Creditors Rights Flashcards
What is a lien?
An interest in property that secures an obligation
Two types of creditors
1) General creditors 2) Secured creditors
Purposes of a pre-judgment attachment lien
1) To preserve debtor’s property 2) To establish creditor’s priority
Statutory grounds for a pre-judgment attachment lien
1) Debtor is a foreign corporation or non-resident 2) Debtor is about to remove himself from Va 3) Debtor intends to remove his property from Va 4) Debtor is converting his property to cash with intent to hinder, delay or defraud his credtiors 5) Debtor has assigned or is about to assign property with intent to hinder, delay or defraud his creditors 6) Debtor is attempting to abscond with his property
Procedure for obtaining a pre-judgment attachment lien
1) Creditor files a sworn petition, setting forth the nature and amount of claims and one of statutory grounds 2) Creditor posts a bond equal to fair market value of property 3) Sheriff serves attachment, or on request, seizes the property 4) To protect the lien from a bona fide purchaser, creditor should file a memorandum of attachment or lis pendens
Distress for rent
Pre-judgment statutory remedy for landlord to recover past due rent. Landlord can have the sheriff seize goods found on leases premises or which may have been removed within prior 30 days.
Time limit for distress action
Must bring action within 5 years from date rent becomes due
What must a landlord establish before getting a distress warrant?
One of the same statutory grounds as for attachment
How long is a judgment valid?
1) Circuit court: 20 years 2) District court: 10 years, unless judgment is docketed in circuit court, then 20 years
How can a creditor get its judgment lien enforced in another state?
Under the Uniform Enforcement of Foreign Judgments Act, he need only register it in the office of the clerk of that jurisdiction & notify debtor
Exempt property
1) Homestead Exemption: Up to $5,000 2) Poor Debtor’s Exemption: Exempts certain specific items, like family portraits and clothing 3) Federal Exemptions: Social security, veteran benefits, wage garnishment exemption
Wage garnishment exemption
A creditor may only garnish the lesser of: 1) 25% of the debtor’s take-home pay 2) the amount by which the debtor’s weekly take-home pay exceeds 30 times (in Va, 40 times) the federal minimum hourly wage
Judgment lien
Attaches to all real property (current and after-acquired) owned by debtor in the county in which judgment is docketed
Can a creditor obtain a judgment lien on property that is held as tenants by the entirety?
No, unless judgment is against both spouses
Can a creditor enforce his judgment lien when the debtor sold his property to another buyer?
Yes, if creditor filed a notice of lis pendens and enforces the lien by bringing a creditor’s suit within 10 years of when buyer recorded her deed
How does a commissioner determine whether real property should be sold to satisfy a judgment lien?
He asks if the rents and profits will pay the judgment within 5 years. If not, then property will be sold.
Execution lien
A writ of execution (writ of fieri facias) is used to obtain a lien on tangible personal property, no sooner than 21 days after judgment is issued
When can a sheriff levy property under a writ of execution?
Within 90 days of the issuance of the writ
Does an execution lien have priority over subsequent liens and buyers?
Yes
Garnishment lien
A writ of garnishment is used to obtain a lien on intangible personal property, e.g., wages, bank accounts, accounts receivable
Procedure for issuing a writ of garnishment
1) Clerk issues the writ to garnishee warning him not to pay debtor 2) Lien comes into existence when writ is delivered to sheriff 3) Lien becomes enforceable when both garnishee and debtor are served with writ 4) Garnishee must respond by indicating amount owed to debtor 5) If creditor does not object, money will be surrendered to clerk and distributed to creditor
Statutory interrogatories
Summons issued to creditor to answer questions about his property (to find out what he owns)
Two types of fraudulent conveyances
1) Conveyances made with intent to hinder, delay, or defraud creditors 2) Voluntary conveyances (constructively fraudulent)
What are voluntary conveyances?
A transfer or conveyance is treated constructively fraudulent if made by an insolvent debtor for less than fair consideration
Which creditors may attack a voluntary conveyance?
Only creditors with liquidated claims at the time of transfer
Which creditors may attack an intentionally fraudulent conveyance?
Any creditor (even future ones)
In a voluntary conveyance, is a good faith purchaser who pays less than fair market value protected from creditors?
Only to the extent of the consideration paid
Is a good faith purchase who pays fair market value protected from creditors?
Yes, he is absolutely protected, regardless of debtor’s intent
How does a creditor attack a fraudulent conveyance?
By bringing a creditors’ bill to set aside the transfer
Mechanics Lien
A statutory lien in favor of those who furnish services or materials that add value to real property
How is a mechanics lien perfected?
A memorandum of lien must be filed in the clerk’s office where property is located no later than 90 days from the end of the month in which: 1) work was last performed; or 2) the construction project was terminated, whichever is later
Priority of mechanics lien
A mechanics lien is superior to prior liens on the structure (not the real property)
Priority among mechanics
If there is not enough value in the property to pay everyone, the priority is as follows: 1) Laborers 2) Materialmen 3) Subcontractors 4) General contractors
When must a mechanics lien be enforced?
Within 6 months after lien is filed or within 60 days of the time work is completed, whichever is later
