Ch. 20: Creditors’ Rights and Remedies – No. 1
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Lien: A claim against a debtor’s property that must be
satisfied before other creditors may claim the property or its
enhance the value of the personal property.
property).
Foreclosure: A statutory lienholder may, after the debtor
Ch. 20: Creditors’ Rights and Remedies – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
JUDICIAL LIENS AND
COMPOSITION AGREEMENTS
Judicial Lien: A lien a creditor obtains by judicial order.
Writ of Attachment: A court order, issued before the
creditor obtains a judgment against the debtor, directing
the sheriff to seize and take into custody the debtor’s
Garnishment: Legal process a creditor may use to seize
the debtor’s property (e.g., wages) being held by a third-
party garnishee (e.g., the debtor’s employer).
and his creditors by which the creditors agree to accept, in full
satisfaction of a debt, a lesser sum than the debtor owes.
Ch. 20: Creditors’ Rights and Remedies – No. 3
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Fixed-Rate Mortgage: Has an unchanging rate of
interest, so payments remain the same for the duration of
the loan.
Adjustable-Rate Mortgage: Mortgage in which the rate
(2) Recording the mortgage with the appropriate office
in the county where the property is located
(3) Including contract provisions, such as a
prepayment penalty clause
Ch. 20: Creditors’ Rights and Remedies – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
FORECLOSURE
Forbearance: A postponement of part or all of the
payments on a loan for a limited time.
Workout Agreement: A contract that describes the
respective rights of the borrower and the lender as they
a job.
Right of Redemption: The right by which a defaulting
borrower can redeem the property before the foreclosure
sale by paying the full amount of the debt.
Ch. 20: Creditors’ Rights and Remedies – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
SURETYSHIP AND GUARANTY
Suretyship: An express promise by a third party (the surety)
to a creditor to be primarily responsible for the debtor’s
obligation to the creditor.
Guaranty: An express promise by a third party (the
“Main Purpose” Exception: The statute of frauds does
not mandate a signed writing if the guaranty agreement’s
main purpose is to benefit the guarantor.
Ch. 20: Creditors’ Rights and Remedies – No. 6
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
DEFENSES OF SURETIES AND GUARANTORS
Material Modification: Any material modification to the
terms of the underlying agreement between the principal and
its creditor not authorized by the surety or guarantor will
discharge a guarantor or surety in part or in whole.
Surrender or Impairment of Collateral: If the creditor
payment is properly tendered but rejected by a creditor who
knows of the guarantor’s or surety’s existence, the guarantor
or surety is discharged.
Other Defenses: Sureties and guarantors are entitled to assert
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
RIGHTS OF SURETIES AND GUARANTORS
Subrogation: The right of a guarantor or surety to stand in
expended or incurred on behalf of the debtor.
Contribution: The right of a co-guarantor or co-surety
(where two or more persons are acting as surety or guarantor)
to recover from his co-guarantor or co-surety any costs,
Ch. 20: Creditors’ Rights and Remedies – No. 8
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
EXEMPT PROPERTY
Homestead Exemption: Each state’s law permits a debtor to
retain his family home, either in its entirety or up to a
specified dollar amount, free from claims of unsecured
family heirlooms,
(3) one or more vehicle(s) for transportation (at least up to a
certain dollar value),
(4) certain classified animals, including pets, and
(5) business or trade equipment used by the debtor (up to
a certain dollar value).
Ch. 20: Creditors’ Rights and Remedies – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
JUDICIAL LIENS AND
COMPOSITION AGREEMENTS
Judicial Lien: A lien a creditor obtains by judicial order.
Writ of Attachment: A court order, issued before the
creditor obtains a judgment against the debtor, directing
the sheriff to seize and take into custody the debtor’s
Garnishment: Legal process a creditor may use to seize
the debtor’s property (e.g., wages) being held by a third-
party garnishee (e.g., the debtor’s employer).
and his creditors by which the creditors agree to accept, in full
satisfaction of a debt, a lesser sum than the debtor owes.
Ch. 20: Creditors’ Rights and Remedies – No. 3
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Fixed-Rate Mortgage: Has an unchanging rate of
interest, so payments remain the same for the duration of
the loan.
Adjustable-Rate Mortgage: Mortgage in which the rate
(2) Recording the mortgage with the appropriate office
in the county where the property is located
(3) Including contract provisions, such as a
prepayment penalty clause
Ch. 20: Creditors’ Rights and Remedies – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
FORECLOSURE
Forbearance: A postponement of part or all of the
payments on a loan for a limited time.
Workout Agreement: A contract that describes the
respective rights of the borrower and the lender as they
a job.
Right of Redemption: The right by which a defaulting
borrower can redeem the property before the foreclosure
sale by paying the full amount of the debt.
Ch. 20: Creditors’ Rights and Remedies – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
SURETYSHIP AND GUARANTY
Suretyship: An express promise by a third party (the surety)
to a creditor to be primarily responsible for the debtor’s
obligation to the creditor.
Guaranty: An express promise by a third party (the
“Main Purpose” Exception: The statute of frauds does
not mandate a signed writing if the guaranty agreement’s
main purpose is to benefit the guarantor.
Ch. 20: Creditors’ Rights and Remedies – No. 6
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
DEFENSES OF SURETIES AND GUARANTORS
Material Modification: Any material modification to the
terms of the underlying agreement between the principal and
its creditor not authorized by the surety or guarantor will
discharge a guarantor or surety in part or in whole.
Surrender or Impairment of Collateral: If the creditor
payment is properly tendered but rejected by a creditor who
knows of the guarantor’s or surety’s existence, the guarantor
or surety is discharged.
Other Defenses: Sureties and guarantors are entitled to assert
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
RIGHTS OF SURETIES AND GUARANTORS
Subrogation: The right of a guarantor or surety to stand in
expended or incurred on behalf of the debtor.
Contribution: The right of a co-guarantor or co-surety
(where two or more persons are acting as surety or guarantor)
to recover from his co-guarantor or co-surety any costs,
Ch. 20: Creditors’ Rights and Remedies – No. 8
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
EXEMPT PROPERTY
Homestead Exemption: Each state’s law permits a debtor to
retain his family home, either in its entirety or up to a
specified dollar amount, free from claims of unsecured
family heirlooms,
(3) one or more vehicle(s) for transportation (at least up to a
certain dollar value),
(4) certain classified animals, including pets, and
(5) business or trade equipment used by the debtor (up to
a certain dollar value).