Bankruptcy: Plan Confirmation - Value of Vehicle

     In the case of In re: Rodnok the United States Bankruptcy Court at Richmond, Virginia, sustained a creditor's objection to the debtors' second modified Chapter 13 plan based upon the valuation of collateral. 

     In Rodnok the creditor, who had a Ford Aerostar van as collateral, filed a proof of claim stating the value as $13,075, which the debtors had not objected to. The debtors argued that the value of the van was already decided in the approved first modified plan to be $9,300, and that a redetermination was barred by the doctrine or res judicata. The creditor argued that the Court was not bound by the value determined in the first modified plan when it was determining approval of the second modified plan. 

     The Court stated that in determining whether a secured creditor should be bound to the value of its collateral as provided for in a confirmed Chapter 13 plan, the Court had to look at Bankruptcy Code §506 (a). This code section states that a claim is a secured claim to the extent of the value of the creditor's collateral and is unsecured as to the extent that the debt owed to the creditor exceeds the value of the collateral. Value of the collateral can be determined in any hearing concerning the disposition or use of the collateral or the confirmation of a plan affecting the secured creditor's interest. Bankruptcy Rule 3012 requires that notice of the hearing be given to the holder of the secured claim before a court may determine the value of that creditor's collateral. 

     In Rodnok the Court determined that the creditor was not provided the appropriate notice that the debtors were going to modify their secured claim, and therefore the creditor cannot be bound by the value assigned in the debtors' first modified plan, which was book value. 

     The Court found that the value of the van was $12,000. The creditor based its determination that the van had a value of $13,075 on the N.A.D.A. As evidenced by the certificate of title, the van came with numerous extras, adding to the overall value of the vehicle. The debtors claimed a deduction for excessive mileage, but the Court noted that at the first meeting of the creditors the debtors stated that the van had only 25,000 miles on it. Overall, the Court found that the value of the van more closely resembled that proposed by the creditor. Accordingly, the Court sustained the creditor's objection to the debtors' second modified plan. 

     The lesson of Rodnok, as it is in so many cases, is that creditors should retain the serves of counsel who has extensive experience in creditor representation.

Collections: Collection Accounts - What We Can Do For You

     We can assist you by handling all seriously delinquent accounts from start to finish - no other collection alternative that you have can do this.

     I also want to thank all of you who are clients. You helped make this year our most successful ever. I look forward to an ever better 2020.

     For those of you who are not yet clients, please know that I am always ready and willing to meet with you. At Lafayette, Ayers & Whitlock, PLC, we have a diverse general practice of law. We focus on Creditor’s Rights. We are unique amongst Creditor’s Rights law firms as we represent you in all areas: collections, bankruptcy, foreclosure and real estate.

     In collection matters, we can assist you by handling all seriously delinquent accounts from start to finish - no other collection alternative that you have can do this.

     If you hire an additional staff employee, you are paying salary and benefits for collections. This amount is non-recoverable from your debtors, even though they caused the expenditure. Further, since the employee is not an attorney, they cannot try contested cases, or file Motions for Judgment in Circuit Court, or conduct debtor's interrogatories (without interrogatories many collection cases will sit inactive).

     If you employ a collection agency, you may incur a flat fee cost for accounts. This cost is not recoverable under Virginia law, despite the fact that your loan documents say that the debtor will pay all costs of collection. In addition to these nonrecoverable costs, you will also have percentage costs that you cannot recover. A collection agency is frequently your worst option because they can do less for you than you can do for yourself. In reviewing the Collection Alternatives Comparison Charts, you will see that if a debtor does not respond to the collection agency's letters, the agency is sunk. The agency cannot file any court papers on your behalf, and they cannot perform any judgment executions. In the end, all a collection agency does is provide a threatening third party voice.

COLLECTION ALTERNATIVES COMPARISON CHARTS

Chart One:  Action

ACTION	COLLECTION AGENCY	ADDITIONAL EMPLOYEE	LAW, PLC
Make Demand	Yes	Yes	Yes
Collect Payments	Yes	Yes	Yes
Take Judgment	No	Yes	Yes
Try Contested Cases	No	No	Yes
File Garnishment	No	Yes	Yes
Levy	No	Yes	Yes
Summons to Answer Interrogatories	No	No	Yes

Chart Two:  Costs

ACTION	COLLECTION AGENCY	ADDITIONAL EMPLOYEE	LAFAYETTE, AYERS & WHITLOCK, PLC
Costs	Unrecoverable fee paid to agency, if they collect, and non-assessable to the debtor	All collection costs are out of your pocket and non-assessable to the debtor	1/3rd fee of all amounts collected- 25% recoverable from debtor upon court judgment unless your loan documents say 1/3rd - you only pay fees on what we collect

     In a future blog, we will address how we handle your accounts from beginning to end.

Foreclosure: Notice of Sale

     The Code of Virginia provides specific guidance as to giving notice of a foreclosure sale. 

     §55-59.1 requires that the written notice of sale contain the time, date and place of the proposed sale, as well as either (i) the instrument number, or, deed book and page number, of the instrument of appointment filed pursuant to §55-59-59 (appointment of substitute trustee), or, (ii) a copy of the executed and notarized appointment of substitute trustee. Personal delivery or mailing a copy of the advertisement by certified or registered mail is sufficient. 

     §55-59.1 requires the trustee to send written notice of the time, date and place of the sale to (i) the present owner of the property … (ii) any subordinate lienholder … (iii) any assignee of such note … (iv) any condominium unit owner’s association that has filed a lien … (v) any property owner’s association that has filed a lien … (vi) any proprietary lessees’ association that has filed a lien. 

     It is important to know that in addition to the notice required by statute, the note or the deed of trust may contain additional notice requirements. Accordingly, the trustee should examine both of these documents. 

     §55-59 provides that the notice can be sent by either the trustee or the lender. 

Real Estate: Using Homeowner Association Liens 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 using homeowner association liens to aid in the collection of your debt. 

   Virginia Code §55-516 provides for special procedures for the collection of homeowners association dues. This code section allows associations to place a lien on the land for unpaid assessments, as well as give associations a priority over certain other debts. To perfect the lien, however, it must be filed before the expiration of twelve months from the time the first such assessment became due and payable. This filing must be by a memorandum filed in the circuit court of the county or city where the development is located. The memorandum must contain the information specified in the statute. Before filing the lien, written notice must be sent to the property owner by certified mail giving at least ten days prior notice that a lien will be filed. Suit to foreclose on the lien must be brought within thirty six months of filing. We will review foreclosure suit procedures in the next issue. 

     We have experienced attorneys and staff who can examine title, file homeowner association liens, and litigate to enforce the same.