Monday, March 26, 2018

Real Estate: Docketing Judgments to Secure an Interest in Real Estate


     In previous blogs 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 review the benefits of docketing judgments to aid in the collection of your debt. 
     Docketed judgments create a lien against the debtor’s real estate in the county or city in which the lien is docketed. Accordingly, make sure that you know where your debtor owns, or may own (e.g., through future purchase or inheritance), real estate. Once recorded, the lien will take priority in line with the date of recording (with some limited exceptions). Depending upon your debtor’s problems, you may have equity to cover your lien. Obviously you will want to “get in line” sooner rather than later to give you the best chance of collection. 
     Once a lien is in place, it must be addressed at any sale or refinance of the real estate. The lien must also be addressed in bankruptcy -- if the debtor does not file a motion to strip the lien, the lien will survive a bankruptcy discharge. 
     If all other collection measures are unsuccessful, you can consider bringing a creditor’s bill, which is an action to force the sale of real estate to satisfy a judgment under Virginia Code §8.01-462: 
     Jurisdiction to enforce the lien of a judgment shall be in equity. If it appears to the court that the rents and profits of all real estate subject to the lien will not satisfy the judgment in five years, the court may decree such real estate, any part thereof, to be sold, and the proceeds applied to the discharge of the judgment. 
     Although creditor’s bills may be costly, given the right judgment it is an effective collection tool. Determining what judgments are "right" requires experience and good judgment. 
     We have experienced attorneys and staff who can seek judgment and then docket and enforce the same.


Monday, March 19, 2018

Bankruptcy: Health Care Providers Beware

Although credit unions may inform debtors that their membership may continue if they repay their unsecured loan, Brown v. Pennsylvania State Employees Credit Union, a health care provider who sent a letter to a debtor stating that it would not provide further family medical care unless his pre-petition debt was paid, was sanctioned for a violation of the Bankruptcy Code automatic stay. The case was In Re Olsen

Monday, March 12, 2018

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 notethe 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.

Monday, March 5, 2018

Foreclosure: Lost Notes

     Virginia Code §55-59.1(B) addresses the situation where the noteholder has lost the original note. With the frequency of sales of notes on the secondary market, the loss of the original note documents occurs more often than might be expected. The Code provides that if the note or other evidence of indebtedness secured by a deed of trust cannot be produced, and, the beneficiary submits to the trustee an affidavit to that effect, the trustee may proceed to foreclosure. However, the beneficiary must send written notice to the person required to pay the instrument stating that the instrument is unavailable and that a request for sale will be made of the trustee upon the expiration of fourteen days from the date of the mailing of the notice. The notice must be sent by certified mail, return receipt requested, to the last known address of the person required to pay the instrument, as reflected in the records of the beneficiary, and shall include the same and the mailing address of the trustee. The notice must also advise the borrower if the borrower believes that he may be subject to claim by a person other than the beneficiary to enforce the instrument, the debtor may petition the circuit court of the county or city whether the property lies for an order requiring the beneficiary to provide adequate protection against any such claim. Failure to give the notice does not affect the validity of the sale.