Debtors and Creditors Outline

Debtors and Creditors
Prof. Russo
2010 Fall

– Closed book exam, multiple choice 15-20 / fill in the blank / 5-6 short answer questions / no long essay
– No old exams posted
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Intro – vocabulary

– Debt: liability on a claim
– Claim: a creditor’s right to repayment
– Debtor: an individual or entity that owes a creditor something
– Creditor: an individual or other entity that has a claim against a debtor
– Levy: seizure of the debtor’s property by a sheriff
– Attachment: pre-judgment remedy that enables a plaintiff to seize or have a law officer seize property of a DF for purposes of either:
(a) Obtaining jurisdiction over a DF, known as Foreign Attachment AND/OR
(b) Securing an eventual judgment, known as Domestic Attachment
– Garnishment: attachment of the property of a DF which is in possession of a 3rd party
– Lien: an interest in the debtor’s property to secure payment of a debt; When one has lien rights in debtor’s property, that enables the creditor to proceed against that property to enforce a claim.
3 Types of Liens:
(1) Judicial
(2) Consensual
(3) Statutory
– Insolvent: the sum of such entity’s debts is greater than all of such entity’s property (this means that debtor’s liabilities > than the fair value of its assets)
– Judgment: a piece of paper that is worth nothing if no assets are attached to which the judgment can attach to. Must be signed by the judge

– Post Judgment Enforcement Remedies:
(a) Subpoena the judgment debtor to find out what assets they have Or
(b) Bankruptcy can protect the debtor
– Homestead Exemption: your home is exempt from judgment enforcement
Note: NEW YORK: $50,000 is the limit. Some States: No limit.
– Two Types of Remedies When You Owe Debts:
(a) Judicial: take property, garnish wages, etc.
(b) Non-Judicial: the court is not involved, nor is the state

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< The Fair Debt Collection Protection Act (FDCPA) > 15 U.S.C. § 1692

Background
– Congress enacted this act as a result of cases like Duty (below), where creditors felt no constraints. Before the Act, there was only common law.
– Congress stepped in, b/c debt collection effects interstate commerce.
– Enacted in 1977
– Purpose: to eliminate abusive practices by debt collectors
– The Act applies only to individual consumer debtors and not to business. It is not designed to protect businesses b/c they can turn the matter over to their attorney

Duty v. General Finance Company (1954)
– Debt collector was using all types of abusive practices, including repeated calling, harassing, and calling brother collect long distance
– PL alleged emotional distress and actual damages (lost her job, suffered physically)
– Court said that this was something a jury should decide
è Back in 1954, there was just common law, no statute on point -> needed to show more than mental anguish
– Held: Was a violation of the FDCPA and the debtor’s actual damages were the loss of her job.

FDCPA
§ 1692. Congressional findings and declaration of purpose
(a) Abusive practices
(b) Inadequacy of laws
(c) Available no-abusive collection methods
(d) Interstate commerce
(e) Purpose – to eliminate abusive debt collection practices by debt collectors

1692a. Definitions
– A debt collector (≠ creditor): any person who uses any instrumentality of interstate commerce or the mails whose principal purpose of business is to collect debts
(Note: law firms can be considered debt collectors under the Act, BUT if a partner just asks you to try to get your own money, then your law firm will not be considered a debt collector and is just a creditor)
(Also: FDCPA does not apply to lawyers who are engaged in litigation)
è Quintessential Example: Collection Agencies
– Debt Collector versus Creditor: A debt collector is an entity that is hired to go out and collect the debt, whereas a creditor is the party who lent you the money, so that you could obtain goods or services, in return for your promise to pay.
– Creditor: the party that extended credit to a purchaser in exchange for something
– ** Once a company assigns a debt to a collection agency THEN this act applies. Before this point the company can do anything up to common law harassment, b/c it is the creditor.
– Who does the act protect? CONSUMERS: any Person obligated to pay a debt.
(Note: Businesses are NOT consumers and not protected under the FDCPA)

1692b. Acquisition of location information (contacting 3rd parties)
– A debt collector cannot identify himself as a debt collector unless expressly requested
– BUT, Must identify oneself (saying that he is correcting location information concerning the consumer)
– If asked by 3rd party, must say who the debt collector is working for
– Cannot state that consumer owes a debt or how much consumer owes
– After the consumer obtains atty, collector cannot speak to consumer about the debt

1692c. Contacting consumers
– Consumers: broad definition including spouse, guardian, executor, administrator, parents if debtor is a minor
– Can only call between 8am-9pm, local time at consumer’s location
– No direct communication w/ debtor once collector knows they have a lawyer, unless it has permission
– Can’t call debtor’s work place if collector knows or has a reason to know they can’t receive such communications there

1692d. Harassment or abuse
– Debt collector may not harass, oppress, or abuse any person in connection with collection of a debt. This conduct is in violation of this section:
► Use of threat or violence to harm the physical person, reputation, or property of any person
►Profane language
►Publication of names, except to consumer reporting agencies, who allegedly refuse to pay debts
►Advertisement of debt for sale
►Continuous calling to harass – intent to annoy
►Calling w/out following guidelines set forth in section b

1692e. False or misleading representations
– The false representation or implication that