debtor and creditor: an overview
Debtor-creditor law governs situations where one party is unable to pay a monetary debt to another. There are three types of creditors. First are those who have a lien against a particular piece of property. This property (or proceeds from its sale) must be used to satisfy the debt to the lien-creditor before it can be used to satisfy debts to other creditors. A lien may arise through statute, agreement between the parties, or judicial proceedings. See, e.g., Secured Transactions and Mortgages. Secondly, a creditor may have a priority interest. A priority arises through statutory law. If a creditor has a priority his debt must be paid when the debtor becomes insolvent before other debts. For example, Congress has granted priority to debts owed the Federal government. See Federal Tax Lien Act. The final type of creditor is one who has neither a lien against the debtor's property or is the subject of a statutory priority.
Non-bankruptcy debtor-creditor law arises mainly from state statutory and common law. Tort law, such as defamation, provides a means for state courts to limit private means of debt collection. States also regulate debt collection through statute. Congress has enacted the Fair Debt Collection Practices Act to regulate some debt collectors.
Creditors use judicial and statutory processes to have debts satisfied. Attachment is a limited statutory remedy whereby a creditor has the property of a debtor seized to satisfy a debt. Garnishment allows a creditor to collect part of a debt (for example wages) to satisfy the obligation. Replevin allows a creditor to seize goods, such as a security interest, that he or she has a property interest in, to satisfy the debt. Receivership involves the appointing of a third party by a court to dispose of the debtor's property in order to satisfy the debt. Creditors commonly seek to create a lien on a debtor's property through a judicial process of lien creation, which is governed by state law. Once a lien has been created state statutory law governs how the lien is executed against the debtor's property. The sale of property subject to a lien to satisfy the debt is also governed by state statutory law. Federal and state statutes, and the Federal Consumer Credit Protection Act also limit the type of property that can be used to satisfy a debt.
A debtor may attempt to fraudulently convey a piece of property to avoid having it seized. State laws seek to prevent this type of property transfer. Many states have adopted the Uniform Fraudulent Conveyances Act or its successor, the Uniform Fraudulent Transfer Act.
Bankruptcy is governed by federal statute which supersedes state debtor-creditor law in circumstances where it applies. See Bankruptcy
menu of sources
U.S. Constitution and Federal Statutes
- U.S. Code:
- CRS Annotated Constitution
Federal Agency Regulations
Federal Judicial Decisions
- U.S. Supreme Court:
- U.S. Circuit Courts of Appeals: Recent Decisions on Debtor and Creditor Law
- Uniform Fraudulent Transfer Act
- New York Debtor and Creditor Law
- California laws regarding Special Relations of Debtor and Creditor - California Civil Code §§ 3429-3449
- State Civil Codes
State Judicial Decisions
- N.Y. Court of Appeals:
- Appellate Decisions from Other States
Key Internet Sources
- National Credit Union Administration
- U.S. Federal Trade Commission
- Debt and Collection Agencies (Nolo)
- Consumer Handbook to Credit Protection Laws (on-line pamphlet from the Federal Reserve)
Useful Offnet (or Subscription - $) Sources
- Good Starting Point in Print: Arthur Winston, Complete Guide to Credit and Collection Law, Aspen (2004).