Monday, June 24, 2013

Foreclosure: Default

     Question: When is a loan in default? Answer: Under one or more of several circumstances. The most common way that a borrower is in default is monetary – e.g., the borrower fails to make a required payment. However, default can be for a non-monetary reason as well, such as:
     Failure to pay taxes.
     Failure to pay insurance.
     Failure to remove or bond over mechanic’s liens.
     Failure to perform requirements unique to the loan.
     If you have questions about default, please call me.


Monday, June 17, 2013

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, June 10, 2013

Bankruptcy: Homestead Exemptions

     Virginia Code §34-26 and §34-4 provide for commonly used exemptions in bankruptcy.
     Virginia Code §34-26 is the "poor debtor's" exemption. This law was updated in 1992. Instead of listing exempt items such as horses, oxen, cattle, bushels of wheat, corn, etc. (as it was pre-1992), the statute now sets out categories with dollar limitations: tools of trade up to $10,000.00; household furnishings up to $5,000.00; family heirlooms up to $5,000.00; motor vehicles up to $2,000.00; and wearing apparel up to $1,000.00.
     Virginia Code §34-4 provides for a flat $5,000.00 exemption per head of household.
     The 1992 statutory charges resulted in an increase in the debtor's effective exemptions of personal property, as well as severe a decrease in effectiveness of the previous frequently used "Sheriff's levy" on personal property.

Monday, June 3, 2013

Collections: Debt Collections: You Need a Plan, From the Beginning

     Any business or lending institution that extends credit to its customers or members will inevitably be faced with bad debts. To insure maximum collection results, creditors should establish credit and collection policies before a problem occurs.
     Before you extend credit, there are several things that you can do to reduce your risk.
     1. Obtain full names, addresses, telephone numbers, places of work, social security numbers and dates of birth.
     2. Obtain the name of the customer's bank, branch, and account number.
     3. Review a credit report.
     4. Ensure that all credit terms are clear.
     5. Have personal guarantees for small businesses.
     6. Perfect security interest in events of large credit.
     When accepting personal checks, take the following precautions:
     1. Insist on two pieces of identification, at least one of which has the customer's photo. A driver's license and a credit card are ideal.
     2. Require checks to be made out in your presence.
     3. Compare the signature on the check with that on the ID.
     4. Limit checks to the exact amount of the sale.
     5. Accept only checks drawn on local banks.
     6. Verify the customer's address and phone number on the check. Also note the customer's social security number and/or driver's license number.
     7. Be cautious when accepting checks with low numbers (indicating that the account was recently opened).
     8. Consider subscribing to a check verifying service. For a modest fee, such a service allows you to call a toll-free number and learn immediately if you can safely accept the check. If a check bounces after being verified using this procedure, the service will cover your loss.
     When the debt is in default, act promptly! The longer you wait, the harder collection will probably be. The firm of Lafayette, Ayers & Whitlock, PLC usually recommends immediate telephone calls, followed by a series of two or three letters. In the final letter, give a definite and short deadline with the promise of attorney action.
     The decision as to when a creditor should deliver its accounts to counsel for collection is not always an easy one. Some creditors deliver collections accounts to counsel after the initial demand has failed to produce results. Some creditors desire to have their credit/collection manager take their judgment and attempt collection by payment plan, garnishment, or even sometimes, sheriff's levy.   
     The problem frequently encountered by creditors who pursue their own judgments, however, is that in most cases the ability to collect without the assistance of counsel ends prior to the receipt of payment in full. When this occurs, counsel must normally assume collection activities after the trail is cold. Further, since the creditor was not represented by counsel at the time of judgment, the judgment order does not include attorney's fees; nevertheless, attorney fees will now be charged to the creditor. In addition, if the creditor's credit/collection manager failed to properly docket the judgment, collection could be forever impaired.
     The firm recommends that creditors immediately deliver accounts to counsel upon the failure of the demand for payment. Creditors should ensure that provisions for attorney fees and interest are included in all loan, contract and/or account documents so that counsel can assess these costs upon delivery. The firm further recommends that all accounts be delivered while the "trail" is still warm--no more then sixty days from default.
     The firm has aggressive collection counsel and staff who represent numerous Credit Unions, Homeowner Associations, property management companies, loan companies, businesses, doctor's offices, and private citizens. The firm is willing to pursue accounts from start to finish, or even finish accounts already in progress.