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Debtor Creditor Rights
SUNY Buffalo Law School
Russo, Michael

Debtor-Creditor Outline
£     Introduction to Creditors’ Rights and Debtors’ Protection
£     Non-Judicial Collection Efforts
o       Intro
§         Litigation is a last resort
o       Debt Collection Practices
§         Debt Collection Efforts by a Creditor
·        Creditors usually make every effort to collect debts without recourse to legal proceedings.
·        West (5 causes of action)
o       (1) Communicating with 3rd parties about debt
§         You can only contact consumer, spouse, parents/guardian (minor)
§         You can try and locate information
o       (2) Threats of criminal prosecution
§         debt collector cannot file criminal charges
§         any threats made that cannot be implemented is a violation of the FDCPA
o       (3) Failure to comply with property notice and debt validation procedures.
§         Following required to be on letter:
·        Name of creditor
·        Amount of debt
·        Statement to the debtor that they have 30 days.
o       (4) Collecting service charges is not expressly authorized
o       (5) Misrepresentation of the amount of debt.
·        Bentley
o       Misrepresentations about threats to take action are in violation of the FDCPA.
·        Heintz
o       The FDCPA applies to a lawyer who “regularly,” through litigation, tries to collect debts for another.
o       BUT, Collecting fees for your own firm is not subject to the FDCPA; this is not debt collection.
§         Peaceful Repossession on Default
·        The UCC provides that “unless otherwise agreed a secured party has on default the right to take possession of the collateral. In taking possession a secured party may proceed without judicial process if this can be done without breach of the peace or may proceed by action.”
·        Secured Party: Has secured interest in property or personalty in case of default.
·        Williams
o       A Repo man may not breach the peace in taking back property.
o       Creditor has right to peacefully repossess.
·        Transactions
o       (1) Security Agreement
§         An agreement that creates or provides for an interest in specified real property or personal property to guarantee the performance of an obligation.
o       (2) Promissory Note
§         An unconditional written promise signed by the maker to pay a sum certain either to the order of a designated person or to bearer payable over a specified period of time on conditions specified in the note.
·        Acceleration Clause: Upon default the creditor can ask for the entire sum NOW, rather than over the specified period of time.
·        Personal Guaranty of Payment: Officers personally put themselves on the line in case of default.
·        Typical Events of Default:
o       (1) Failure to make payment
o       (2) Filing of Bankruptcy
o       (3) Maker adjudicated bankrupt or insolvent.
§         Insolvent: More liabil

l property.
·        Confession of Judgment is enforceable when both parties are of equal bargaining power, and that Confession of Judgments are useful in the commercial world.
·        *If a party voluntarily, knowingly, and intelligently waives their right to a lawsuit before a judgment is filed, then this is permissible.
·        Adhesion Contract: Standard form contract prepared by one party to be signed by another party who is in a substantially weaker position to negotiate the terms.
§         Fiore
·        Personal Guaranty of Payment: Not conditioned on the creditors exhausting legal remedies against the principle debtor before suing the guarantor.
·        Personal Guaranty of Collection: Conditioned on the creditors having first exhausted legal remedies against the principal debtor before suing the guarantor.
·        Where 2 parties are sophisticated and represented by counsel, where they both know what they are doing, there is no public policy reason to void judgment.
§         Demand Note: Payable in full immediately on date of execution at the option of the holder.
·        Versus
·        Promissory Note: Has payment terms extending over period; so long as there are no defaults, the bank cannot accelerate for the full sum.