Creditors Rights

Question 1

What is a lien?

Answer 1

An interest in property that secures an obligation

Question 2

Two types of creditors

Answer 2

1) General creditors 2) Secured creditors

Question 3

Purposes of a pre-judgment attachment lien

Answer 3

1) To preserve debtor’s property 2) To establish creditor’s priority

Question 4

Statutory grounds for a pre-judgment attachment lien

Answer 4

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

Question 5

Procedure for obtaining a pre-judgment attachment lien

Answer 5

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

Question 6

Distress for rent

Answer 6

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.

Question 7

Time limit for distress action

Answer 7

Must bring action within 5 years from date rent becomes due

Question 8

What must a landlord establish before getting a distress warrant?

Answer 8

One of the same statutory grounds as for attachment

Question 9

How long is a judgment valid?

Answer 9

1) Circuit court: 20 years 2) District court: 10 years, unless judgment is docketed in circuit court, then 20 years

Question 10

How can a creditor get its judgment lien enforced in another state?

Answer 10

Under the Uniform Enforcement of Foreign Judgments Act, he need only register it in the office of the clerk of that jurisdiction & notify debtor

Question 11

Exempt property

Answer 11

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

Question 12

Wage garnishment exemption

Answer 12

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

Question 13

Judgment lien

Answer 13

Attaches to all real property (current and after-acquired) owned by debtor in the county in which judgment is docketed

Question 14

Can a creditor obtain a judgment lien on property that is held as tenants by the entirety?

Answer 14

No, unless judgment is against both spouses

Question 15

Can a creditor enforce his judgment lien when the debtor sold his property to another buyer?

Answer 15

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

Question 16

How does a commissioner determine whether real property should be sold to satisfy a judgment lien?

Answer 16

He asks if the rents and profits will pay the judgment within 5 years. If not, then property will be sold.

Question 17

Execution lien

Answer 17

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

Question 18

When can a sheriff levy property under a writ of execution?

Answer 18

Within 90 days of the issuance of the writ

Question 19

Does an execution lien have priority over subsequent liens and buyers?

Answer 19

Yes

Question 20

Garnishment lien

Answer 20

A writ of garnishment is used to obtain a lien on intangible personal property, e.g., wages, bank accounts, accounts receivable

Question 21

Procedure for issuing a writ of garnishment

Answer 21

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

Question 22

Statutory interrogatories

Answer 22

Summons issued to creditor to answer questions about his property (to find out what he owns)

Question 23

Two types of fraudulent conveyances

Answer 23

1) Conveyances made with intent to hinder, delay, or defraud creditors 2) Voluntary conveyances (constructively fraudulent)

Question 24

What are voluntary conveyances?

Answer 24

A transfer or conveyance is treated constructively fraudulent if made by an insolvent debtor for less than fair consideration

Question 25

Which creditors may attack a voluntary conveyance?

Answer 25

Only creditors with liquidated claims at the time of transfer

Question 26

Which creditors may attack an intentionally fraudulent conveyance?

Answer 26

Any creditor (even future ones)

Question 27

In a voluntary conveyance, is a good faith purchaser who pays less than fair market value protected from creditors?

Answer 27

Only to the extent of the consideration paid

Question 28

Is a good faith purchase who pays fair market value protected from creditors?

Answer 28

Yes, he is absolutely protected, regardless of debtor’s intent

Question 29

How does a creditor attack a fraudulent conveyance?

Answer 29

By bringing a creditors’ bill to set aside the transfer

Question 30

Mechanics Lien

Answer 30

A statutory lien in favor of those who furnish services or materials that add value to real property

Question 31

How is a mechanics lien perfected?

Answer 31

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

Question 32

Priority of mechanics lien

Answer 32

A mechanics lien is superior to prior liens on the structure (not the real property)

Question 33

Priority among mechanics

Answer 33

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

Question 34

When must a mechanics lien be enforced?

Answer 34

Within 6 months after lien is filed or within 60 days of the time work is completed, whichever is later