Term
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Definition
| One who promises to be held liable for the debts of another. Agreements must be in writing. |
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Term
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Definition
| Surety has primary liability on the note with the debtor. Bank could go after either for payment. Strictly burden, no benefit. |
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Term
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Definition
| Creditor can't hold guarantor liable until the debtor defaults. (Most common type) |
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Term
| Guarantor or Collectibility |
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Definition
| Creditor can't hold surety liable until the debtor defaults and the creditor must exhaust all legal remedies in order to collect debt. (Creditor sues debtor first) |
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Term
| Guarantor or Collectibility |
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Definition
| Creditor can't hold surety liable until the debtor defaults and the creditor must exhaust all legal remedies in order to collect debt. (Creditor sues debtor first) |
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Term
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Definition
| Surety does not get compensated ex: Grandma signing for Kevin |
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Term
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Definition
| Surety is paid to give creditor money if the debtor doesn't perform. Usually an insurance company. Most state and municipal contracts require Performance Bonds. |
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Term
| Differences between Compensated and Uncompensated Surety |
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Definition
| 1) Uncompensated are favored by the law. If there is a change between the creditor and debtor agreement the uncompensated surety is discharged. 2) Compensated surety is discharged only if the change between the debtor and creditor increases the risk and then the compensated surety is only discharged for the increase in risk, not for prior liability. |
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Term
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Definition
| If surety pays, can be reimbursed by the debtor. |
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Term
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Definition
| Whatever rights the debtor has against a third party, a surety with subrogation has those rights too. ex: Joe crashes into Kevin. Kevin's insurance company pays the body shop on behalf of Kevin. They have the right to sue Joe for the money paid to the body shop. |
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Term
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Definition
| Surety has idea that debtor is going to default and gets a court order to make the debtor perform. |
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Term
| Rights Surety has Against a Co-Surety |
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Definition
| 1) Subrogation 2) Exoneration 3) Contribution (can limit the amount of their liability) |
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Term
| Rights Surety has Against a Creditor |
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Definition
| If it appears that debtor has defaulted you can request that collateral be applied to the debt |
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Term
| Defenses Surety has Against Debtor |
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Definition
| 1) Surety proves that surety or debtors signature were forged 2) Creditor committed fraud 3) Duress on debtor from creditor that surety did not know about 4) Non performance by the creditor 5) The debtors obligation is illegal |
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Term
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Definition
| 1) Debtor files bankruptcy 2) Fraud, misrepresentation, or duress on surety by the debtor 3) incapacity of the debtor |
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