Laws Protecting
Debtors/Creditors and
Bankruptcy
Unit C Basic Business Law
Objective 6.02
Laws Protecting Debtors
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Setting maximum interest rates
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Usually apply to loans of money
Some states govern charges imposed on credit
purchases of goods/services “on time”
2
Laws Protecting Debtors
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Disclosure of Terms
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Full disclosure of interest and finance charges
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Does not limit percentage amount

True annual percentage rate (APR)
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Does not apply to first mortgages
3
Laws Protecting Debtors
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Challenging Unconscionable Contracts
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Unfair and oppressive
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Judge decides if conscionable
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Refuse to enforce contract
Remove unfair clause and enforce contract
Limit clause’s application so no longer unfair
4
Laws Protecting Debtors

Prohibiting Abuse in the Credit System

Federal Equal Credit Opportunity Act
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May not refuse due to sex or marital status
May not ask marital status if applying for unsecured
separate account
May not prohibit a married female from
opening/maintaining account in maiden name
May not request information about birth control
practices or intentions
Married persons with joint accounts have right to have
credit information reported in both names
5
Laws Protecting Debtors

Federal Fair Debt Collection Practices Act
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Prohibits:
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Harassment of debtors
Abusive and profane language
Threats of violence
Contract with 3rd parties
Communication with the debtor at work
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Laws Protecting Debtors

Federal Fair Credit Billing Act
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Creditors must mail bills at least 14 days before due date
Creditors must acknowledge billing inquiries within 30 days
Creditors must settle complaints within 90 days
Creditors may not send repeated letters demanding payment
until disputes over billing are settled
Credit cardholders may withhold payment for items defective
without being liable for entire amount owed (purchases of
$50 or more and 100 miles from home)
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Laws Protecting Debtors

Federal Fair Credit Reporting Act



Deals with unfavorable credit reports
Have right to correct report
Credit Repair Organization Act

Governs companies that help consumers correct credit
reports
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Laws Protecting Debtors

Notice of debt payment to be recorded
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Request receipt
Canceled checks
Bankruptcy

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Chapter
Chapter
Chapter
Chapter
7
11
13
12
9
Bankruptcy

Chapter 7 – Liquidation

Sale of nonexempt property for cash

Nonexempt property



Bank Accounts
Stocks
Bonds
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Chapter 7 Bankruptcy
Procedure
1.
File the following with the court:
a.
b.
c.
d.
2.
3.
4.
5.
List of all creditors and amounts owed
List of all property owned
Statement about financial affairs
List of current income and expenses
Trustee is selected
Assets liquidated
Proceeds used to pay creditors
Money left over returned to debtor
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Bankruptcy

Chapter 11 Reorganization

Business can keep operating

Files plan of reorganization

Court approves plan
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Bankruptcy

Chapter 12

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
Used for Family Farmers wishing to make a
debt adjustment to save the business
Debt Ceiling $1.5 million
Debt plan is for 3 years with a possibility of
a 2 year extension
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Bankruptcy

Chapter 13 Extended Time Payment Plan

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Applies to individuals with regular income
Unsecured debts less than $250,000 and/or secured debts
of less than $750,000

Submit plan for repayment of debts within three years

May be extended to five years

Creditors cannot file suit
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