Monday, July 15, 2024

Foreclosure: Right to Cure a Default

Question: Once a borrower is in default, can he “reinstate the loan”, or, “cure the default” and stop the foreclosure sale? Answer:  yes. In general, most deeds of trust contain language that allows a borrower the opportunity to reinstate, or cure, the loan after the due date set out in the note. If the deed of trust contains this language, the note cannot be placed into default and accelerated until the cure period has expired. Government loans such as Fannie Mae and Freddie Mac have very specific requirements. In fact, a borrower can always cure a monetary default and stop a foreclosure up to the time of sale by paying in full, in good funds, the deficient amount, including all costs of the sale.

Monday, July 8, 2024

Real Estate: Using Mechanic’s Liens to Secure an Interest in Real Estate

In recent editions of Creditor News we have been discussing the benefits of using real estate to improve creditors’ positions. As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss. In this edition, we will begin a review of the benefits of using mechanic’s liens to aid in the collection of your debt.

Virginia Code §43-3 et. seq. provides for special procedures for the collection of unpaid bills related to work performed on, or products supplied for, real estate. §43-3 A states:

“All persons performing labor or furnishing materials of the value of $150 or more … for the construction, removal, repair or improvement of any building or structure permanently annexed to the freehold … shall have a lien, if perfected as hereinafter provided, upon such building or structure, and so much land therewith as shall be necessary for the convenient use and enjoyment thereof … subject to the provisions of §43-20. But when the claim is for repairs or improvements to existing structures only, no lien shall attach to the property repaired or improved unless such repairs or improvements were ordered or authorized by the owner, or his agent.”

Virginia Code §43-3 B provides for special rules regarding condominiums.

Virginia Code §§43-4, 43-7 and 43-9 provide for the perfection of the lien by general contractors, subcontractors, and laborers and suppliers. We will explore this more in next month’s edition.

We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.

Monday, July 1, 2024

Bankruptcy: Dischargeability of Debts - False Pretenses

In the case of Slonim v. Marineau the United States District Court confirmed a Bankruptcy Code ruling that a debt was non-dischargeable pursuant to Bankruptcy Code §523(a)(2)(A), as it was obtained by false pretenses. The Bankruptcy Court had made a factual finding that the debtor's loan agreement with the creditor, who was an individual investor, provided that the $90,000.00 loaned by the creditor would be used to construct pre-sold homes in Albermarle and Greene Counties, but instead the debtor had used the loan to pay personal expenses.

The debtor had argued that his statements did not "qualify" as misrepresentations under Bankruptcy Code §523(a)(2)(A) because the statements concerned future performance. Most courts, however, have held that when such statements are accompanied by the present intention not to perform as promised. The statement of present intention at issue in this case involved the use to which the debtor would put the money. The Court ruled that where money is entrusted to a debtor for a specific purpose, the debtor impliedly represents that it will be used for that specific purpose constitutes a misrepresentation of the debtor's intention.

The debtor's own testimony established that he never intended to use the funds for that purpose. He testified at trial that he always intended to use the loan to reimburse himself and his partner for expenses incurred in building the house for the partner. Thus, the debtor's representation that the money would be used for a specific purpose was knowingly false when he made it. Furthermore, his intent to deceive could be inferred from his immediate depletion of the funds and statements aimed at making the investor believe that there was less risk involved than which truly existed. Accordingly, the debt was ruled non-dischargeable pursuant to Bankruptcy Code §523(a)(2)(A).

Monday, June 24, 2024

Collections: Interest on Accounts

Virginia Code §8.01-382 addresses pre-judgment and post-judgment interest, and provides that:

In any action at law or equity, the verdict of the jury or judgment by the court may provide for interest on the entire principal sum awarded or any part of that sum, and fix the period at which the interest is to commence.

The judgment order entered provides for the accrual of interest until the principal sum is paid. This code section further provides that if no interest is provided on a judgment, the statutory rate of interest shall be applied as of the date of entry of such verdict or judgment. The statutory judgment rate of interest is presently set at an annual rate of six percent, unless otherwise provided by a written contract, agreement or note.