Monday, September 29, 2014

Real Estate: The Virginia Property Owners’ Association Act – An Introduction

     The Virginia Property Owners’ Association Act provides homeowner’s associations with additional protections when homeowners fail to pay their dues; it also defines responsibilities of the association. Accordingly, homeowner’s associations should be knowledgeable of the Act and its provisions. The Act applies to developments subject to a declaration recorded after January 1, 1959, associations incorporated or otherwise organized after such date, and all subdivisions created under the former Subdivided Land Sales Act. In the November, I will briefly introduce this Act and some of the special duties it imposes on homeowner’s associations. In December, I will address memorandum of liens and foreclosures.

Monday, September 22, 2014

Creditors, Let's Talk about Post Judgment Collections

     Post Judgment Collections. Frequently this is the time that you will collect most of your money.

     While at Lafayette, Ayers & Whitlock PLC we represent creditors from beginning to end in the collection process, we recognize that some creditors either still file some of their own suits, or, have done so in the past. After taking that judgment, and if collection does not come easy, all too frequently judgments are “put on the shelf” and eventually forgotten. Do not let this happen to you! At Lafayette, Ayers & Whitlock PLC we can help you collect judgments that you have already taken. Your General District Court judgments are good for ten years, but can be docketed in a Circuit Court to extend the life of the judgment to twenty years. These judgments can even be renewed for an additional twenty years. We can work your old judgments. We have the most up-to-date programs, resources and methods. We do all of this on a percentage of collections fee basis – in other words, if we do not collect, you do not pay us a fee. Accordingly, our incentive is to collect! I take pride in the fact that at Lafayette, Ayers & Whitlock PLC our experience, staff, responsiveness and resources have made our post judgment collections superior to other collectors.

     I invite you to please call me so that we can discuss your questions.

Monday, September 15, 2014

Bankruptcy: Redemption - Exercising the Right of Redemption

     Can debtors exercise the right of redemption after discharge has been ordered?
     A decision by Judge Krumm for the Western District of Virginia appears to have answered this question. The case was In Re Hawkins. The debtors sought to reaffirm the bank loan secured by their Dodge Colt. The debtors later learned of Bankruptcy Code §722 redemption rights, and sought to redeem instead of reaffirm. Before redemption was achieved, the chapter 7 discharge was granted. The creditor opposed the motion and alleged that debtors' right of redemption expired when they were discharged in bankruptcy. The court found for the debtors and held that the debtors' discharge did not bar their motion for redemption under § 722. Debtors were clearly entitled to reaffirm debts after discharge under 11 U.S.C.S. § 524. While 11 U.S.C.S. § 722 was silent on whether they were allowed to redeem property after discharge, the court found that it was Congress' intent to consider the concepts of reaffirmation and redemption together. The court reasoned that although the Code is silent as to when debtors may exercise their right to redeem, since concepts from reaffirmation and redemption were considered by Congress together, the time frame for exercising one option should be applicable to the other option. Therefore, the time frame for exercising redemption rights was the same as that for exercising reaffirmation rights.
     Right to redeem / repossess property in Chapter 13 cases:
     In the case of Tidewater Finance Co. v. Moffett, the Fourth Circuit Court of Appeals ruled that a Chapter 13 debtor was entitled to the return of her car, which had been repossessed by a finance company. This decision affirmed the original bankruptcy court decision, as well as the appellate decision of the District Court.
     In Moffett, the debtor, in her reorganization plan, exercised her right to redeem under the Virginia Uniform Commercial Code (“UCC”); the plan provided for full payment of her debt to the finance company, plus interest on the delinquent payments.
     The debtor worked at the Federal Emergency Management Agency, forty miles from her home. A couple of years prior to the bankruptcy filing she had bought a previously owned, three year old Honda Accord from a dealer in Woodbridge, which assigned its loan to the finance company creditor. The car was the debtor’s only means to get to work each day. The debtor made her payments in a timely fashion for a year, and then missed two payments. This prompted the finance company to repossess the car. Later that same day the debtor filed for Chapter 13 bankruptcy. A week after that the debtor’s lawyer demanded that the finance company return the car. The finance company filed a motion for relief from the automatic stay so that it could sell the vehicle. The bankruptcy court denied the motion, however, and ordered the finance company to return the car. In doing so, the bankruptcy judge required adequate protection for the creditor in the debtor’s Chapter 13 plan. The debtor’s Chapter 13 plan provided for full payment of the loan. The finance company returned the car, but appealed to the District Court.
     The District Court Judge found that the debtor had a statutory right of redemption, and also found that the finance company was required to turn over the car once its interest was adequately protected in the Chapter 13 plan.
     The finance company appealed again, this time to the Fourth Circuit Court of Appeals. In his opinion, the Fourth Circuit Court Judge cited that pursuant to the federal bankruptcy code, once a petition is filed, an automatic stay goes in effect. Any party with property that the trustee can use, sell or lease must turn it over to the trustee, after that party’s interest is protected. The district judge said the question in this case was whether the finance company and the car at issue were subject to the referenced code provisions. The judge looked at the UCC as controlling, since the case involved default on a purchase agreement with a secured creditor. The UCC allows the creditor the right of repossession, but within limits. The debtor also has rights upon repossession, including the right to redeem the property under UCC Section 8.9A-623 (c)(2). The Judge ruled that the debtor’s right to redemption becomes one of the “legal or equitable interests” of her bankruptcy estate.
     The 4th Circuit agreed with the lower courts that if the creditor’s interest is protected in the plan, then it must turn over the car. UCC Section 8.9-623(b) allows a debtor to redeem collateral by tendering in full its obligations to the creditor. In this case, the Judge noted that the debtor’s plan did just that. The plan even provided interest to the finance company for the delinquent payments. The Judge wrote: “[T]he bankruptcy plan here provided for the payment of all future installments, the curing of all delinquent payments, and the payment of all applicable interest over the course of the plan”. “Such a flexible approach to repaying claims is precisely what the Bankruptcy Code allows in order to facilitate a debtor’s successful rehabilitation.” The Judge affirmed the lower court’s decision.

Monday, September 8, 2014

Collection: Fraudulent Conversion or Removal of Property Subject to Lien or Title

     The Richmond Circuit Court case of Va. Builder's Supply, Inc. v. Brooks & Co. Gen Contractors Inc. serves as a good example of judicial recognition of the rights of judgment creditors in arbitration proceedings.
     In Va. Builders, the creditor, a building supply company, issued a garnishment summons upon a general contractor for sums due from the general contractor to the judgment debtor, a subcontractor. The contracts between the contractor and the subcontractor, under which the judgment creditor sought to garnish the sums due the subcontractor, included clauses for mandatory arbitration. The garnishee sought arbitration after being served with the garnishment. The garnishee refused to allow the judgment creditor to participate. The garnishee received a garnishment award indicating that it owed the subcontractor no sums. The garnishee answered the garnishment that no sums were due. The Richmond General District Court agreed. The Richmond Circuit Court disagreed, and sent the case back for further review. The Richmond Circuit Court reasoned that the garnishee should not be able to affect the potential funds due the judgment creditor while prohibiting the judgment creditor from participating in the proceedings.

Monday, September 1, 2014

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 Section 55-59(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 Section 55-59(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 Section 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.