Debtors and creditors are free to change the terms of their debt by agreement at any time. In the case of a debtor with multiple creditors, there are different types of agreements that can be negotiated to avoid bankruptcy. These are called workouts. A reorganization is a written contract between a debtor and several creditors. Reorganizations permitted by general and public debtor-creditor laws are governed by contract law. They require the participation of two or more creditors due to contractual consideration requirements. This course provides an overview of the legal relationship between debtors and creditors. Specifically, it is what happens when a debtor-creditor relationship is established by the parties and then interrupted by one of them. The course is not about how these relationships are established – this is the scope of contract law and other laws such as infringements and taxation. The course focuses on unsecured bonds.

Covered bonds are covered in our video course on secured transactions. Unlike tort and contract law, most debtor-creditor laws are statutory, state or federal. This is especially true when it comes to protecting debtors from unfair debt collection practices, as in the case of the Fair Debt Collection Practices Act. [6] However, some common law means may limit the collection process, even if they are rarely used or successful. They generally operate where debtor law and credit law overlap with contract and tort law. (2) a limited-use credit agreement to finance a transaction between the debtor and a supplier entered into by the creditor and containing agreements between the creditor and the supplier; Sometimes debtors may agree to give something to creditors in exchange for some relaxation of collection efforts. For example, the debtor could give an unsecured creditor a security right in his car in exchange for the creditor`s consent to terminate the collection measures for three months. However, this may not be the case in the context of a credit agreement with atypical transferability conditions – in particular under conditions which provide that any participation in it is not a sale but a financing between the lender and the participant.

Such a circumstance complicates the analysis of an operation as an actual sale, since, in order to determine whether there is a real sale, the relevant case-law attaches great importance to the objective intention of the parties to make an actual sale. For example, would a bankruptcy court doubt that a lender (as a assignor under a capital agreement) really intends to sell its credit interest if the same lender had also agreed (as a party to the loan agreement) that an equity interest would create a debtor-creditor relationship between the seller/lender and the participant? Maybe. While this isn`t necessarily conclusive evidence, it`s probably a bad fact that weighs against an actual sell-off. Therefore, any seller seeking treatment in sales accounting, or any buyer who wishes to avoid being involved in possible future insolvency proceedings of a seller, should be aware of the risk posed by such debtor-creditor language. In our next module, we will work on the litany of state legal concepts that define debtor-creditor law. Search: `Debtor-creditor agreement` in Oxford Reference » The first type of formation between a debtor and several creditors is called a composition. It is an agreement between a debtor and two or more creditors whereby each creditor receives less than the total amount due to settle the debt. The second type of training is an extension in which the debt repayment period is extended by a certain period of time. The Debtor-Creditors Act governs situations in which one party is unable to pay a monetary debt to another party. There are three types of creditors. First of all, those who have a privilege over a particular property. This asset (or the proceeds of its sale) must be used to repay the debt to the secured creditor before it can be used to settle debts to other creditors.

A privilege may arise from the law, an agreement between the parties or legal proceedings. See e.B. secured transactions and mortgages. Second, a creditor may have an overriding interest. Priority derives from legal law. If a creditor has priority, its debt must be settled if the debtor becomes insolvent before other debts. For example, Congress has prioritized debt owed to the federal government. See Federal Tax Lien Act. The last type of creditor is one who has no lien over the debtor`s assets and has no legal priority. Debtor-creditor law not due to insolvency derives mainly from State law and customary law. Tort laws, such as defamation, offer state courts the ability to restrict private funds to recover claims.

States also regulate the collection of debts by law. Congress enacted the Fair Debt Collection Practices Act to regulate certain debt collection agencies. .