Real Estate: The Virginia Property Owners' Association Act - Foreclosing on Memorandums of Lien

     In prior blogs, I discussed the provisions related to filing a memorandum of lien under the Virginia Property Owners’ Association Act.

     The Act provides: “At any time after perfecting the lien pursuant to this section, the property owners' association may sell the lot at public sale, subject to prior liens.” In order to conduct a nonjudicial foreclosure, the association must comply with the statutory requirements.  
     The association must give notice to the lot owner prior to advertising the sale. The notice must include notice of: “(i) the debt secured by the perfected lien; (ii) the action required to satisfy the debt secured by the perfected lien; (iii) the date, not less than 60 days from the date the notice is given to the lot owner, by which the debt secured by the lien must be satisfied; and (iv) that failure to satisfy the debt secured by the lien on or before the date specified in the notice may result in the sale of the lot.” The notice must also inform the lot owner of the right to bring a court action in the circuit court of the county or city where the lot is located to assert the nonexistence of a debt or any other defense of the lot owner to the sale.
     If the lot owner (i) satisfies the debt secured by lien that is the subject of the nonjudicial foreclosure sale and (ii) pays all expenses and costs incurred in perfecting and enforcing the lien, including but not limited to advertising costs and reasonable attorneys' fees, then the sale is discontinued. However, if after 60 days and the lot owner has not made those payments, the association may appoint a trustee for the sale and advertise the sale. In addition to advertising the sale, the association must give written notice of the time, date and place of any proposed sale in execution of the lien, and including the name, address and telephone number of the trustee. That notice must be at least given to the owner, lienholders and their assigns by certified or registered mail 14 days prior to the sale.
     The association must advertise the sale in a newspaper in the city or county where the property will be sold. The advertisement must be in a section with legal notices or where the property being sold is generally advertised for sale. The advertisement must describe the property by address and general location and have information for the representative or an attorney who can respond to inquiries about the property with their name, address, and telephone number. The advertisement must be in the newspaper for four successive weeks, but if the lot is located in a city or county immediately contiguous to a city, publication of the advertisement for five different days is sufficient. The sale then must be held on any day after the last advertisement but not earlier than 8 days after the first advertisement and not more than 30 days after the last advertisement. 
     Failure to comply with these and other requirements in the statute will render the sale of the property voidable by the court. The law firm of Lafayette, Ayers & Whitlock, PLC, represents homeowner’s associations and can handle memorandums of lien and foreclosure procedures.

Bankruptcy: IRA Accounts and Exemptions

     The United States Bankruptcy Court, in Smith v. Bryant, ruled that the debtor’s IRA funds were not excluded from the bankruptcy estate. In doing so, the Court examined and explained that there are significant differences between IRA's and ERISA-qualified retirement plans, the provision in Bankruptcy Code §541(c)(2) exempting qualified funds from the bankruptcy estate does not apply to the IRA funds in this case.

     In Smith the debtor, after her termination of employment from a bank, rolled over her interest in a stock and thrift plan at the bank into her own individual retirement account. The debtor argued that the IRA should have been excluded from her bankruptcy estate because the assets used to fund the IRA had been accumulated in an ERISA-qualified retirement plan.
     In reviewing the differences between ERISA-qualified retirement plans and IRAs, the Court noted that IRAs are subject to almost complete control by its owner and do not contain the same anti-assignation and non-alienation provisions required under ERISA-qualified plans. The Court stated that if the debtor had an interest in a trust that contained an anti-alienation provision that was created under Virginia law, such an interest would also be excluded from her bankruptcy estate under Bankruptcy Code §541(c)(2). Nevertheless, because the debtor created her IRA and had complete control over the funds in it, the funds were not exempt from the bankruptcy estate, and the debtor was ordered to turn the funds over to the trustee.
     The Court's ruling in Smith clarifies the issue regarding IRA accounts and exemptions, and with debtors frequently changing jobs, the issue is likely to resurface in many instances.

Collections: Post Judgment Collection - A Focus on Debtor's Interrogatories

     Once judgment is entered, what is next? Although all creditors would like for the judgment amount to "fall from the sky", it does not. Sometimes debtors will pay, either in full or in incremental payments. Sometimes creditors can garnish wages or accounts, or issue a levy on property. Sometimes creditors can bring a creditor's bill to sell real estate. But what can be done when the above listed remedies are not, or at least are not yet, options, or when there is no information about the debtor from which to devise a post judgment collection plan? Virginia Code §8.01-506 provides a good start - Debtor's Interrogatories. For the price of a summons to answer interrogatories (usually $44.00 plus service charges) an attorney can summon the debtor to appear before the court granting the judgment (or other court should the matter be transferred by the judgment court) or a Commissioner in Chancery (a lawyer appointed by the court to serve in this capacity) to examine the debtor's personal estate, specifically, to answer questions about income, assets and the debtor's general ability to pay in order to attempt to satisfy the judgment. The summons is enforceable by a capias (arrest warrant) which is issued through the court.

     The interrogatory procedure is summary in nature. No pleadings are required. No trial by jury is available. Under recent amendment to Virginia Code §8.01-506, the creditor may, as part of the interrogatory system, require the production of account books or other writings that contain evidence of the judgment debtor's estate, provided that the creditor gives an affidavit stating that he believes the books exist and identifies them with reasonable certainty.
     Virginia Code §8.01-506 allows a debtor to request that the interrogatories be held at a court most convenient for the debtor. Therefore, if the debtor moves far from the creditor's area, it may not be cost effective to pursue the interrogatories.
     It is important to note that a creditor cannot conduct debtor's interrogatories - only an attorney can. This certainly can be frustrating for creditors who take their own uncontested judgments and file their own garnishments, but it is a reminder as to why creditors are better served by turning all accounts over to counsel for collection prior to seeking judgments so that counsel can assess the attorney's fee provided in the contract or note, and can keep the entire process moving.

Creditors, Let's Talk about Foreclosures!

      Foreclosures. This is not a topic that most creditors wish to discuss. After all, if you get to this point your loan is delinquent and you are not having success getting your borrower to pay. When to take action and what action to take – these are important matters to discuss. We can help!

      At Lafayette, Ayers & Whitlock PLC we represent holders of deeds of trust and help our clients evaluate their order of priority and equity cushion, as well as explore bankruptcy implications and collection strategies. We do this for first, second and subsequent deeds of trust, as well as equity lines and judgment liens (the last of which can be enforced through a Creditor’s Bill).
      We do foreclosures all across the Commonwealth of Virginia.
      Even if we are not your specified trustee in your deed of trust, we can prepare and record a deed of appointment of substitute trustee and protect your interests.
      I invite you to please call me so that we can discuss your questions.
Eddie