Figures: tax year 2026
A debtor owes payment or performance, while a creditor holds the corresponding claim against the obligated party. The agreement, collateral documents, and enforcement events establish creditors' remedies and the duties of debtors and guarantors.
An unsecured creditor holds no lien securing the claim against particular property. A secured creditor has an enforceable interest in identified collateral, although competing claims can reduce the collateral's available value.
Creditors enforce matured obligations subject to payment, contract defenses, applicable collection limits, and bankruptcy restrictions. Debtors must perform enforceable promises, preserve collateral as agreed, and account for payments; default does not eliminate their procedural protections.
- An unpaid supplier ordinarily sues the buyer for a money judgment. Execution or garnishment then reaches nonexempt assets through the applicable state procedures.
- Execution enforces a judgment against property; garnishment reaches property or debts held by another person, such as a bank or employer.
- Entry of judgment does not necessarily create a lien on every asset. State law determines whether recording, docketing, delivery of a writ, or levy is necessary.
Common mistakes
- Labels replace undertaking language. An immediate payment promise and an unsuccessful-collection condition produce different enforcement dates, even when both documents use guarantor.
- Filing creates collateral rights. Harbor's all-assets notice cannot expand its inventory-only security agreement to cover a production press.
- Late means unperfected forever. Day 21 loses the equipment superpriority window; an otherwise effective filing still perfects the attached interest.
Bottom line
- The undertaking's language determines when creditors may enforce against a surety or guarantor and whether prior collection efforts are required.
- Exoneration precedes payment, reimbursement follows proper payment, subrogation generally requires full creditor satisfaction, and contribution reallocates excess cosurety payments.
- Attachment requires value, debtor rights or transfer power, and the required security-agreement, possession, delivery, or control condition.
- Perfection depends on collateral type and governing law; filing alone neither creates attachment nor proves first priority.
Exam shortcut
Start with the requested defendant. Mark whether relief runs against the debtor, collateral, a payment guarantor, a collection guarantor, or another cosurety. Build separate dates for attachment, filing or control, effective judgment lien, public tax-lien notice, and bankruptcy commencement. Use receipt as the equipment purchase-money clock's starting event. On a distribution question, separate exempt property, collateral proceeds, and unsecured estate cash before ranking claims.
The full lesson (about 9,935 words, 66 min read) adds 5 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- II.C1
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