Legal Term for Debtor

Combine the assets and liabilities of two or more related debtors into a single pool to pay creditors. (Courts are reluctant to permit substantive consolidation because the claim must justify not only the benefit received by a group of creditors, but also the harm suffered by other creditors as a result.) To learn more about the various issues related to debtor and creditor law, read FindLaw`s Consumer Financial Protection and Debt Relief sections. Unlike tort and contract law, most debtor and creditor laws are statutory, state, or federal. This is particularly true when it comes to protecting debtors from unfair collection practices, as in the case of the Fair Collection Practices Act. [6] However, there are some common law pleas that may limit the collection process, even if they are rarely used or successful. As a rule, they operate when debtor`s law and credit law overlap contract law and tort law. In some cases, there are exceptions to this rule. For example, in some states, if a debtor has been ordered by the court to pay a debt and does not pay, he is charged with contempt of court, and contempt of court can result in a prison sentence, indirectly sending the person to jail because he is a debtor. The law of debtor-creditors governs situations in which one party is unable to pay a pecuniary debt to another. There are three types of creditors. First, those who have a lien on a particular piece of land. This asset (or the proceeds of its sale) must be used to repay the debt owed to the secured creditor before it can be used to repay debts owed to other creditors.

A privilege may arise by law, agreement between the parties or legal proceedings. See, for example, secured transactions and mortgages. Second, a creditor may have an overriding interest. A priority stems from the law. If a creditor has priority, its debt must be paid if the debtor becomes insolvent before other debts. For example, Congress has prioritized debt over the federal government. See Federal Tax Lien Act. The last type of creditor is one that has no lien over the debtor`s assets and is not subject to any legal precedence. Prior to the creation of consumer and debtor protection laws, it was difficult for a debtor to react against bad behavior of the creditor, such as constant phone calls, home visits, etc. Debtors have responded to this behaviour over the years by suing odious creditors under various theories of tort liability, including defamation, invasion of privacy, and intentional infliction of emotional distress.

The average monthly income received by the debtor during the six calendar months preceding the commencement of bankruptcy proceedings, including regular contributions to household expenses of non-debtors and income of the debtor`s spouse if the application is a joint application, but excluding social security income and certain other payments made because the debtor is a victim of certain offences. 11 U.S.C. § 101(10A). A debtor`s obligation may arise from a variety of circumstances, including loans, loan extensions, taxes, leases, medical bills, and tort damages. Debts may be written or oral, and agreements may be express or implied in accordance with contract law. Debts can also be created by law, for example in tax matters or when a defendant loses a lawsuit. A common means of transferring property rights to creditors is through “assignment to creditors”. [11] The debtor transfers ownership of land to a trustee for a liquidation sale in favour of the debtors.

A debtor may attempt to fraudulently transfer property to avoid seizing it. State laws attempt to prevent this type of transfer of ownership. Many States have adopted the Uniform Law on Transfers of Goods or its successor, the Uniform Law on Fraudulent Transfer. Debtors` prisons appeared in England in the Middle Ages and functioned until the country passed the Debtors Act in 1869. [5] Other countries around the world followed suit, and the United States never allowed official debtor prisons. The EDCPA is a consumer protection law designed to protect debtors. This law describes when debt collectors can call debtors, where they can call them and how often they can call them. It also focuses on elements related to the debtor`s privacy and other rights. However, this law only applies to external debt collection agencies, such as companies that attempt to collect debts on behalf of other companies or individuals. For businesses, a lawyer practicing this type of law can help businesses make loans, collect debts, or better understand laws and regulations that protect both consumers and businesses (including the Fair Debt Collection Practices Act).

However, small businesses typically hire more general practitioners to handle a variety of legal issues, including credit and debt issues. Debtors and creditors are free to change the terms of their debt at any time by agreement. In the case of a debtor with multiple creditors, there are several types of agreements that can be negotiated to avoid bankruptcy. These are called workouts. A reconstitution is a written contract between a debtor and several creditors. Arrangements permitted under general and state debtor and creditor laws are governed by contract law. They require the participation of two or more creditors on the basis of the contractual consideration. In the United States, debtor prisons were relatively common until the time of the Civil War, when most states began phasing them out. These days, debtors don`t go to jail for unpaid consumer debts like credit cards or medical bills. The series of debt practices laws, known as the Fair Debt Collection Practices Act (FDCPA), prohibits debt collectors from threatening debtors with jail time. However, courts can send debtors to jail for unpaid taxes or child support.

A creditor who holds a claim against the debtor and has the right to take over and hold or sell certain assets of the debtor to satisfy part or all of the claim. Sometimes, debtors may agree to give something to creditors in exchange for some relaxation of collection efforts. For example, the debtor could give an unsecured creditor a security right in its car in exchange for its consent to stop collection transactions for three months. Assignments for the benefit of creditors are now regulated in most states, while in others they are governed exclusively by common law rules. [14] In some states, debtors may choose between “common law” and “statutory” assignments. Learn more about FindLaw`s newsletters, including our Terms of Use and Privacy Policy. Courts have also ruled in favour of the debtor in cases of invasion of privacy, where the creditor contacted the debtor`s neighbours, published the debt in a local newspaper, or published a notice about the debt at the debtor`s workplace.