Difficult Debt Collection: General Rules for Debt Security

Difficult Debt Collection: General Rules for Debt Security

Creditor’s rights guarantee is a commonly used legal knowledge. We often encounter problems about creditors’ rights and debts in our lives. There are three legal persons in the relationship between creditor’s rights and debts, one is the creditor, the other is the debtor, and the other is the debtor. It is the debt guarantor. The law directly stipulates the method of debt security. This article mainly introduces some general rules of debt security.

1. The form of debt guarantee

 1. Deposit. It means that the seller can require the buyer to pay a certain percentage of the total payment in cash in advance before the contract is performed, as a guarantee to pay the full payment due. The difference between deposit and advance payment. The deposit is a form of guarantee, which is mainly used to punish the breach of contract. The advance payment is part of the payment for the goods from the very beginning, and the above two can be converted into each other by agreement. The difference between deposit and liquidated damages. The default metal is like compensation for damages, and the determination of its amount depends entirely on the loss of the injured party, while the deposit is a kind of creditor’s rights guarantee, and once the amount is determined, it cannot be changed without mutual agreement.

 2, stay. It means that the creditor places a lien on the property of the debtor in his possession according to the provisions of the law or the contract until all the debts owed by the debtor are repaid, and then return it to the debtor.

 In practice, there are the following characteristics: Generally speaking, the lien property is not agreed in advance by both parties, but when the debtor owes a certain debt to the creditor in the transaction activity, the creditor places the property in the transaction activity to ensure the realization of its creditor’s rights; The lien property can only be the property associated with the overdue creditor-debt contract. Therefore, the creditor can exercise the lien only when the debtor is unable to repay the debt due, otherwise, it is an illegal act. This form of guarantee has great limitations and is limited to property related to creditors’ rights and debts, such as processing contracts and custom-made contracts.

 3. Pledge. Refers to the seller or a third party handing over the property to the creditor, so that the latter enjoys the priority of the creditor’s right to be paid. In a pledge, the creditor can independently make decisions on the pledged property; in a mortgage, since the creditor does not possess the mortgaged property, it does not have the obligation to take care of the pledged property, while in a pledge, the creditor should properly take care of the pledged property.

 4. Mortgage. It means that the buyer or a third party provides a certain amount of property as a guarantee for payment. When the debtor fails to perform the debt, the creditor has the right to be paid preferentially at the price of auction or sale of the property at a discount according to law.

 The mortgage should pay attention to:

 a. A written mortgage contract should be concluded and indicated in the contract: the names of both parties, the amount and scope of the creditor’s rights guaranteed, the name of the mortgaged property, the ownership of the mortgaged property, and the date of the mortgaged property.

 b. Clarify the scope of collateral security: compensation for the original creditor’s rights, compensation for losses and liquidated damages due to non-performance of debts, and expenses for realizing the mortgage rights (notarization, litigation fees).

 c. During the mortgage period, others shall not use or dispose of the mortgaged property.

 5. Guarantee. It means that the seller can ask the buyer to provide a legal person with strong economic strength and good faith as a third party to guarantee the buyer’s payment. Once the buyer fails to pay on time, the guarantor shall bear the payment responsibility.

 The guarantee should pay attention to the following issues:

 a. The guarantor should be voluntary. The guarantor shall sign a written guarantee contract with the seller, and state the content and method of the guarantee, which shall be signed and sealed by both parties.

 b. The responsibilities of the guarantor should be stipulated in the guarantee contract. Among them, it is necessary to pay attention to the difference between “perform on behalf of” and “joint and several liabilities”. Acting on behalf of the debtor means that only when the original debtor is truly unable to perform the debt and compensate for the loss, can the guarantor be required to perform the debt and compensate for the loss. Joint and several liabilities mean that as long as the debtor fails to perform the debt, regardless of whether it can perform, the creditor can directly request it to perform or compensate for the loss.

 c. When changing or modifying the original debt contract with the original debt, the guarantor’s consent must be obtained in advance, otherwise, the guarantor will not be responsible for the guarantee responsibility.

 d. Reasonably select the guarantor. It should be noted that the competent department of the state-owned enterprise or other administrative agency cannot act as the guarantor, and the selected guarantor can indeed bear the corresponding payment responsibility, that is, a credit investigation of the guarantor is required.

 e. When signing a guaranteed contract, the following contents are indispensable: the type and amount of the creditor’s rights to be guaranteed; the method of guarantee; the scope of the guarantee; the duration of the guarantee.

2. General Warranty and Joint Warranty

 (1) The concept of guarantee

 A guarantee means that a third party and a creditor agree that when the debtor fails to perform its debt, the third party will perform the debt or assume responsibility under the agreement. The third party here is called the guarantor; the creditor here is not only the creditor of the main debt, but also the creditor in the guarantee contract; here “performing the debt or taking responsibility according to the agreement” is called the guaranteed debt, and some people call it the guarantee responsibility.

 The so-called general guarantee refers to the guarantee that the parties agree in the guarantee contract that the guarantor shall bear the responsibility when the debtor cannot perform the debt.

 Joint and several liability guarantees refer to the joint and several liability guarantees where the parties agree in the guarantee contract that the guarantor and the debtor shall bear joint and several liabilities for the debt. That is to say, if the debtor of the joint liability guarantee fails to perform the debt at the expiration of the performance period stipulated in the main contract, the creditor can either require the debtor to perform the debt, or request the guarantor to assume the guarantee responsibility within the scope of its guarantee, and the guarantor has no right of first defense.

 (2) The main difference between a general guarantee and joint liability guarantee

 The main difference between a general guarantee and a joint and several liability guarantees is whether the guarantor enjoys the right of first lawsuit defense. In general guarantees, the guarantor has the right of first-action defense (Article 17, paragraph 2 of the Guarantee Law ); while in joint and several liability guarantees, the guarantor does not have the right of first-suit defense.

 When we sign the contract, the following points need to be paid attention to regarding the issue of guarantee:

 1. The terms of the guarantee should be clear

 If the other party is required to provide a guarantee, it must be clearly stated that “the guarantor provides a guarantee for the performance of the debt”. Do not use vague words such as “responsible for settlement” and “responsible for coordination” by the other party, otherwise, the court will not be able to determine that the guarantee contract is established

 2. Pay attention to the nature of the guarantee

 The contract should specify “joint and several guarantees” or “general guarantees”. If there is no express agreement, the court will regard it as a joint and several guarantees.

 3. Pay attention to the time limit

 When the guaranteed debt is not repaid after the due date if the guarantee contract adopts the method of “general guarantee”, arbitration or litigation must be initiated against the debtor and the guarantor within the guarantee period; and if the method of “joint and several guarantees” is adopted, the guarantee contract must be available within the guarantee period. The effective way of proof requires the guarantor to perform the guarantee obligation immediately. Otherwise, the guarantor will release the guarantee liability to you.

 4. The guarantee period should be agreed

 If you need to provide guarantees to others yourself, you must clearly state the start and end time of the guarantee period when signing the guarantee contract. If the guarantee period stipulated in the guarantee contract is earlier than or equal to the main debt performance period, it shall be deemed that there is no agreement, and the guarantee period shall be six months from the date when the main debt performance period expires. If the guarantee contract stipulates that the guarantor shall bear the guarantee responsibility until the principal and interest of the principal debt are repaid, etc., the agreement shall be deemed unclear, and the guarantee period shall be two years from the date when the principal debt performance period expires.

 5. The scope of the guarantee should be clear

 The scope of the guarantee includes the main creditor’s rights and interest, liquidated damages, damages, and the cost of realizing the creditor’s rights. If it is otherwise stipulated in the guarantee contract, the agreement shall be followed. If the parties do not agree on the scope of the guarantee or the agreement is not clear, the guarantor shall be liable for all debts.

3. Mixed guarantee

 A mixed joint guarantee is a situation in which there is both guarantee, mortgage, and pledge guarantee for the same creditor’s right, that is, the guarantee of the person and the guarantee of the property are mixed. A mixed guarantee is very simple to understand. It means that there is a physical guarantor for the creditor’s right. However, the guarantee responsibility of the guarantor and the creditor may be based on different guarantee contracts, and there is no prior intentional contact between the guarantors, but As far as the legal effect is concerned, as long as one of them undertakes the guaranty responsibility to the creditor, the other guarantors will be exempted accordingly within the limit.

 Where the same creditor’s right has both a guarantee and the debtor himself provides his property as a guarantee, the guarantor is always in the position of the second guarantee when assuming the guarantee responsibility, and cannot assume joint and several liabilities. At this time, the creditor can only claim the repayment from the guarantor only by exercising the security interest on the collateral provided by the debtor first, and the collateral is insufficient for the repayment part. In the case of a third party providing collateral, the guarantee of the property and the guarantee of the person are in the same status, and the creditor has the right to choose whether to exercise the security right or the guarantee creditor’s right. Relevant laws and regulations also provide for this point. Article 176 of the Property Law: If the secured creditor’s right has both a property and a person’s security, and the debtor fails to perform the due debt or realizes the security interest as agreed by the parties, The creditor shall realize the creditor’s right following the agreement; if there is no agreement or the agreement is not clear, and the debtor provides the security for the property, the creditor shall realize the creditor’s right for the security of the property first; if a third party provides the security for the property, the creditor can realize the creditor’s right for the security of the property. , the guarantor may also be required to bear the guarantee responsibility.

 (1) Sequence of external repayment

 After the promulgation of the “Property Law of the People’s Republic of China”, Article 176 stipulates that: if the secured creditor’s right is guaranteed by both the property and the person, the debtor fails to perform the due debt or the parties agree to realize the security interest. If there is no agreement or the agreement is not clear, and the debtor provides the security for the property, the creditor shall first realize the creditor’s right for the security of the property; if a third party provides security for the property, the creditor may provide the security for the property. To realize the creditor’s rights, the guarantor may also be required to bear the guaranty responsibility. The third party providing the guarantee shall have the right to recover from the debtor after assuming the guarantee responsibility.

 Article 176 provides for the situation where there is both property security and personal security on the secured creditor’s right, and it is stipulated in three cases: 

(1) In the case where the parties have agreed on the relationship between the property security and the human security

(2) If there is no agreement or the agreement is not clear and the debtor provides security for the property, the security right shall be realized first for the security of the property;

(3) If there is no agreement or agreement It is not clear that if the third party provides the guarantee of the property, and there is another person’s guarantee, the parties should be allowed to choose.

 It can be seen that, after years of legal evolution, the third-party guarantee has moved down from being the same as the debtor’s provision of property insurance to the position equivalent to the third-party’s guarantee.

 (2) The internal repayment ratio of the guarantor, the conflict between the latest Nine People’s Minutes and the original legal provisions, and the author’s opinion

 The principle that multiple subjects provide a guarantee for the same debt, once one of the guarantors assumes the guarantee responsibility, can obtain the right to recover from other guarantors has been passed down in the theoretical and practical circles for many years, and the legal provisions are also relatively detailed. However, due to the “Guarantee Law”, “Guarantee Law Interpretation” and “Property Law,” all have provisions on third-party guarantees, and some of the provisions are in conflict, which makes the internal settlement of third-party guarantees are more complicated. The author believes that according to the different forms of guarantees, the treatment is not the same.

 First, the issue of internal repayment after the guarantor assumes the guaranty responsibility.

 Article 38 of the Interpretation of the Guarantee Law stipulates that “if the same creditor’s right has both guaranty and the guaranty provided by a third party, the creditor may request the guarantor or the guarantor of the guarantor to assume the guaranty responsibility. If the scope is not agreed or the agreement is unclear, the guarantor who has assumed the guaranty responsibility may seek repayment from the debtor or may require other guarantors to pay off their share. The right to recover from the debtor and to demand repayment from other guarantors. Article 20 of the Interpretation also stipulates the share of internal repayment between the guarantors: “After the guarantors jointly and severally undertake the guaranty responsibility, the part that cannot be recovered from the debtor shall be shared by the joint guarantors according to their internally agreed proportions. If there is no agreement, shared equally.”

By aamritri

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