Lecture Dynamic business law - Chapter 31: Other creditors’ remedies and suretyship

After reading this chapter, you will be able to answer the following questions: How can liens assist creditors? What are the various kinds of statutory liens available to creditors? What are the various kinds of judicial liens available to creditors? How does mortgage foreclosure assist creditors? What is a creditors’ composition agreement for the benefit of creditors? What is an assignment for the benefit of creditors? What are suretyship and guaranty contracts?

Other Creditors’  Remedies and  Suretyship

Claim to property (or proceeds of sale 

of property)

 Consensual Lien:  Secured interest in property created by  agreement of parties

 Statutory Lien:  Claim to property created through statute

 Mechanic’s Lien:  Claim on real property

 Artisan’s Lien:  Claim on personal property

 Judicial Lien:  Legal action whereby creditor seize debtor’s property to 

satisfy debt

 Attachment:  Court­ordered judgment permitting local court officer to 

seize debtor’s property

 Writ of Execution:  Document authorizing law officer to seize debtor’s  non­exempt property

 Garnishment:  Order that satisfies debt by seizing debtor’s property 

that is being held by third party (such as bank or employer)

pays debt

court to ensure fairness

pay bill

 Landlord’s Lien:  Claim on furniture and property in apartment by landlord

 Maritime Lien:  Claim on vessel for service made to vessel

 Medicare Lien:  Hospital’s claim to medical benefits paid under Medicare 

Act

 Possessory Lien:  Claim to property representing lienholder’s right to be in  possession of property until debt paid

 Tax Lien:  Claim against taxpayer’s property for unpaid taxes

(Definition):

Foreclosure and sale of mortgaged property 

to pay debt

Creditors (Definition):

Transfer of title of property to trustee, who sells 

property to pay creditors on pro­rata basis with 

proceeds of sale

 Suretyship:  Contract between creditor and third party  who agrees to pay another person’s debt, and is 

primarily liable for debt

 Guaranty:  Third party (usually called “guarantor”)  who must pay debt only after debtor has defaulted, 

and is secondarily liable for debt

 Statute of Frauds

 Discharge from debt

 Bankruptcy

 Debtor’s fraud

 Right to Subrogation:  Surety/guarantor entitled to all rights 

creditor had against debtor

 Right to Reimbursement:  Surety/guarantor can recover actual  Right to Reimbursement:  Surety/guarantor can recover actual  amount of debt paid to creditor, plus legal expenses against 

debtor

 Right of Contribution:  Other sureties/guarantors must pay 

their equal shares