Creditor's Rights

Question 1

If a creditor does not have a judgment what will the commonwealth do?

Answer 1

No remedies without a judgment

exception is attachment in a pending suit

Question 2

What is a prejudgment remedy for a creditor?

Answer 2

attachment
creditor - files a petition of attachment alleging debtor doing something wrong and posts a bond
court - ex parte determination and if established, then a writ of attachment
sheriff - provides copy of attachment to person in possession and returns documents to court

Question 3

If a court issues a writ of attachment what does the creditor get?

Answer 3

1) contingent or inchoate lien that dates from time of levy by sheriff
2) judgment is necessary to make lien enforceable

Question 4

D borrows $5000 from C on 1-10. T sues D for tort on 2-3 alleging money damages of $10,000. T obtains an attachment lien on D’s property on 3-3. C obtains judgment against D on 4-4 and get a judgment lien on D’s property. On 5-5, T gets a judgment against D. Who gets paid first from D’s property?

Answer 4

T - attachment lien became first in line with attachment line because judgment lien was enforceable.

Question 5

If a creditor has a judgment, but it is from an out-of-state court?

Answer 5

need to domesticate judgment by:

1) register the judgment with VA court that will enforce; and
2) notify the debtor in writing regarding registration

Question 6

C has a judgment against H. W and H own property in tenancy by the entirety. Can C look to the Commonwealth for help in collecting this judgment against H from the property?

Answer 6

No - can only enforce if debt is from H and W.

- IRS is not limited

Question 7

Creditor has a judgment against debtor. Creditor garnishes debtor’s bank account in Bank. Does homestead provision help debtor?

Answer 7

Yes. Homestead - includes personal property.

Homestead can be assert (by filing a deed) any time prior to the creditor actually garnishing or selling.

Question 8

The homestead protection does not allow a debtor to protect against:

Answer 8

a purchase money mortgage (PMM), purchase money security interest (PMSI), intentional tort claims, alimony or child support, or if waived.

Question 9

Can a debtor waiver the homestead exemption?

Answer 9

Yes, waiver is allowed in VA.

To assert the homestead, a deed must be filed.

Question 10

Creditor with judgment against real property of debtor must do what to get the Commonwealth to help collect it?

Answer 10

Judgment creditor must docket (record) judgment in the court where land is located.
- If judgment lien was obtained in same locality as real property then automatic docketing.

Question 11

How long does a judgment lien last on real property?

Answer 11

20 years.

Question 12

How does a creditor with judgment lien on real property turn the lien into money?

Answer 12

1) creditor brings a creditor’s bill in equity where land is located.
2) commissioner determine whether 5 years of income (rents/profits) would be sufficient to satisfy judgment lien.
3) if not, then land may be sold to cover judgment lien.

Question 13

D owns land subject to a recorded mortgage by H. F obtains a judgment of $90,000 against D and dockets judgment when land is located. S obtains a $20,000 judgment against D and dockets similarly. F brings a credit suit in equity which results in sell of $100,000. Who gets what?

Answer 13

F - $90,000
S - $10,000

Buyer takes subject to M’s mortgage?

Question 14

Creditor has a judgment from debtor’s tangible personal property. What is needed to get the Commonwealth to enforce judgment?

Answer 14

1) Court prepares a writ of execution (fi fa) to direct sheriff to levy (identify personal property of debtor and symbolically controls lien)
2) return to court
- sell of seized property at public sale

Question 15

Is a levy required after a writ of execution for judgment against debtor’s intangible personal property?

Answer 15

No. - important to give written notice

enforced by garnishment

Question 16

What does a judgment creditor do garnishment?

Answer 16

1) obtain writ of execution
2) obtain garnishment summons from clerk of court
3) service of summon on garnishee and judgment debtor

Question 17

What can the garnishee do in response to judgment creditor’s writ of execution?

Answer 17

1) assert defense
2) exercise right of setoff
3) acknowledge liability

Question 18

What are the limits on garnishment of wages?

Answer 18

25% or 30x minimum wage, whichever is lesser

Question 19

What is difference between fraudulent conveyance and voluntary conveyance?

Answer 19

fraudulent - requires showing of bad intent to hinder or delay creditors
voluntary - requires showing less than valuable consideration by person who is insolvent or is unable to pay off debts
- preference of creditor not fraudulent/voluntary

Question 20

On 1-1, D transfers land to T. On 4-4, C extends credit to D. What does C have to do to recover land from T?

Answer 20

Show that transfer was fraudulent
If no judgment then file a creditor’s bill of rights and notice of lis pendens and obtain a judgment
If judgment - file a motion to set aside transfer

Question 21

What is a mechanic’s lien?

Answer 21

Statutory lien for work/improvement/repair on buildings/personal property
- must be filed within 90 days of completion of work

Question 22

Can a subcontractor obtains its own mechanic’s lien?

Answer 22

Yes.
Must file a memorandum of mechanic’s lien
Must notify the owner and general contractor
Subcontractor’s mechanic’s lien is limited to amount owner owes to general contractor

Question 23

What is needed to perfect a mechanic’s lien?

Answer 23

File a memorandum of a mechanic’s lien in the clerk’s office within 90 days after completed of work or when work was stopped

Memo needs: name of parties, verified amount, and description of property

Question 24

What is a blanket lien?

Answer 24

Single contract for the work performed and is not distributed to different lots or units

• applies to mechanic liens when multiple properties in one job
• release of lot of a blanket lien is a release of entire lien

Question 25

What is the effect of releasing the lien on one property when creditor has a claim for multiple properties?

Answer 25

estops the creditor from enforcing the entire blanket lien

Question 26

What is the dollar amount for a mechanic’s lien?

Answer 26

$150 or more for construction, removal, repair, or improvement

Question 27

What is required to properly domesticate a judgment in the Commonwealth?

Answer 27

File an authenticated copy of the foreign judgment filed in any circuit court and pay the prescribe fee
File an affidavit setting forth the last known post address of the judgment debtor and creditor

Question 28

How can a default foreign judgment that is domesticated in VA be challenged?

Answer 28

Challenge that service of process was insufficient, i.e. foreign state did not follow its long arm statute.
Issues must be raised in the courts of Virginia.

Question 29

What is the purpose of a debtor’s interrogatory proceeding?

Answer 29

determine nature, location, and present condition of all debtor’s assets

Question 30

How is a debtor interrogatory proceeding initiated?

Answer 30

Creditor must secure a) live writ of execution; b) obtain a date for the proceedings from the trial and c) have clerk issue an interrogatory summons against the debtor

Question 31

What assets must a debtor disclose at the debtor interrogatory proceeding?

Answer 31

Disclose all information about all assets

- can apply homestead exception after ($5,000 of property + $500 for each dependent)

Question 32

What is the homestead deed?

Answer 32

Allows debtors to exempt property up to $5000 plus $500 for each dependent

Question 33

What is covered by the poor debtor’s exemptions?

Answer 33

wedding rings, heirlooms, clothes, household goods, cars

Question 34

How much of a person’s wages may be garnished?

Answer 34

25% of weekly income of disposable income or amount by which exceeds 30 times the federally minimum wage, whichever is less

Question 35

What must a creditor demonstrate to void a transfer of property of debtor under a theory of voluntary conveyance without consideration?

Answer 35

Creditor must demonstrate that it was a creditor prior to the conveyance.

Fraud is not involved.

Question 36

Is a constructive trust only imposed when there is a showing of fraud?

Answer 36

No. Can be based on fraud or when equity deems that the property should not be retained.
Fraud must be shown by clear and convincing evidence.

Question 37

If a creditor alleges that the debtor fraudulent conveyance property with the intent to defraud, what is a defense of party who received the conveyed property?

Answer 37

That they took title as a bona fide purchaser.

Question 38

When seeking to impose a constructive trust on property that has a deed of trust, must the owner and holder of the deed trust be joined as defendants?

Answer 38

Yes. Parties with an interest in the property are entitled to notice and have an opportunity to challenge.

Question 39

When the creditor is seeking to obtain property transferred by a debtor under a theory of voluntary conveyance, what must the creditor must show regarding the debtor?

Answer 39

Debtor was insolvent when voluntary transfer was made or was made insolvent by the transfer.

Question 40

A purchaser of land is notified after closing that a third party has a judgment lien against the previous owner on work to improve the land. Does the purchaser have to the pay the lien?

Answer 40

Yes, takes subject to lien.

Lien needs to be docketed in the jurisdiction where the land is located.

Question 41

When an after acquired provision is exercised by the perfected attached creditor, what is the status of the creditor?

Answer 41

good faith purchaser

Question 42

Can a creditor domestic a judgment against a defendant on property that is temporarily in VA?

Answer 42

Yes - need to follow the Uniform Enforcement of Foreign Judgments Acts

Question 43

After a judgment is domesticated in VA, how long does the plaintiff need to wait to obtain a writ of fieri facias from the clerk of the court?

Answer 43

21 days.

Question 44

Once a sheriff seizes property described in the writ of fieri facias, how are the proceeds distributed?

Answer 44

• pay expenses of sale
• satisfy the creditor’s judgment
• remaining goes to debtor

Question 45

Is a debtor in default on a foreign judgment estopped from raising a lack of personal jurisdiction when the judgment is domesticated in VA?

Answer 45

No. Can raise lack of personal jurisdiction (minimum contacts and fairness)

• Must attack judgment within 21 days or domesticated judgment becomes final

Question 46

When will a stay of the enforcement of a foreign judgment be granted?

Answer 46

When debtor can show foreign judgment is on appeal or subject to appeal