Monday, September 30, 2013

Bankruptcy: Lien Avoidance Case Review: Judicial Liens Larger than Available Exemptions

     In the case of Andrews Distributing Co. v. Stanley the United States District Court at Big Stone Gap, Virginia, held that a creditor's lien must be avoided in the amount of the debtors' homestead exemption, but the amount not avoided would remain a lien against the debtors' real property. The District Court's decision overruled a bankruptcy court's decision avoiding the entire lien. The Bankruptcy Court had concluded that the debtors' homestead exemption was impaired by the presence of the creditor's lien, and thus avoided the lien in full. The creditor, on appeal to the District Court, contended that the Bankruptcy Court erred, in that the clear language of Bankruptcy Code §522(f) mandated that the lien be avoided only to "the extent that" it impaired the exemption. The District Court agreed with the creditor and ruled that under the plain meaning of Bankruptcy Code §522(f), only the amount of the judicial lien which impaired the exemption should be avoided. The District Court stated that the Court of Appeals for the 4th Circuit, in strongly worded dicta, had addressed this issue in the case of In re Opperman. The Court of Appeals in Opperman concluded that a lien larger in amount than the exemption available to the debtor did not impair that exemption. Thus, in Andrews the District Court found for the creditor and decided that only that part of a lien which actually interfered with the debtor's homestead exemption may be avoided.

Monday, September 23, 2013

Collections: Perfection of Vehicle Liens

     In almost all circumstances, courts will recognize a lien as being valid only when it has been "perfected". Perfected means registered with the appropriate governmental agency - DMV, Board of Inland Game and Fisheries, etc.; language on a promissory note that the loan is secured by the vehicle is not enough. Although the result of failed perfection could be harsh (a lost lien), it makes sense; without a registration, no one could ever know who has liens. Understanding this, it is important to have someone in your creditor organization be designated to follow-up on lien perfection to ensure that it is done, to ensure that it is done promptly, and to ensure that it is done right.
     What happens when your debtor moves to another state? As long as the creditor holds the original certificate of title reflecting the lien, the creditor will usually be protected. If the vehicle is taken to another state but is never re-registered or re-titled, the original secured creditor who is listed as lienholder on the original certificate of title maintains its perfection. The original secured creditor also maintains its lien if the debtor moves and obtains a new certificate of title with the creditor's name on it. However, what happens if the debtor moves, obtains a new certificate without the lien recorded? There could be a problem. To avoid the possible problem, follow up on your transient debtors like you do your new liens.

Monday, September 16, 2013

Foreclosure: Notice of Sale

     The Code of Virginia provides specific guidance as to giving notice of a foreclosure sale.
     §55-59.1 requires that the written notice of sale contain the time, date and place of the proposed sale, as well as either (i) the instrument number, or, deed book and page number, of the instrument of appointment filed pursuant to §55-59-59 (appointment of substitute trustee), or, (ii) a copy of the executed and notarized appointment of substitute trustee. Personal delivery or mailing a copy of the advertisement by certified or registered mail is sufficient.
     §55-59.1 requires the trustee to send written notice of the time, date and place of the sale to (i) the present owner of the property … (ii) any subordinate lienholder … (iii) any assignee of such note … (iv) any condominium unit owner’s association that has filed a lien … (v) any property owner’s association that has filed a lien … (vi) any proprietary lessees’ association that has filed a lien.
     It is important to know that in addition to the notice required by statute, the note or the deed of trust may contain additional notice requirements. Accordingly, the trustee should examine both of these documents.
     §55-59 provides that the notice can be sent by either the trustee or the lender.

Monday, September 9, 2013

Real Estate: Suit to Enforce Mechanic's Liens

     In recent editions of Creditor News (which can be viewed at we have been discussing the benefits of using real estate to improve creditors’ positions. Last month we discussed perfection of liens. 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.

Monday, September 2, 2013

Bankruptcy: Lien Avoidance Case Review: Judicial Liens

     Bankruptcy Code §522(f) provides that debtors may avoid judgment liens if the liens impair an exemption to which the debtor would be entitled under Bankruptcy Code §522(b). Bankruptcy Code §522(b) allows debtors to exempt property pursuant to state homestead provisions.
     Although opinions vary in different jurisdictions, in the Fourth Circuit, Eastern District of Virginia, to avoid judgment liens, debtors must claim the subject property as an exemption on Schedule B-4 of their bankruptcy petition, and then must also file their homestead exemption in a timely manner. The case of In Re Wall, decided by the United States Bankruptcy Court, Eastern District of Virginia, demonstrates that debtors can lose their rights by failing to properly claim the avoidance.
     In upcoming bankruptcy blogs, we will review cases where judicial lien avoidance is examined.