Secure debtspersonal property or real property are common ways the law allows creditors to protect themselves (sell or process)
PledgesHave procession of the property until the debt is paid (stocks)
Pawn- Collateral for this type of pledge (jewelry, camera, musical instrument)- pawn ticket
Lien- a claim, encumbrance, or charge against property that give the creditor the right, in case of default on a payment that is due, to sell the property and to use the proceeds from the sale to pay the dept.
Mechanic’s Lien- allows a person who had not been paid for labor or materials furnished to build a home, building or other real property improvement to file a legal claim against the property. If the debt is not paid, the realty may be sold
Artisan’s Lien- allows persons who have not been paid for service, such as repairing a car or watch to retain possession of the serviced items until the service charges are paid.
Laws Involving Third Parties
Suretyship – Creditor who wishes assurance beyond the debtor’s promise to pay may demand that a creditworthy third party assumes the liability. A contractual relation in which a third party agrees to be primarily liable for the debt or obligation if payment or performance becomes overdue. Three parties are involved:
SURETY- 3rd party promises to be liable for debt
GuarnetyProtects the creditor-guarantor agrees to pay if the principal debtor fails to do so. The guarantor is only secondarily liable.
Laws Concerning Unsecured Debts
Unsecured Debts-debt based only on the oral or written promise of the debtor. Must sue the debtor for breach of contract.
Laws Allowing Garnishment of Wages
Once a creditor's claim is shown to be legally valid and fair in a court hearing the creditor may receive a portion of the debtors wages directly from the debtors employer- 25% of take home pay- Consumer Credit