Creditor–Debtor Relations and Bankruptcy

These flashcards cover key concepts and terminology related to debtor and creditor relations, as well as the bankruptcy process.

Default

Failure to pay a debt when it is due.

Secured Creditors

Creditors whose loans are backed by collateral.

Unsecured Creditors

Creditors whose loans are not backed by collateral.

Lien

A claim against specific property to satisfy a debt.

Mechanic’s Lien

A statutory lien on real property to ensure payment for work performed.

Artisan’s Lien

A possessory lien given for improvements made to another person's personal property.

Judicial Lien

A court's order to seize property to satisfy a debt after obtaining a judgment.

Writ of Attachment

A court-ordered seizure of nonexempt property prior to judgment.

Writ of Execution

A court's order to seize and sell a debtor's nonexempt property after a judgment.

Garnishment

A legal process to collect a debt by seizing property of the debtor held by a third party.

Creditors’ Composition Agreement

An agreement where creditors accept a lesser sum than owed as full satisfaction.

Suretyship

A relationship where a third party agrees to be primarily responsible for the debtor's obligation.

Guaranty

A promise by a third party to satisfy the debt of another only after a default.

Homestead Exemption

A law that allows a debtor to retain their family home up to a specified amount.

Bankruptcy Code

Federal laws that govern bankruptcy proceedings.

Chapter 7 Bankruptcy

Liquidation bankruptcy where the debtor’s nonexempt assets are sold to pay off creditors.

Chapter 11 Bankruptcy

Reorganization bankruptcy allowing a business to continue operating while repaying debts.

Automatic Stay

The suspension of almost all litigation and actions by creditors against the debtor upon filing for bankruptcy.

Bankruptcy Trustee

An individual appointed to oversee the bankruptcy process for the debtor.

Discharge

The release of a debtor from personal liability for certain debts.

Disposable Income

Income remaining after necessary living expenses are paid.