Other Creditors’ Remedies and Suretyship

Chapter 31Other Creditors’ Remedies and SuretyshipCopyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Lien (Definition):Claim to property (or proceeds of sale of property)31-231-3Types of LiensConsensual Lien: Secured interest in property created by agreement of partiesStatutory Lien: Claim to property created through statuteMechanic’s Lien: Claim on real propertyArtisan’s Lien: Claim on personal property31-4Types of Liens (Continued)Judicial Lien: Legal action whereby creditor seize debtor’s property to satisfy debtAttachment: Court-ordered judgment permitting local court officer to seize debtor’s propertyWrit of Execution: Document authorizing law officer to seize debtor’s non-exempt propertyGarnishment: Order that satisfies debt by seizing debtor’s property that is being held by third party (such as bank or employer)31-5Exhibit 31-2: Other Types of LiensAttorney’s Lien: Right of attorney to keep client’s money/possessions until client pays debtBroker’s Lien: Claim to property by real estate broker for commissionCommon Law Lien: Claim to property by implication of law (rather than statute)Consummate Lien: Lien of judgment that arises when motion for new trial deniedEquitable Lien: Claim on property either created by sales contract, or imposed by court to ensure fairnessInnkeeper’s Lien: Claim on baggage of guests who stay at inn and are unable to pay bill31-6Exhibit 31-2: Other Types of Liens (Continued)Landlord’s Lien: Claim on furniture and property in apartment by landlordMaritime Lien: Claim on vessel for service made to vesselMedicare Lien: Hospital’s claim to medical benefits paid under Medicare ActPossessory Lien: Claim to property representing lienholder’s right to be in possession of property until debt paidTax Lien: Claim against taxpayer’s property for unpaid taxesVendor’s Lien: Vendor’s claim to land for unpaid purchase price of landMortgage Foreclosure (Definition):Foreclosure and sale of mortgaged property to pay debt31-7Assignment for Benefit of Creditors (Definition):Transfer of title of property to trustee, who sells property to pay creditors on pro-rata basis with proceeds of sale31-831-9Suretyship and Guaranty ContractsSuretyship: Contract between creditor and third party who agrees to pay another person’s debt, and is primarily liable for debtGuaranty: Third party (usually called “guarantor”) who must pay debt only after debtor has defaulted, and is secondarily liable for debt31-10Defenses of Surety and GuarantorStatute of FraudsDischarge from debtBankruptcyDebtor’s fraud31-11Rights of Surety and GuarantorRight to Subrogation: Surety/guarantor entitled to all rights creditor had against debtorRight to Reimbursement: Surety/guarantor can recover actual amount of debt paid to creditor, plus legal expenses against debtorRight of Contribution: Other sureties/guarantors must pay their equal shares