Bus_Law_320_Class_Creditor_Debtor

Bus_Law_320_Class_Creditor_Debtor - BUS LAW 320 SPRING 2011...

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BUS LAW 320 SPRING 2011 Breslow Topics for this Class Creditors and Debtors Overview of the rights of creditors and protections for debtors (especially consumers) Mortgages and Foreclosures Secured Transactions Pledging collateral for a loan Bankruptcy Terminology Mortgage Note (Promissory Note) Deed of Trust Reconveyance Debtor Creditor Collateral Foreclosure Deficiency / Anti-deficiency Personal Property Secured Transaction Secured Party Recording Constructive Notice UCC-1 Lien Perfecting (a security interest) Redemption Petition Trustee Discharge Exempt property Discharge 1
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Reorganization Preference Creditors and Debtors Debtor – borrows money Usually signs a “Note” (promissory note; promise to pay) (“IOU”) Creditor – lends money The Creditor might also be the seller of goods : two-party transaction Or may be a third-party lender : three-party transaction Two main categories of loans: Secured – the borrower puts up some kind of collateral If borrower defaults, lender can seize (reposess) the collateral and Keep it Sell it If collateral sells for less than the amount owed, creditor may sue for the balance – deficiency Unsecured – no collateral If borrower defaults, lender has to sue and get a judgment Then look for property to seize through various collection tools, such as garnishment of wages, Two major categories of property that might be collateral: Real estate Personal Property Can be tangible Or intangible (e.g., intellectual property, receivables) Real Estate Loans 2
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To buy – purchase money To refinance To borrow against equity Almost always secured by the real estate itself Depending on state, security is a mortgage or a deed of trust Mortgage – two party Borrower = mortgagor Lender = mortgagee Deed of Trust – three party Borrower = trustor Lender = beneficiary Third party = trustee Trustee hold title until paid in full Then Deed of Reconveyance Recording What does it mean? Why do it? Constructive Notice – giving the world a way to find out about your mortgage/loan/lien/etc. Give your loan priority over loans that are (a) not recorded, or (b) recorded later than yours Priority means you get paid first in case of a sale or foreclosure, before the other lenders Where do it? For real estate, usually in county recorder’s office where land is For personal property, usually in a state office, e.g., Secretary of State 3
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What if you don’t record? Still have rights against borrower But later lender can trump you if it records And subsequent buyer isn’t affected by it See example p. 409 Foreclosure If borrower doesn’t pay loan, lender can force a sale of the property May require court order (judicial foreclosure) May not, if built into agreement (e.g., deed of trust, trustee sale) Example p. 410 Deficiency? Can lender sue the borrower for the deficiency if the amount paid at the
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Bus_Law_320_Class_Creditor_Debtor - BUS LAW 320 SPRING 2011...

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