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What is Debtor-Creditor Law?
Debtor-Creditor laws govern the relationship between the one who has provided services (creditor) to someone (debtor) in exchange for a promise to be paid in future. The relationship comes into being the day the debtor fails to honor his/her side of the bargain by failing to repay within the stipulated time. A creditor may then decide to pursue the debtor on his/her own. On the face of it, there is nothing wrong with this approach. However, it must be remembered that a debtor has rights too and under exemption laws, a creditor may not go after certain property of the debtor. This may or may not be known to a layman who, despite having a rightful claim, may not be able to sell and/or seize the debtor’s property to satisfy his/her debt. Therefore hiring debtor creditor lawyers may be advisable.
Types of creditors
There are three types of creditors: those who have a lien against the debtor’s property. For example, a bank may have mortgaged a certain piece of the debtor’s property in case of a default. The bank would sell that piece of the debtor’s property to recover its debt before other non-secured creditors. The second type of creditors is those who have a priority interest. For example, under the Federal Tax Lien Act, debts owed to the federal government are given priority. The third and the last category of creditors comprises of those who neither have a lien against the debtor’s property like a bank nor enjoy statutory priority like the federal government. Hiring debtor creditor lawyers are advisable since they are in a better position to determine your category and initiate the legal proceedings against the debtor accordingly.
Further advantages of hiring debtor creditor lawyers
As mentioned earlier, exemption laws may hinder a creditor’s efforts to recover his/her debt by either seizing or selling a debtor’s piece of land, life insurance and/or sums of money. Another problem that creditors have faced in the past and especially by those who have tried recovering the debt without hiring a professional is that a fraudulent debtor may convey a piece of property to avoid its sale and/or seizure. Debtor creditor lawyers may be able to help their client avoid this situation under the Uniform Fraudulent Transfer Act and the Uniform Fraudulent Conveyances Act.