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Debtor and Creditor Issues

A debtor (a person or business who owes money to others) may choose to file a bankruptcy proceeding to resolve a hopeless financial situation, or to stave off the collection of debts for a period of time to allow for financial reorganization. Chapters 7, 11 or 13 of Title 11 of the United States Code are the most common types of reorganizations chosen.

Chapter 7 allows for a liquidation of debt for individuals.

Chapter 11 is the most common type of protection given businesses which seek to restructure their debts.

Chapter 13 allows individuals to repay debts under the protection and guidance of the federal Bankruptcy Trustee.

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. There are dozens of types of lien, categorized by the party to whom the money is owed or the actions taken which produced the debt.

Secondly, a creditor may have a priority interest. A priority arises through statutory law. If a creditor has a priority interest, his debt must be paid before other debts, when the debtor is hown to be insolvent, that is, unable to pay what he owes in full in a timely fashion. For example, Congress has granted priority to debts owed the Federal government. See Federal Tax Lien Act.

Liens or Priority Interests are examples of Secured Debts

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. This is Unsecured Debt. Credit card debt is among the most common of this type of debt.

Your Fair Debt Collection Rights

The collection company keeps calling you at the office and bothering you at home, sometime calling as late as 11:00 p.m. What are your rights?

While you have an obligation to pay your bills on time, there are laws to protect your right if you should find yourself being pursued by a debt collection agency.

For example, the collection agency cannot call you at home before 8:00 a.m., or after 9:00 p.m., and may not call you at work if they know your employer bans such calls. And obscene, profane, or abusive phone calls are prohibited.

While there are a number of protections for consumers in the Fair Debt Collections Practices Act, there is still one important point - you are responsible for your debts. Nothing in this law gives you the right to skip out on your bills. It just protects you from unscrupulous collection agencies. And the lender can take legal action to collect the money.

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