Collections: The Importance of Docketing Judgments

     If the creditor has obtained a judgment in the General District Court, the creditor should ensure that an abstract is recorded in the Circuit Court where the debtor's real property is located. Docketing perfects a lien against the debtor's real estate in that jurisdiction. Docketing also provides creditors with the right to force the sale of the real property to satisfy the debt. Judgments obtained in the Circuit Court, however, are automatically docketed, but only in that locality, pursuant to Virginia Code §8.01-446. If the debtor owns realty in another jurisdiction, the creditor should have the abstract of the judgment docketed in the Circuit Court of that jurisdiction in order to perfect a lien. 

Foreclosure: Right to Cure a Default

     Question: Once a borrower is in default, can he “reinstate the loan”, or, “cure the default” and stop the foreclosure sale? 

     Answer: yes. In general, most deeds of trust contain language that allows a borrower the opportunity to reinstate, or cure, the loan after the due date set out in the note. If the deed of trust contains this language, the note cannot be placed into default and accelerated until the cure period has expired. Government loans such as Fannie Mae and Freddie Mac have very specific requirements. In fact, a borrower can always cure a monetary default and stop a foreclosure up to the time of sale by paying in full, in good funds, the deficient amount, including all costs of the sale.

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.

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.