Monday, January 28, 2019

Real Estate: Using Mechanic's Liens to Secure an Interest in Real Estate

    In recent 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 blog, 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 a future blog.
    We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.

Monday, January 21, 2019

Bankruptcy: Bankruptcy Exemptions - Intentional Tort

    The United States Bankruptcy Court at Alexandria, Virginia, in the case of In Re: Scott, entered a judgment in favor of the creditor in the amount of $12,735 on a theory of conversion. In doing so, the Bankruptcy Court determined that the judgment was nondischargeable under Bankruptcy Code §523(a)(6). In Scott the Bankruptcy Court found that the creditor hired the debtor to look after the creditor's elderly mother, paying the debtor $28,000 in advance wages. The debtor quit the job six weeks later and refused to return the unused funds. The debtor subsequently filed for bankruptcy and the creditor filed a nondischargeability complaint. In the debtor's bankruptcy schedules she listed exemptions of a car, clothing, household goods, jewelry and a savings account. The creditor challenged both the specific items claimed as well as the debtor's right to claim any exemptions at all against a claim for an intentional tort. 
    In regard to the creditor's challenge for specific items, the Bankruptcy Court found that Virginia state law exemptions include the homestead exemption under Virginia Code §34-4 and the poor debtor's exemption under Virginia Code §34-26. The Court ruled that the debtor was entitled to claim a "poor debtor's" exemption on the car, and that the debtor's interest in the vehicle was less than $2,000. The Court also found that the debtor's claim for $5,400 in exemptions for the household goods did not exceed the amount allowed under Virginia Code §34-4. The Bankruptcy Court denied the debtor's "poor debtor's" claim for exemption for a herringbone gold necklace, as there was no evidence that the necklace was a family heirloom. The Bankruptcy Court also denied the debtor's claim for an exemption in a $300 savings account as tenants by the entirety property.
    In regard to the creditor's claim that the debtor was not entitled to any exemptions because Virginia law does not allow for the assertion of Virginia exemptions against a claim based on an intentional tort, the Bankruptcy Court examined the bankruptcy statutes and the results that other courts had reached on similar questions. The Bankruptcy Court noted that other courts had reached different opinions. However, the Bankruptcy Court decided that since Congress had specifically legislated as to the type of claims that could be enforced against exempt property, and since the creditor's claim in this case did not fall within any of the enumerated exceptions, in this case, the debtor was entitled to her exemptions notwithstanding the fact that the creditor held a nondischargeable claim based upon an intentional tort.

Monday, January 14, 2019

Collections: Bank Loses Without Aggressive Action

     The need for aggressive action was again proven when a bank lost a priority in assets due to the bank's non-action. 
     In the case of First Union National Bank of Virginia v Craun, a federal court found that the bank obtained a consent judgment from the debtor (a limited partner in a Virginia limited partnership), but took no further action. A year later the limited partnership perfected a security interest in the debtor's partnership interest by filing a financing statement with the state corporation commission. The partnership's security interest was to perfect a loan by the debtor from the partnership. 
     Eventually a dispute arose on the priority of liens on the proceeds between the bank, based on its judgment, the partnership, and on its perfected assignment. 
     The partnership had priority, the court ruled, because the bank had not sought to enforce the judgment or levy on the limited partner before the assignment was perfected. The Court stated: 
     "… had a writ of execution issued, and had such a writ been delivered into the hands of the marshal, defendant's inchoate intangible rights in distributions from the limited partnerships could have subjected to the lien of the writ....Plaintiff could then argue the writ of execution would have taken priority over a security interest perfected after the writ was issued and placed in the hands of the serving official, assuming the secured lienor was provided notice of the issuance of execution...But, that is not the case here.  Plaintiff did not cause a writ of execution to issue. Instead, it merely sought the entry of a charging order armed only with what may be best described as a "naked" final judgment...Therefore, until a charging order entered, the judgment debtor...virtually was free, as against the instant plaintiff, to encumber intangible property, including here interests to discretionary distributions of a limited partnership."
     The lesson of Craun is simple - take aggressive action and consult with counsel early in the process.

Monday, January 7, 2019

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.