Law 3220 Ch. 13

requirements for negotiable instruments

1. has to be written 2. be an unconditional order or promise to pay 3. be signed by the maker or drawer 4. be payable on demand or at a specified time 5. be made out "to order" or "to bearer" 6. state a certain sum of money 7. must be "payable to order"

draft

a binding order to pay a fixed sum of money that involves three parties. may be payable at a later date and may have a bank, an individual, or a corporation as a drawee.

surety

a contract to be responsible for the borrower's payment obligations, or performance, to a creditor.

defaults

a customer cannot or will not meet payment obligations

check

a draft drawn on a bank, and payable on demand. Most commonly used form of draft, however a check must always be paid on demand and MUST have a bank as its drawee.

mortgage

a lien that gives the lien holder the rights to sell property by mortgage, the debtor is the mortgagor and the creditor is the mortgagee

note

a promise-not an order- by one party, called the maker, to pay a certain sum of money to another party, the payee.

negotiable instrument

a written promise or order to a pay a certain sum of money. substitute for cash, method to extend credit, promissory note.

drawee

agrees to make the payment, such as the bank making a payment based on the document presented to it.

debt extension

asking for more time to pay back creditors or asking the credit to take less than the faec value of the debt

personal bankruptcy

before a person may file for bankruptcy, he must complete a credit counseling course. you can only file every 8 years.

payee

beneficiary who will be paid by the drawee

balloon note

borrow 10 thousand due in 5 years, 50% or more of principal is due, it has larger principal payment due near maturity

credit financing

businesses borrow money to keep it running, has legal obligation

liquidation

by discharge of most debts after sale and distribution of the sale proceeds of the debtor's non-exempt assets to the creditors. the most drastic. can only do this every 8 years usually takes 3 creditors to force this on you. trusties take your assets and sells them to pay off creditors

bearer instruments

can be created in different ways. are risky because mere delivery creates a negotiation or transfer.

smaller company's rely on ______ to do background checks on debtors

credit agencies

involuntary bankruptcy

creditors file a petition with the court, forcing the declaration of bankruptcy and the beginning of proceedings

assignment

debtor assigns al nonexempt assets to an assignee. they act like a trustie to the creditor but they try to help get creditors stuff for their assets.

voluntary bankruptcy

filed by either individual or business debtors

discharge

final stage of bankruptcy proceedings. the nonexempt assets have been liquidated and the proceeds distributed among certain creditors, who may not ask for more.

attachment lien

goods can be ceased while the court makes a decision, to prevent the customer from disposing of goods

credit policy:

have to know 1. capacity (debtors ability to pay) 2. capital (the debtor's financial condition) 3. character (debtors reputation) 4. collateral (the debtor's assets to secure debt) 5. conditions (the economic situation affecting the debtor's business)

unsecured creditor

having little more than the customer's promise to pay securing the loan

deficiency judgement

if the proceeds are not sufficient the mortgagee may be able to seek to recover the remainder from the debtor

subrogation

if you paid for it as a surety, you have the right of the creditor against the debtor

holder in due course

instrument can be freely traded in the market. holder of due course must 1. give value for the negotiable instrument. 2. take the instrument without knowledge that it is overdue or defective 3. take the instrument in good faith

drawer

issues or creates the document that requests payment, probably from a bank, but it could be from another party

exoneration

legal action taken against somebody who is able to pay, but refuses to. You go to court and order the debtor to pay

real-estate note

mortgage

mechanics lien

most common lien for work performed on real property. if someone performed work on your property, they can sell stuff to get their money.

credit terms

must specify the interest rate, the principal of the debt, and payment dates.

possessory lien

on personal property, you refused to pay the law says they can hold your property until you pay

cashier's check

one form of check in which the bank is both the drawer and the drawee. Frequently used when the seller demands guaranteed payment.

creditor

one who lends money to, or allows goods or services to be purchased on credit by another party, the debtor.

reorganization of debts

only for individuals, you do not get legal discharge. 3-5 extension to pay off debt. Court protected debt payment plan, you get under protection so creditors cant take legal action against you.

collateral note

personal property is used to secure the promise

guarantor

provides a guarantee of payment to a creditor should the principal debtor fail to pay and, therefore can be the same as a surety.

lien

security obtained by a creditor thorugh the operation of law

equity financing

selling stock, no obligation

secured creditor

the ability to take some of the nonpaying customer's property to satisfy the debt. collateral - give insurance they will be paid back

debtor in possession

the debtor acts as a trustee of the operation attempting to generate income to cover debts owed.

"to bearer"

the party in possession is required only to deliver the instrument to transfer it.

floating lien

the security interest in any specific item of inventory ends when the item is sold, but the interest attaches to new inventory.

perfection of security interest

the seller can reclaim the goods

judgement lien

they say who wins and how much

revealing credit accounts

things differ each time, businesses need to decide how to get paid, and if to give discount if people pay early (ex credit cards)

purchase money security interest

to protect its interests, the lender extending credit to a business obtains a security interest, which gives the lender rights against the borrower.

negotiability

transfer it to someone else and they get value

promissory notes

two parties, the maker and the payee. a promise by one party to pay another

collection policy

what do you do if people don't pay you.

bill of exchange

when a draft guarantees payment for goods in international trade

secured transaction

when goods are sold to a customer, the goods may secure the debtor's obligation to pay. Occurs when a buyer wants goods and does not pay cash.

bank workout

when most of your debt is owed to a bank, you ask for them to lend you more money, or you ask for more time to pay them back

certificate of deposit

you can lend your money to the bank and they will pay you interest, they give you this note as a promise to repay you.

installment credit account

you make periodic equal installment payments

installment note

you repay the debt in periodic payments

open account

you sell to someone and full payment is expected in a secret amount of time. discounts offered for early payment.