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.
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
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.
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 debtor. Some debts are, by law, nondischargeable
debts, and thus, must be included with all payments to be made in a
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 that 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.