Creditor's Rights Flashcards
Creditor’s Rights is about
how a successful plaintiff turns a victory in a lawsuit into cash
Generally, what is the process for turning a victory in a lawsuit into cash?
- getting a judgment
- using the judgment to obtain a lien on a particular piece of property
- foreclosing on the lien to sell the property
The lien protects
the rights of the creditor in the debtor’s property against other creditors
What are the two broad types of creditors?
- General Creditors
- Secured or Lien Creditors
What is a general creditor?
A creditor who has a claim only against the total assets of the debtor and must obtain a lien on the debtor’s property before the debtor can be forced to make payment
What is a secured or lien creditor?
A creditor who possesses a lien in specific property of the debtor and may acquire their liens by agreement, by force of statute, or by use of legal process.
As related to creditor’s rights,
what is attachment?
A prejudgment remedy by which a plaintiff may obtain a lien on the defendant’s property before judgment to satisfy an anticipated money judgment
When is a writ of attachment (detinue) issued?
as an ancillary proceeding in connection with a pending suit, or to initiate an independent action
Regardless of whether the writ of attachment is issued as an ancillary proceeding or to initiate an independent action, the plaintiff must
post bond.
To have a writ of attachment issued, the plaintiff must allege 1 of the following grounds:
- Defendant is a nonresident of VA or is a foreign corp
- Defendant has made or is about to make a fraudulent conveyance
- Defendant has removed or is about to remove his property from the state
- Defendant has concealed or is about to conceal his property with the intent to hinder or delay creditors
- Defendant has left or is about to leave VA with intent to change domicile
For tangible personal property in possession of the defendant, the lien attaches when
the sheriff makes a proper levy
For tangible personal property in a third party’s possession or a debt owed by a third party to the defendant, the lien attaches when
the third party is served a copy of the attachment. The third party must be named as co-defendant.
For real property, the lien attaches when
- a copy of the attachment is served on the person in possession, and
- the officer’s return describes the property
What is the officer’s return?
the document prepared by the sheriff in response to court’s writ of attachment
What makes the lawsuit consummate?
Final Judgment
What is consummation?
It gives the creditor priority in the property against third parties back to time of attachment.
What is a memorandum of lis pendens and what is the effect of filing it in Circuit Court?
A document placed in the real estate recording office indicating that real property is subject to litigation. It is filed to be effective against a BFP.
How long does a defendant have to challenge a lien?
10 days
On what grounds can a defendant get the judge to quash a lien?
- the lien is invalid
- the lien is unsupported
- the plaintiff is unlikely to prevail in the underlying lawsuit
What type of property is exempt from creditor’s claims?
- Personal Injury Actions
- Tenancy By the Entirety
- Homestead Exemption
- Poor Debtor’s Exemption
What type of personal injury debt can be acquired by creditors?
Medical expenses related to the injury
What creditors can attach a lien against a tenancy by entirety?
- The IRS can enforce a tax lien
- A creditor who is owed a joint debt by spouses
What is the homestead exemption to attachment?
- any property worth up to $5,000 ($10K is 65 yrs old+)
- an additional $25,000 in real or personal property used as principal residence of claimant or claimant’s dependants
- an additional $500 per dependent
What is the method of claiming the Homestead exemption?
- Real estate - debtor files a homestead deed for claimed real estate in the county where property is located
- Personal Property - debtor files a homestead deed in place where debtor resides, describe items claimed and designate their values
What exemption takes priority over all creditors?
The Homestead exemption
What debts can a Homestead exemption not be claimed?
- purchase money mortgage or security interest in property
- spousal or child support obligations
- intentional tort claims
- those debts where protection has been waived
- IRS claims
Under the Porr Debtor’s Exemption, every VA resident may claim the following property exempt:
- clothes up to $1K and household furnishings up to $5K
- tools of the trade up to $10K (excluding a perfected security interest)
- motor vehicle up to $6K (excluding a perfected security interest)
- heirlooms up to $5K
- sentimental items
- burial lots up to $5K
Exemption from garnishment of earnings or wages is limited to the lesser of
- 25% of disposable weekly earnings; or
- the amount by which disposable earnings exceed 40 times the effective federal minimum hourly wage
What is required to give third parties notice of a judgment creditor’s interest in property?
A public act such as recording or repossessing personal property
What is the duration of a judgment creditor’s rights?
- 20 years from date of judgment if dated before 1/1/21 or concerns the nonpayment of child support
- 10 years from the date any judgment was rendered if dated on or after 1/1/21 and doesnt concern nonpayment of child support
The debtor only needs to be given what to extend a judgment?
Actual notice. Formal service of the motion is not required.
A judgment is automatically docketed by the clerk of court in
the county where the judgment is rendered
A judgment from another county is docketed by filing a
copy of the judgment with the county clerk where enforcement is sought
A judgment lien on real estate is a floating lien on
all non-exempt real property in the county.
A judgment lien on real estate attaches automatically to
after-acquired property
A judgment lien on real estate lasts
as long as the judgment
A judgment lien on real estate must be re-docketed after
a 20-year extension
A lien on the judgment debtor’s real property must be enforced within 10 years of
the debtor’s sale to any purchaser
To enforce a judgment lien, the creditor must
bring suit in equity in the city or county where the land is located
In Virginia, is there a right to redemption for real property?
No, once the creditor has a lien, the debtor may not prevent its enforcement by paying the debt
In what order are proceeds of sales distributed?
- costs
- creditor bringing the action
- junior creditors
- debtor
Priority to proceeds of the sale of real estate among creditors is determined by
the date on which the interest in the real estate was recorded
What does a creditor need to satisfy a judgment against tangible personal property?
A writ of fi fa
What is the effect of a writ of fi fa?
It commands the officer to whom it is delivered to find property of the debtor, seize it and sell it to satisfy the judgment
How many days from the date of judgment does the clerk have to issue a writ of fi fa?
21 days
The lien against tangible personal property attaches for priority purposes at what time?
The time of the levy
Executions against tangible personal property
How long does the sheriff have to give the return back to the court before it’s void?
Dependent upon the time listed by the court, usually 90 days
What are the general requirements of a levy?
- property must belong to the debtor at the time of the levy
- sheriff must seize property or observe with power to exercise control or dominion
- sheriff must serve a copy of the writ on the judgment debtor
- sheriff must describe property seized in the return
