Collections: Child Support Exemption for Garnishment

In the case of General Electric Capital Auto Lease, Inc. v. Turner, the City of Richmond Circuit Court denied a debtor's exemption to garnishment claim.

In Turner the debtor claimed an exemption based on the amount of monthly child support the debtor owed. The Court noted that the specific exemption claimed by the debtor on the garnishment form was the exemption created by Virginia Code §55-165. The judgment creditor argued that this code section only applied to assignments of wages executed and approved by a judge under the procedure specifically set out in Virginia Code §55-161 through 167. That procedure included notice to and consent of the debtor's creditors, the appointment of a trustee, and so on. The Court found as fact that none of those things were done in this case. Therefore, the Court ruled that an exemption under Virginia Code §55-165 did not apply. The Court also considered all the other exemptions from garnishment listed in Virginia Code §8.01-512.4, and none of those exemptions applied either. Accordingly, the debtor's claim of exemption was denied.

Foreclosure: Substitute Trustees

Question: What happens if the trustee under your deed of trust is either unavailable, or, is no longer the person you desire to serve as trustee? 

Answer: You can appoint a substitute trustee. Under Virginia Code §5.1-320(9), the noteholder, or, the holders of greater than fifty percent of the monetary obligation secured by the deed of trust, have the right and the power to appoint a substitute trustee or trustees for any reason, regardless of whether such right is expressly granted in the deed of trust. The timing of your action is important. The trustee must be empowered before taking action – this occurs when the instrument of appointment has been executed. You do not have to wait for recording. However, as Virginia Code §55.1-320(9) states that the appointment of a substitute trustee shall be recorded before, or at the time of, the recording of the deed conveying the property (such as after a foreclosure).

Question: Can a lender appoint their counsel as trustee? 

Answer: Yes. Virginia Code §26-58 holds that a trustee is not disqualified merely because he is a stockholder, member, employee, officer or director or counsel to the lender.

Real Estate: Suit to Enforce Mechanic’s Liens

In recent editions of Creditor News we have been discussing the benefits of using real estate to improve creditors’ positions. This month we will discuss suit to enforce mechanic’s liens.

Virginia Code §43-17 provides that no suit to enforce a mechanic’s lien can be brought:

“…after six months from the time when the memorandum of lien was recorded or after sixty days from the time the building, structure or railroad was completed or the work thereon otherwise terminated, whichever time shall last occur; provided, however, that the filing of a petition to enforce any such lien in any suit wherein such petition may be properly filed shall be regarded as the institution of a suit under this section; and, provided further, that nothing herein shall extend the time within which such lien may be perfected.”

Virginia Code §43-17.1 provides that:

“Any party, having an interest in real property against which a lien has been filed, may, upon a showing of good cause, petition the court of equity having jurisdiction wherein the building, structure, other property, or railroad is located to hold a hearing to determine the validity of any perfected lien on the property. After reasonable notice to the lien claimant and any party to whom the benefit of the lien would inure and who has given notice as provided in § 43-18 of the Code of Virginia, the court shall hold a hearing and determine the validity of the lien. If the court finds that the lien is invalid, it shall forthwith order that the memorandum or notice of lien be released from record.”

Virginia Code §43-18 provides:

“The perfected lien of a general contractor on any building or structure shall inure to the benefit of any subcontractor, and of any person performing labor or furnishing materials to a subcontractor who has not perfected a lien on such building or structure, provided such subcontractor, or person performing labor or furnishing materials shall give written notice of his claim against the general contractor, or subcontractor, as the case may be, to the owner or his agent before the amount of such lien is actually paid off or discharged.”

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

Bankruptcy: Vehicle Repossessions/Automatic Stay

The United States District Court of Abingdon, Virginia, in the case of Nationsbank N.A. v. Bush reversed a Bankruptcy Court decision finding that the creditor bank had violated the Bankruptcy Code's automatic stay against actions by creditor's against bankrupt debtors.

The District Court found that in order for the bank to have violated the automatic stay, the bank must have known of the debtor's filing. The District Court found that the notice of filing was mailed to the proper address and was not subsequently returned undelivered may support the conclusion that the bank received notice, it does not support the conclusion that the bank received the notice before the sale date. The issue was not whether the bank ever received notice, but when the bank received the notice. The District Court found that there was no evidence from which the Bankruptcy Court could have found that the bank received the notice before the sale.

Despite the favorable ruling, creditors should be very careful to establish a checking system so that violations will not occur. The penalty for violations range from jail time to fines and attorney's fees.