Chapter 31 Other Creditors’ Remedies and Suretyship McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Lien (Definition): Claim to property (or proceeds of sale of property) 31-2

Types of Liens Consensual Lien: Secured interest in property created by agreement of parties Consensual Lien: Secured interest in property created by agreement of parties Statutory Lien: Claim to property created through statute Statutory Lien: Claim to property created through statute Mechanic’s Lien: Claim on real property Mechanic’s Lien: Claim on real property Artisan’s Lien: Claim on personal property Artisan’s Lien: Claim on personal property 31-3

Types of Liens (Continued) Judicial Lien: Legal action whereby creditor seize debtor’s property to satisfy debt Judicial Lien: Legal action whereby creditor seize debtor’s property to satisfy debt Attachment: Court-ordered judgment permitting local court officer to seize debtor’s property Attachment: Court-ordered judgment permitting local court officer to seize debtor’s property Writ of Execution: Document authorizing law officer to seize debtor’s non-exempt property Writ of Execution: Document authorizing law officer to seize debtor’s non-exempt property Garnishment: Order that satisfies debt by seizing debtor’s property that is being held by third party (such as bank or employer) Garnishment: Order that satisfies debt by seizing debtor’s property that is being held by third party (such as bank or employer) 31-4

Exhibit 31-2: Other Types of Liens Attorney’s Lien: Right of attorney to keep client’s money/possessions until client pays debt Attorney’s Lien: Right of attorney to keep client’s money/possessions until client pays debt Broker’s Lien: Claim to property by real estate broker for commission Broker’s Lien: Claim to property by real estate broker for commission Common Law Lien: Claim to property by implication of law (rather than statute) Common Law Lien: Claim to property by implication of law (rather than statute) Consummate Lien: Lien of judgment that arises when motion for new trial denied Consummate Lien: Lien of judgment that arises when motion for new trial denied Equitable Lien: Claim on property either created by sales contract, or imposed by court to ensure fairness Equitable Lien: Claim on property either created by sales contract, or imposed by court to ensure fairness Innkeeper’s Lien: Claim on baggage of guests who stay at inn and are unable to pay bill Innkeeper’s Lien: Claim on baggage of guests who stay at inn and are unable to pay bill 31-5

Exhibit 31-2: Other Types of Liens (Continued) Landlord’s Lien: Claim on furniture and property in apartment by landlord Landlord’s Lien: Claim on furniture and property in apartment by landlord Maritime Lien: Claim on vessel for service made to vessel Maritime Lien: Claim on vessel for service made to vessel Medicare Lien: Hospital’s claim to medical benefits paid under Medicare Act Medicare Lien: Hospital’s claim to medical benefits paid under Medicare Act Possessory Lien: Claim to property representing lienholder’s right to be in possession of property until debt paid Possessory Lien: Claim to property representing lienholder’s right to be in possession of property until debt paid Tax Lien: Claim against taxpayer’s property for unpaid taxes Tax Lien: Claim against taxpayer’s property for unpaid taxes Vendor’s Lien: Vendor’s claim to land for unpaid purchase price of land Vendor’s Lien: Vendor’s claim to land for unpaid purchase price of land 31-6

Mortgage Foreclosure (Definition): Foreclosure and sale of mortgaged property to pay debt 31-7

Assignment for Benefit of Creditors (Definition): Transfer of title of property to trustee, who sells property to pay creditors on pro-rata basis with proceeds of sale 31-8

Suretyship and Guaranty Contracts Suretyship: Contract between creditor and third party who agrees to pay another person’s debt, and is primarily liable for debt Suretyship: Contract between creditor and third party who agrees to pay another person’s debt, and is primarily liable for debt Guaranty: Third party (usually called “guarantor”) who must pay debt only after debtor has defaulted, and is secondarily liable for debt Guaranty: Third party (usually called “guarantor”) who must pay debt only after debtor has defaulted, and is secondarily liable for debt 31-9

Defenses of Surety and Guarantor Statute of Frauds Statute of Frauds Discharge from debt Discharge from debt Bankruptcy Bankruptcy Debtor’s fraud Debtor’s fraud 31-10

Rights of Surety and Guarantor Right to Subrogation: Surety/guarantor entitled to all rights creditor had against debtor Right to Subrogation: Surety/guarantor entitled to all rights creditor had against debtor Right to Reimbursement: Surety/guarantor can recover actual amount of debt paid to creditor, plus legal expenses against debtor Right to Reimbursement: Surety/guarantor can recover actual amount of debt paid to creditor, plus legal expenses against debtor Right of contribution: Other sureties/guarantors must pay their equal shares Right of contribution: Other sureties/guarantors must pay their equal shares 31-11