garnishment is usually manifested expressly as a deduction of up to a quarter of one’s paycheck to satisfy a debt upon court order. Furthermore, an employer cannot stand in the way of collections through this avenue. As for receivership/custodianship, the hallmark of these solutions is that they make use of a third-party mediator/holder of properties, somewhat like a trustee.


Priority of Claims in Bankruptcy
When debtor-creditor law and bankruptcy do coincide, there must be standards by which the distribution of liquidated and reorganized assets to multiple creditors is governed. Indeed, as specified by Section 507 of Title 11 of the U.S. Code, a priority of claims system brings a sense of order to the collection process.
Highest up on the ladder in terms of priority are certain non-dischargeable debts. In all, though, a number of different kinds of debt have their place in the claims priority breakdown. In a manner comparable to out-of-bankruptcy garnishment orders, wages may also be used to defray balances on debt. Taxes also are by no means negligible, and things like income taxes and property taxes are thus covered by Section 507. Even restitution for vehicular manslaughter is considered a priority claim.

Make Sure You Know the Debtor Creditor Law

Make Sure You Know the Debtor Creditor Law

For the most part, debtor-creditor law is concerned
with when a debtor fails to uphold the conditions of a creditor’s services.
Whether it be an extension of funds, land, goods, a line of credit, or some
other form of transaction between debtor and creditor, the former must pay the
latter back in full, plus interest. In fact, debtor-creditor law is
applicable to pretty much any financial obligation that is incumbent upon the
debtor to
pay to another party.

 

Even when the debtor has not received a specific product
or service from the person(s) or organization(s) to whom he or she is indebted,
the duty to provide compensation still exists. For example, in the event the
debtor owes a party money for damages, similar principles apply as with debtor
and creditor law.

 

Then again, it may be the
debtor who applies debtor-creditor law to the creditor in terms of a
broken agreement or unfair collection practices. Theoretically, legal disputes
between debtor and creditor in which the debtor feels wronged by the
creditor are possible. Such a situation may come to pass in a small claims
court, for example. The debtor pays for a certain service to be performed, such
as hiring a contractor to accomplish certain core goals in a building scheme,
only to find the contractor has not fulfilled his end of
terms as specified and files suit accordingly. Clearly,
then, debtor-creditor law is not a one-way street.

Debtor and
creditor law exists on two complementary yet separate planes. As noted
elsewhere, when debtor-creditor law is extended to bankruptcy cases, these
legal proceedings are judged by
Federal standards in bankruptcy
courts
.

Learn All About Debtor Creditor Governing Laws

Learn All About Debtor Creditor Governing Laws

In terms of the guiding principles behind the administration of bankruptcy in the United States, much of it is determined by the language of the Bankruptcy Code (Title 11 of the United States Code) and the Federal Rules of the Bankruptcy Procedure amended and transported to federal courts by the Supreme Court. However, filing for bankruptcy is only one legal remedy and portion of the discussion of credit as a whole.
Thus, to understand the governing laws behind debtor-creditor relations, we must have knowledge of the various credit laws that are implemented by various levels of government across the country, or, for the sake of greater specificity, the credit collection laws that preside over the debtor-creditor binary.
Only then can we approach a fuller understanding of credit and bankruptcy. The following are considerations of some of the credit collection laws that influence how debtors and creditors interact:
As noted above, the main credit laws that are enacted by the federal government are bankruptcy laws. However, these procedural standards put a bit of a different spin, so to speak, on credit collection laws as they exist in out-of-bankruptcy situations.
With bankruptcy, original terms of credit, loans and other sources of debt are more or less used as a guide for new liquidation and rehabilitation that try to squeeze as much value as possible out of the debtor’s assets; frequently, creditors will get less through bankruptcy than they stood to get if the loan reached maturity, and will therefore agree to the terms of the plan as somewhat of a concession to recoup at least part of what was owed. 
The credit laws that most closely resemble debtor-creditor law in its purest form are pieces of omnibus legislation that individual states may choose to adopt or not adopt. On the state level, meanwhile, different systems of law may be invoked in the enforcement of credit laws on behalf of either debtors or creditors. Credit collection laws, for the most part, are regulated by state statute, as are a number of individual aspects of debtor-creditor law. 
In particular, state credit laws outline how contracts may be upheld in the wake of missing payments. Often, through the provisions of a court judgment, creditors will be allowed to subtract from a debtor’s assets against which a loan is secured or which the statutes specifically grant may be claimed in the collection process. As always, it must be stressed that credit collection laws work both ways; that is, they represent the interests of both debtors and interests to the best extent possible. 
Concerning how debtors may be abused by creditors, though creditors do have their right to get back the funds they lend to individuals, this right does not justify unethical business practice on their part to procure those sums. In the event a lender uses harassment, threats, defamation and other injurious tactics to justify the means, precepts of tort law will likely come into play and entitle the debtor—not the creditor—to collect for damages as a victim.

Need to Know Facts About Consumer Protection Laws

Need to Know Facts About Consumer Protection Laws

As critical as financial obligations are in matters of debtor-creditor law, the obligations to fairness in borrowing and lending are of even greater important in the grand scheme of things. Truly, it is bad for debtors to willfully neglect to make payments on the credit they have been issued. However, unpredictable, disastrous personal circumstances affecting one’s ability to work and pay may mitigate one’s culpability.
Along the lines of the saying “two wrongs don’t make a right,” creditors may not use this leverage over the debtor in an exploitative way. Ultimately, they may have to pursue what they are owed in court, but they must do so with respect and without malice.
Debtor-creditor law is a mere subset of a larger set of principles that guides the treatment of everyday Americans in the marketplace, known as consumer protection laws. Whereas state statutes obviously are subject to the interpretation and values of the individual states that promulgate them, consumer protection law has a strong basis in Federal legislation.
Some sources of consumer protection laws in the United States include:
One aspect of debtor-creditor law that is of notable concern to the administration of consumer protection laws as a whole is collection of debt by creditors. After all, the use of consumer credit is widespread in the modern age, with millions of Americans using their credit cards on a regular basis. As such, it is no stretch to say credit makes the world go around. Credit agencies have a responsibility to deal with debtors in a responsible manner, even if debtors have yet to reciprocate financially.
One of the primary instruments of consumer protection law in this regard in the United States is the Fair Debt Collection Practices Act (FDCPA), which contains a list of illegal tactics that have been reported of creditors as well as a number of conditions by which they must abide. The FDCPA also outlines what legal recourse consumers have to hold creditors accountable for their actions.
Of course, a creditor and a lender are not always one in the same. Sometimes, with loans in particular, lenders will be confrontational with borrowers about preserving the terms of their contract even when it is clear that said terms were not very well understood in the first place.
The Truth in Lending Act (TILA), which, like the FDCPA, falls under the jurisdiction of the Consumer Credit Protection Act, is just one of the consumer protection laws targeting lack of disclosure in business between debtors and creditors.
TILA mandates that all specifics within a lending agreement be enumerated clearly for the debtor’s sake, especially interest rates and other fees attached to the contract. This consumer protection law specifically addresses standards for advertising closed-end loans (loans that must be paid in full by a specific date), informing people of their rights in a language with which they are comfortable (e.g. Spanish-speakers), and special provisions for mortgage loans.
Consumer protection laws such as the Fair Debt Collection Practices Act and the Truth in Lending Act are overseen by Federal agencies. The Federal Trade Commission (FTC), for one, makes consumer protection law its primary mission and also tries to make sure competitive balance is preserved in matters of national commerce. The Federal Deposit Insurance Corporation (FDIC) also mentions “consumer protection” by name in its mission and stands for sound practice of financial institutions such as banks across America.

Debtor Creditor Liens

Debtor Creditor Liens

There are limits to how creditors and lenders may go about trying to obtain returns on their investments. Above all else, they should use tact and be respectful when they go about pursuing the customer (as the old adage says, “the customer is always right”).
Even when creditors do their best to accommodate debtors’ needs and handle their claims responsibly, debtors will be intent on avoiding the promises they made in taking out a loan or a line of credit. It should be noted that a certain degree of volunteerism may factor into lien law in some circumstances. In other words, debtors may willingly assent to placing a lien on property that belongs to them as terms of an agreement to take out a sizable loan, as in a home mortgage situation.
However, the scope of lien law applies not only to contractual creations. Adversary litigation may await the debtor if some charge is allowed to go unpaid. With the previous example of the mortgage, the lender and the holder of the lien are one in the same, and there would be few legal options for the borrower outside of filing for bankruptcy.
Additionally, the scope of lien law exceeds mortgages and real estate. Assets may be held from debtors for services rendered without due compensation. One salient emblem of this is what is known as an attorney’s lien. If individuals and their lawyers are able to win cash settlements, for example, but these people refuse to pay their legal representatives as per specified fees, the attorneys have the right to refuse the return of the award to their clients until their terms are met.