Monday, February 25, 2019

Real Estate: Perfecting Mechanic's Liens

     In a prior blog we were discussing the benefits of using real estate to improve creditors’ positions. We began a discussion of the benefits of using mechanic’s liens to aid in the collection of your debt. 
     Virginia Code §§43-4, 43-7 and 43-9 provide for the perfection of the lien by general contractors, subcontractors, and laborers and suppliers. In each section the creditor must file a memorandum of lien at any time after the work is commenced or material furnished, but not later than 90 days from the last day of the month in which he last performs labor or furnishes material, and in no event later than 90 days from the time such building, structure, etc., is completed, or the work thereon otherwise terminated. The memorandum must contain specific information as set forth in the code (and there are forms in the code), and must be filed in the clerk's office in the county or city in which the building, structure etc., or any part thereof is located. The memorandum shall show the names of the owner of the property sought to be charged, and of the claimant of the lien, the amount and consideration of his claim, and the time or times when the same is or will be due and payable, verified by the oath of the claimant, or his agent, including a statement declaring his intention to claim the benefit of the lien, and giving a brief description of the property on which he claims a lien. 
     In another blog we will explore suits to enforce the lien. 
     We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.

Monday, February 18, 2019

Bankruptcy: Debtor's Exemption Request for Personal Property Disallowed in Chapter 7 Case

     The United States Bankruptcy Court at Alexandria, in the case of In re Potter, disallowed a Chapter 7 debtor’s exemption request under Bankruptcy Code §522(b)(2)(B) for stock. The debtor claimed that the stock was exempt because it was held as tenants by the entireties with his wife. The Court, however, ruled that the stock was not held as tenants by the entireties, but merely as joint tenants. Accordingly, the debtor was not entitled to the exemption. 
     The Court found that the debtor was estranged from his wife, and that the shares of stock listed the parties’ two names as joint tenants with right of survivorship, but without any indication of a marital relationship. In determining whether the stock was held as tenancy by the entireties or joint tenants the Court was required to review Virginia law. In doing so, the Court stated that under Virginia law, property held as tenants by the entirety could be reached by joint creditors of both spouses, but such property could not be reached for the debts of either spouse alone. The Court noted that while there was at one time a question as to whether personal property could be held as tenants by the entirety, Virginia Code §55-20.1, enacted in 1999, expressly provides that personal property can be held as tenants by the entirety. In order to create a tenancy by the entireties, it is necessary that the interest so created satisfy the five common-law “unities” of interest, time, title, possess and marriage. Further, under Virginia Code §55-21, a tenancy by the entireties cannot result unless the parties involved have manifested an intent that the part of the one dying should belong to the other. In Virginia, it is not necessary that the deed or other evidence of title actually use the magic words “tenants by the entirety” in order to create such an estate, so long as the owners are described as husband and wife jointly taking with the right of survivorship. On the other hand, the use of the words “tenants by the entireties” (or some reasonable abbreviation thereof) is sufficient to create a tenancy by the entirety even without words expressly describing the joint owners as husband and wife.
     In summary, the Court ruled that in order to create a tenancy by the entireties, the document by which the debtor and the debtor’s spouse acquire or hold joint title must either 1) designate them as tenants by the entireties, or 2) designate them as husband and wife, joint tenants with the right of survivorship.
     In Potter the Court ruled that since the stock shares were titled simply in two names as joint tenants with right of survivorship, but without any indication of marital relationship, the stock was not held as tenants by the entireties but merely as joint tenants. Accordingly, the debtor’s interest in the stock could not be claimed as exempt under Bankruptcy Code §522(b)(2)(B).
     The lesson of Potter is that creditors should not assume that an exemption is proper simply because it is claimed. Check the record of title.

Monday, February 11, 2019

Collections: Parties Liable for Credit Card Debts

     The Richmond Circuit Court, in the case of Chevy Chase Savings Bank v. Strong, ruled that a husband who was only an “authorized user” on a bank credit card issued to his wife was not liable to the bank for a $5,024 cash advance check he wrote on the credit card; only the wife was liable. 
     In Virginia Code §11-31, Virginia has codified the rule that use by an authorized agent of a cardholder shall be the equivalent of use by the cardholder. That rule, however, does not address the question of the liability of the agent. The court reasoned that while it does not appear that any Virginia Court has addressed the issue, the language used in the statute and case law from other jurisdictions led the Court to believe that the issue was governed by agency law. 
     The Court stated that it was well established in Virginia that when an agent contracts for a disclosed principal, credit is extended to the principal, and the benefits of the contract are accepted by the principal, there is no personal liability on the agent. In this case, the bank was well aware that the principal was the wife. It extended credit to her based on her application for a card. They were aware that no contract was ever made with husband individually and, therefore, they knew that he was simply an authorized agent. 
     The Court found that there was no indication in this case that husband exceeded his authority in executing the check against the account, or that he agreed to be personally liable for any debt incurred on his wife’s account. Accordingly, the court ruled that the liability for the debts belonged only to wife. The court ruled that the husband was not liable for any portion of the outstanding balance, including the amount of the check that he personally wrote.
     The lesson from Strong - do not confuse guarantors with authorized users.

Monday, February 4, 2019

Foreclosure: Default

    Question: When is a loan in default? Answer: Under one or more of several circumstances. The most common way that a borrower is in default is monetary – e.g., the borrower fails to make a required payment. However, default can be for a non-monetary reason as well, such as: 
    1. Failure to pay taxes. 
    2. Failure to pay insurance. 
    3. Failure to remove or bond over mechanic’s liens. 
    4. Failure to perform requirements unique to the loan. 
    If you have questions about default, please call Eddie at 545-6251.