Chapter 28 - Introduction to credit and secured transactions. In this chapter, the learning objectives are: Explain the difference between secured and unsecured credit, differentiate suretyship from guaranty, describe the various types of liens on real and personal property, compare methods for holding a security interest in real property. | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 6 Introduction to Credit and Secured Transactions Security Interests in Personal Property Bankruptcy Credit P A R T Introduction to Credit and Secured Transactions P A E T R H C 28 Creditors have better memories than debtors. Benjamin Franklin Poor Richard’s Almanac (1758) Learning Objectives Explain the difference between secured and unsecured credit Differentiate suretyship from guaranty Describe the various types of liens on real and personal property Compare methods for holding a security interest in real property Most transactions are unsecured: a service was rendered or good sold and the consumer-debtor promises to pay for the service or good upon receiving a bill Maximum risk of loss to the creditor To minimize risk, a creditor may require the debtor to convey to the creditor a lien (security interest) on the debtor’s property Secured vs. Unsecured Credit Examples of unsecured . | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 6 Introduction to Credit and Secured Transactions Security Interests in Personal Property Bankruptcy Credit P A R T Introduction to Credit and Secured Transactions P A E T R H C 28 Creditors have better memories than debtors. Benjamin Franklin Poor Richard’s Almanac (1758) Learning Objectives Explain the difference between secured and unsecured credit Differentiate suretyship from guaranty Describe the various types of liens on real and personal property Compare methods for holding a security interest in real property Most transactions are unsecured: a service was rendered or good sold and the consumer-debtor promises to pay for the service or good upon receiving a bill Maximum risk of loss to the creditor To minimize risk, a creditor may require the debtor to convey to the creditor a lien (security interest) on the debtor’s property Secured vs. Unsecured Credit Examples of unsecured credit: store charge accounts, medical services to be billed, repair services later billed, inventory shipped and invoiced for later billing, etc. Examples of secured credit: appliances sold on an installment plan, a mortgage for real property, a lien on restaurant equipment, a lien on agricultural products or machinery, etc. In unsecured credit transactions, a creditor has recourse against a debtor’s default by sending notices to pay and eventually filing suit against the debtor for payment Result: collection effort begins In a secured credit transaction, creditor can go against the security (repossess) to collect debtor’s outstanding obligation If Consumer Fails to Pay The collection effort includes having a sheriff “execute” a judgment and/or (depending on state law) garnishing debtor’s wages – a very long process in and of itself. A surety is a person who is liable for the payment of another person’s debt or for the performance of another person’s duty The surety joins with the .
