Creditor's Rights/Suretyship Flashcards Preview

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Flashcards in Creditor's Rights/Suretyship Deck (64):

How long does a creditor have a right to enforce a money judgment?

20 years from the date of judgment and may be extended for an additional 20 years by motion to the court that rendered the judgment. The debtor need only be given notice of the motion and need not be formally served.


In VA, how does a creditor enforce a sister state money judgment?

creditor need only 1) register the judgment in the office of the clerk of court where judgment is sought to be enforced and 2) notify the D of the registration in writing.


A _________ ___ is required which gives 3rd parties notice of the judgment interest in the property

Public Act (recording a real estate lien or repossessing property rights)


How long does a creditor have a right to enforce a Judgment lien?

Continues indefinitely, BUT, must be enforced within 10 years of the debtor's sale to any purchaser.


What is the timeframe for enforceing a judgment lien?

Must bring suit in equity within 20 years from the date of docketing


What is the writ of fieri facias?

commads the officer to whom it was delivered to find tangible personal property of debtor, seize it and sell it to satisfy a judgment


What are the mechanics of writ of fi fa?

clerk must issue at 21 days from the date of judgment directing the sheriff to levy on the debtor's property, if the levy occurs after the return date, it is void. lien is recorded at time of levy


How is an enforcement of lien through garnishment obtained?

A summons of garnishment must be served on the garnishee on or before the return date on the fi fa. debtor must also be given notice. Failure to serve proper notice on the debtor is grounds to quash.


What is not subject to garnishment?

negotiable instruments or a negotiable stock certificate must be levied upon to be effective; garnishment of the issuer has no effect. A joint bank account generally is subject to garnishment to the extent of the debtor's interest. - There is a rebuttable presumption that the nondebtor spouse owns one half of the account


What are creditor's rights when the debtor has died?

claims of the creditor will be paid out of the decedent's personalty to the extent it is sufficient


What is Attachments (detinue) in creditor's rights law?

attachment is a prejudgment remedy by which a plaintiff may obtain a lien on the defendant's property judgment to satisfy an anticipated money judgment


What are the grounds for attachment?

P must allege one of the following:
1) D is nonresident of VA or foreign corporation
2) D has made or is about the make a fradulent conveyance
3) D has removed or is about to remove his property from VA
4) D has concealed or is about to conceal his property with the intent to hinder or delay credotrs
5) D is trying to move himself out of VA


What is a memorandum Lis Pendens

A document placed in the real estate recording office indicating that real property is subject to litigations. Puts BFPs on notice. If a lien is to be effective against a BFP, lis pendens must be filed.


What is a suretyship?

arises when 1 person agrees to be liable for the debt or obligation of another. - A surety is the person who promises along with the debtor to pay the debtor's obligation when it becomes due. A surety is directly liable on the obligation


What is a guarantor?

a guarantor is a person who promises to pay the obligation of a debtor only if the debtor defaults. - creditor may only seek guarantor for payment after seeking payment from debtor


How does the SoF apply to Suretys and what are the exceptions?

suretyship not evidenced by a writing signed will not be enforceable EXCEPT:

1) a promise that is not collateral to another person's promise to pay is not a suretyship bound by SoF.

2) Also, if the main purpose of the surety's promise is his own pecuniary advatacge the promise is not within the SoF


Subrogation in suretyship

After full payment by the surety, the surety is entitled to step in to the shoes of the creditor and can use all the remedies the creditor could use against the principal


What is the general process for turning a victorious lawsuit into cash?

1) Get a judgment
2) use the judgment to obtain a lien on a particular piece of property
3) Foreclose on the lien and sell the property


What is the purpose of the lien?

The lien protects the right of the creditor in the debtor's property against other creditors. - To get this protection, all other creditors must be put notice of the lien by a PUBLIC ACT


What will VA do to help you collect a debt BEFORE you have a judgment?

VA allows you to obtain a prejudgment lien. This is officially called Prejudgment Attachment ( or Detinue) - essentially calling "dibs" on a piece of property for if you win your suit.


How is a prejudgment lien obtained?

petition the court for a "writ of attachment" (issued ancillary to suit OR to commence suit and establish jdx)

1) File w/judge
2) allege specific facts supporting grounds for attachment
3) judge has ex parte hearing
4) D has 10 days to challenge lien


You must have proper grounds for a "writ of attachment". What are they?

1) D is non resident
2) Fradulent conveyance has happened or is about to happen
3) D is going to move the property out of state
4) D is concealing property
5) D is leaving state permanently


How does pre-judgment lien attach to property?

PP: must be a proper levy on PP (if PP is 3rd parties possession, 3P must be joined as a co-d in the underlying lawsuit)

RP: 1) Officers RETURN (doc prepared by sheriff in response to writ of attachment) must describe the property 2) attachment served on the party in possession

Important Notes: 1) Attachment gives creditor an "Unconsummated lien" - lien becomes connsummated when P wins judgment. - If Creditor wins judgment, they are given priority in property against other creditors back to time of attachment.

2) in order to take priority over a BFP, must first file a lis pendens in real estate recording office


How can a D get a judge to quash pre-judgdment lien?

1) lien is invalid (no proper grounds listed)
2) lien is unsupported (is proper ground listed, but no facts supporting)
3) P unlikely to prevail


What are surety's rights against creditors?

1) Surety can require the creditor to proceed first against the debtor. (only in VA, different than fed rule

2) Surety can raise duress or fraud on debtor's debt to creditor. i)

3) Surety can't raise the personal defenses: infancy, lack of capacity, bankruptcy, statute of limitations

4) surety has defense if contract between debtor and creditor is moidfied (gratuitous surety fully discharged, compensated discharged if material change)

(no right of notification of debtor's default)


What rights does a surety have against a debtor?

1)Right of exoneration ( cause of action to force debtor to pay her debt to the creditor
2) right of indemnification - they can force a debtor to pay the surety for money paid by the surety to the creditor


If gratuitous surety provides a guarantee at the time os sale on credit there _____ consideration. Whereas if the gratuitous sureter promises to guartee after the sale, there -_____ consideration.


There has to be consideration for a surety to be effective.


Which of the following defenses may a surety invoke?

A Duress upon the surety by the principal.
B Duress upon the principal by the creditor.
C Incapacity of the principal to form a contract.
D Bankruptcy of the principal.

Duress upon the principal by the creditor

A surety will not be liable if the principal's promise was obtained by duress, as long as the surety was unaware of the duress.


A creditor may seek payment from a guarantor of collectibility:

Only after exhausting all legal remedies


A surety's promise is not enforceable unless it is supported by ________. Where a surety does not make his promise until ______ the creditor has performed, there is no consideration to support the surety's promise, since the debtor has not incurred any new _________in exchange for the surety's promise.

consideration; After; deteriment


A surety has an absolute right to be reimbursed by the principal except when?

if the principal is not aware of the suretyship arrangement.


A surety’s right to sue the principal debtor in order to compel the principal debtor to pay the creditor is most commonly referred to as:



What would discharge a surety's obligations?

If a creditor releases all or part of the collateral given by the creditor, the surety is released to the extent of the value of the collateral released. The loss of collateral through mere inaction or passive negligence on the part of a creditor is insufficient, in and of itself, to discharge a surety from his obligation.


What may a creditor discover about the debtor with postjudgment interrogatories?

Real or personal property, wherever located


the context of postjudgment interrogatories, what is a capias?

A writ instructing an officer to take the debtor into custody until he properly answers the interrogatories.


From the creditor's perspective, a debtor holds which types of property?

Exempt property and nonexempt property still in the debtor's possession or that the debtor fraudulently transferred.


Avoiding or upsetting a fraudulent transfer made by a debtor means:

Title to the property will be restored to the debtor so the creditor attacking the transfer may sell it.


When may a debtor's transfer of Real Property to a third party be avoided by a creditor?

if if the debtor acted with fraudulent intent,
and the transferee knew, or should have known, of the debtor’s fraudulent intent.


Debtor sells property to Buyer for less than fair market value. Buyer is unaware of Debtor's fraudulent intent to protect property from Creditor's judgment. Can the property be sold to satisfy the debtor's debt?

Yes, but buyer receives a lien up to the amount of consideration paid.


A creditor may avoid a voluntary transfer of a debtor’s property if the creditor holds a ____________________ claim at the time of the transfer, and if ____________________ .

Liquidated; the debtor was insolvent prior to the transfer or became insolvent as a result of the transfer.


A mechanic’s lien is a ____________________ remedy to give security to those adding value to ____________________ property.

statutory; real property


To perfect a mechanic’s lien, a general contractor must file a memorandum of mechanic’s lien in the clerk’s office within ____________________ of ____________________ .

90 days; the completion or termination of the work


If a contractor files one mechanic’s lien for work performed on several pieces of property (all covered by one contract): to apportion costs among the different properties, is the lien valid?

The lien is valid but only if it apportions the costs of labor and materials among the different properties, to the extent that apportionment is possible.


A repairer's lien allows a mechanic to retain property until:

The owner pays the just and reasonable charges for the repair.


Under what circumstances does a repairer’s lien have priority over competing article 9 security interests?

If the repair was made in the ordinary course of business and the property remains in the repairer’s possession.


How does a security interest attach to collateral?

I) parties must agree that security interest ataches (evidenced by authentication)
II) value must be given by the secured party
III) debtor must have rights in the collateral


To achieve its maximum priority over other creditors, a security interest must be perfected. How a security interest in equipment perfected?

By filing with state corporation commission (scc) a financing statement containing the names and mailing addresses of both parties and indicating the collateral. Debtor must authorize by signing or authentications


By creditor taking possession


In VA How is a valid possessory lien created in equipment?

Where a mechanic repairs an item of PP on request and is not paid for the services provided. When repair is made at the owners request, mechanic is entitled to just and reasonable charges of his services.

Possessory liens have priority over any security interest in collateral as long as 1) goods or services were provided in the ordinary course of business and II) the collateral remains in the lien holders possession.


When is a principle bound by the act of an agent?

If agent has actual or apparent authority.

Actual authority is authority that the agent reasonably believes that she possesses based on te principles dealings with him.

Apparent authority, same as above except swap "third party" for "agent"


If a signature is unauthorized, a principle may still be liable on the instrument if------

She ratifies the signature.
Ratification occurs when a principal knowingly adopts a signature as her own( with full knowledge of the circumstances) OR when she appropriates the benefit of the unauthorized signing (kept and used furniture in hypo)


When are guarantor's discharged from liability?

if the creditor fails to perfect its security interest in the collateral. because failing to perfect a security interest impairs the value of collateral.


When does a "guarantor of collection" become liable on an instrument?

only if
1) execution of judgment against creditor is returned unsatisfied
2) the debtor is insolvent
3) otherwise useless to proceed against debtor

Cannot be sued until full efforts of collection are taken against debtor


What are the defenses to a mechanics lien?

Statute of Limitations (later of 6 months after completion of work or, 60 days after filing)

Blanket Lien Defense - lump sum - did not distribute charges and materials proportional to each lot

Release of 1 Lot Defense - creditor who releases the lien on one lot is estopped from enforcing the lien against the remaining lots.


How does one get a mechanics lien?

Generally, all persons PERFORMING LABOR OR FURNISHING MATERIALS valued at $150 or more for the construction, removal or repair or improvement of any BUILDING OR PERMANENT STRUCTURE has a lien for the VALUE OF THEIR SERVICES.


How does a general contractor perfect a mechanics lien in Virginia?

1) File memo of mechanics lien with Clerk of court
2) within 90 days of the completion of the work OR from the time work was terminated
3) memo must have names of the parties, verified amount of the claim and description of the property.
4) contractor must also file a certification that he has mailed a copy of the memo to the affected owner's last address


What is the purpose of a "debtor interrogatory"?

to determine NATURE, LOCATION, and PRESENT CONDITION of ALL debtor's assets.


How is a "debtor interrogatory" carried out?

1) Creditor must secure a LIVE WRIT OF EXECUTION,

2) obtain a date for the proceedings from the trial judge or commissioner, and

3) have the clerk issue an INTEROGATORY SUMMONS against debtor


What is the difference between an EXISTING CREDITOR, and a SUBSEQUENT CREDITOR?

EC can attack the conveyance from the debtor regardless of the nature of conveyance.

SC can only attack conveyances made with fradulent intent.


How do you prove a quasi contract existed in Unjust Enrichment cases?

1) The D received a benefit conferred by the P
2) D knew he was receiving the benefit
3) retention of the benefit by the D is inequitable without paying for it.


What are the elements to prove FRAUDULENT CONVEYANCE?

Must prove by Clear & Convincing Evidence:
1) D intended to defraud
2) 3P did not pay valuable consideration OR knew of D's fraud


What are the elements to prove VOLUNTARY CONVEYANCE?

Must prove by Clear & Convincing Evidence:
1) 3P did not pay valuable consideration
2) bank must prove that it was a creditor PRIOR to the conveyance
3) D was insolvent or was made insolvent when he made the transfer


What are the elements to prove CONSTRUCTIVE TRUST?

Must prove by Clear & Convincing Evidence:
1) 3P was unjustly enriched
2) 3P is NOT a BFP
3) 3P Received benefits fraudulently
4) In balance of equity bank is more harmed than 3P


What type of procedure does a general creditor bring to attack fradulent conveyance or voluntary transfer?



What type of procedure does a judgment creditor bring to attack fradulent conveyance or voluntary transfer?

Motion to Set Aside Transfer