Creditor Rights

Question 1

If you are confused by a creditor right’s problem, what three questions should you ask?

Answer 1

1. What type of creditor is trying to collect money from the debtor
   * unsecured creditor (or general creditor) (i.e., no lien)
   * Judicial lien creditor
   * statutory lien creditor
   * creditor with a consensual lien
2. Where are we in the process? (especially relevant for unsecured creditors
   * the debtor has defaulted, but no lawfuit has been filed
   * a lawsuit has been filed, but no judgment is entered yet
   * a judgment ahs bee nentered
   * a judgment was entered a long time ago
3. What type of property is at issue?
   * Real property
   * tangible personal property
   * intangible personal property
   * property that ahs been transferred to third parties

Question 2

What is the necessaries doctrine?

Answer 2

the general rule is that spouses are not liable for each other’s debts that arise before or after the marriage, but under the necessaries doctrine a spouse will be directly liable to a third party for reimbursement of costs of goods or services rendered to spouse or to child.

For example, dad signs Note to pay for medical expenses rendered unto child. Mom can also be held directly liable under the Note.

Question 3

Can a creditor reach the assets held in a bank account held in joint tenancy with rights of survivorship? Presumption for married couples?

Answer 3

Yes, it is not a tenancy by the entirety, which would not be subjected to the individual debts of the tenants. A creditor can reach the debtor’s share of the account.

There is a presumption that when an account
is owned by a husband and wife

Question 4

What actions should a creditor take to collect on a judgment from a debtor’s bank account?

Answer 4

1. Wait 21 days from the date of the entry of any judgment
2. File a Suggestion in Garnishment, which requests the Clerk’s Office of the court where the judgment was entered to issue a writ of execution 3. the court will then issue a garnishment summons to be issued on the garnishee and the debtor for garnishment of the debtor’s interest in the bank account.

Question 5

What are the Virginia statutory exemptions to creditor collection?

Answer 5

1. Poor Debtor’s exemption
2. Homestead Exemption
3. Veteran’s exemption
4. Federal exemptions

Question 6

What is the poor debtor’s exemption?

Answer 6

VA residents may exmpt their interests in certain specific property from creditor collection, including but not limited to:
1. the family bible
2. wedding and engagement rigns
3. pets
4. family heirlooms
5. clothing up to $1,000 in value
6. a motor vehicle up to $6,000 in value
6. etc.

think any thing that would be unfair to take lol

Question 7

What is the homestead exemption?

Answer 7

In addition to the poor debtor’s exemption, VA residents can exempt $5,000 worth of personal or real property. They get to pick the property.

A debtor aged 65 and older gets $10,000 exemption

For each dependent, add $500, regardless of age.

Question 8

Process for claiming homestead exemption?

Answer 8

Debtor must record a homestead deed describing the property claimed and its value

Question 9

Limitations on Homestead exemption?

Answer 9

the exemtpion does not apply to consensual liens

the exemption cannot be enforced against a spousal or child support claimant, or against an intentional tort claimant

Question 10

What is a mechanic’s lien for personal property?

Answer 10

A statutory lien in favor of every mechanic that alters or repairs any article of personal property at the request of the owner for just and reasonable charges and may retain possession until such charges are paid. Priority up to $1,000 and then priority in the remainder of proceeds after all other interests have been paid off.

Question 11

What does proof by creditor of fraudulent conveyance allow them to do?

Answer 11

seize that property from third parties to stausfty a judgement entered against the defendant.

Question 12

What are the five steps of analysis when faced with a potential fraudulent conveyance? (4)

Answer 12

1. Determine the type of fraudulent conveyance (intentional or constructive)
2. identify which type of creditor is involved (current or future)
3. Put those together to apply baseline rules
4. Identify potential defenses for certain transferees

Question 13

What must creditor prove for intentional fraudulent conveyance?

Answer 13

• The debtor made the conveyance with the intent to hinder, delay, or defraud creditors
• if conveyance was between spouses, and debt existed at the time of conveyance: there is a presumption of intent to defraud
  Consider:
• the timing of the transfer in relation to creditor actions
• the amount of consideration
• the debtor’s continued use/access to the property after transfer
• anything else “off” (e.g., to a family member)

Question 14

common argument against finding of fraudulent conveyance where transfer between spouses?

Answer 14

The fact that the property was held as tenants in entirety negates intent to hinder, delay, or defraud because it could not have been reached anyway.

Question 15

What is a deed in trust?

Answer 15

deed the property to a trust held for the benefit of the creditor until the debt is paid or not

Question 16

Prove constructive fraud?

Answer 16

1. property transferred for less than its face value; and
2. debtor is insolvent at the time of the transfer or becomes so as a consequence of the transfer

insolvency: if a debtor has insufficeint property to pay all debts

Question 17

Difference between current and future creditor?

Answer 17

• Current: the clai mexisted at the time of the transfer and the claim was liquidated (fixed; no judge or jury needed)
• Future: the claim is acquired post-transfer, or the claim existed at the time of the transfer but was unliquidated.

liquidated: set in stone; no judicial determination needed.

Question 18

Who can sue on constructive vs. fraudulent conveyance?

Answer 18

• onyl current creditors can sue for constructive
• any creditor can sue to set aside intentional

Question 19

Three types of transferees?

Answer 19

1. good faith transferee who paid fair value
2. good faith transferee who paid less than fair value
3. other transferees: (1) one who did not pay value (e.g., donee) (2) bad faith purchaser

Question 20

Defenses for transferees?

Answer 20

1. good faith purchaser who paid fair value has perfected the transfer regardless of whether the transfer was constructively or fraudulently conveyed.
2. good faith transferee who paid less than fair value: property can be taken but they are entitled to the amount they paid, so in effect, they have a lien on the property for that amount.

Question 21

Does a preference payment to a different creditor give rise to a claim of fraudulent conveyance? what if it is to a company that is owned by the debtor?

Answer 21

1. Not if it is a bonifide payment for full value
2. That raises a question of whether it was bonifide. Discuss the fact that they are seperate entities.

When a stockholder of an insolvent corporation, which was also a debtor of the stockholder, had corporate assets transferred to the stockholder to satisfy his claim against the corporation, it was held to be a voidable fraudulent preference under §55-80 (fraud conveyance section). Darden v. George G. Lee Co. 204 Va. 108 [1963

Question 22

What is a lis pendens and where should it be recorded and when?

Answer 22

It should be recorded in the circuit court of the county where the property is located. It is a memo of attachment. It should not be recorded until a lawsuit is pending, the outcome of which could affect title.

see attachment process below

Question 23

Pre-judgment Attachment Liens

What does an attachment lien give a creditor?

Answer 23

1. priority compared to other creditors
2. prevents the debtor from disposing of its property before the creditor can get a judgment
3. Sheriff seizes the property if tangible

Question 24

What are the statutory grounds that must exist for attachment? (7)

Answer 24

1. debtor is a foreing corporation or out-of-state resident
2. debtor is removing property from VA
3. debtor is converting his property to other forms (e.g., cash) with the intent to hinder, delay, or defraud creditors;
4. debtor has transferred or assigned his property or is about to do so;
5. debtor has absconded or is about to with the property;
6. Debtor is reomving or about to remove himself from virginia
7. the property is likely to be sold, removed, secreted, disposed of, damages, or destroyed if left in the possession of the defendant

Question 25

What is the procedure for obtaining a pre-judgment attachment lien?

Answer 25

1. creditor files petition for attachment with court that (1) describes the creditor’s claim; (2) indicates the amount of the claim; and (3) states one of the statutor grounds for issuance of the writ.
2. Creditor has to post a bond
3. Judge revviews the petition and issues a writ
4. sheriff goes to seize
5. Creditor files a lis pendens (i.e., notice of pending lawsuit) in the court in the county where the property is located (once filed, any BFP takes subject tot the attachment lien).

Question 26

What is the difference between a pre-judgment attachment lien and a pre-trial seizure in detinue?

Answer 26

the plaintiff is a creditor with an attachment lien, but the plaintiff claims a right to the property with a pre-trial seizure in detinue. Also, detinue is specific personal property, a writ of attachment can be used for real property as well.