Debtor-creditor law governs the relations between people who lend money (creditors) and people who borrow it (debtors). Be aware that if you owe money and have difficulty paying it back, you have many rights that prevent the creditor from harassing you. Under certain circumstances (subject to an array of legal protections) a creditor may “garnish” your wages, legally requiring your employer to give a portion of your earnings directly to the creditor. A creditor can also attempt to legally “attach” property, such as a bank account, in order to satisfy a debt.
In a secured transation, the debtor’s agreement with the creditor gives the creditor the right to seize the property, say an automobile for which the creditor has given the debtor a loan, without instituting a separate attachment proceeding, in the case of non-payment. Real property mortgages come under this classification.
Bankruptcy law is a branch of debtor/creditor law largely governed by federal statutes. In all cases, it takes precedence over state debtor-creditor law. If you file for bankruptcy your debts may be wiped out (subject to a growing list of limitations) or you may have a chance to reorganize your finances and pay back a portion of the money. In either case, the federal court gives you a great deal of protection against the creditor. In determining exemptions and other matters, the federal court often looks to the law of the state involved. Of course, if you yourself are the creditor, you need to know about these laws so you can operate within the law when you try to collect money owed to you.
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