A Newsletter for individuals and businesses concerned with Creditor’s Rights |
August 2024 | 389th Edition |
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Collections: Promissory Note - Acceleration of Balance |
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The case of Atlas Rooter Co. v Atlas Enterprise, Inc., decided by the City of Richmond Circuit Court, serves as an excellent review of creditor's acceleration rights upon late payment on a promissory note.
In Atlas the undisputed facts were that the debtors mailed their loan payment within the ten-day grace period provided for in the promissory note (as they routinely did), but the payment was received after the ten-day grace period. The creditor moved to accelerate the balance due on the note. The debtors argued that the usual course of dealing between the parties authorized the use of the mails for payment. The debtors claimed that because payment by mail was permitted in the past, payment was made when the letter containing the payment was deposited in the mail, and that the risk of late payment was assumed by the note holders. The note, however, did not specify this.
The Court ruled that under Virginia law, payment of a debt is made upon receipt by the creditor, rather than by mailing by the debtor. The Court further reasoned that Virginia Code §8.3A - 602 provides that tender of payment of a negotiable instrument must be made "to a person" entitled to enforce the instrument. Payment or satisfaction discharges the liability of a party only if made to the holder of the instrument. The Court stated that to allow the mailing of an installment as timely payment would act to qualify the U.S. Postal Service as an agent of the note holder.
There is a lesson for creditors in Atlas even though the creditor prevailed. Keep detailed records of payments, do not waive payment due dates, and create a "paper trail" regarding late payment reminders. Creditors prevail best when they do not have to pay the cost for enforcing their rights.
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Court records can be used to find addresses if there are recent judgments against the debtor. |
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Bankruptcy: Cross Collateralization Prevails |
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In another case pursued by the Virginia League Central Union, In Re: Martin, an important precedent was set in regard to the enforceability of cross collateralization.
In Martin the debtors filed a Chapter 13 bankruptcy case. At the time of the filing the debtors were obligated on three loans to the credit union:
(1) $1,200.00 open end credit agreement (initial loan);
(2) $3,401.01 open end credit agreement for a truck loan (truck loan); and,
(3) $1,386.94 Visa card credit account (Visa loan).
The initial loan documents and the truck loan documents had cross collateralization language stating that collateral given as security for these loans, or for any other loan, would secure all amounts owed to the credit union now or in the future. The Visa application did not contain cross collateralization language. The debtor argued that because the Visa application did not have cross collateralization language and did not refer to the truck, that the truck should not stand as collateral for the Visa loan. The credit union argued that the truck should stand for all three loans.
The Court found the cross collateralization language to be enforceable and effective as to all three loans. The Court held that confirmatory language was not required in the Visa application so long as the original agreement contained cross collateralization language.
One would have to wonder, however, if the result would have been different if the Visa loan had been executed first.
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Law Review of the Month: Estate Planning |
The firm has extensive experience in estate planning. We welcome the opportunity to discuss wills, trusts, living wills (Declarations for Natural Death) and other planning matters. |
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Real Estate: Perfecting Mechanic’s Liens |
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In recent editions of Creditor News we have been discussing the benefits of using real estate to improve creditors’ positions. Last month we began a discussion of the benefits of using mechanic’s liens to aid in the collection of your debt.
Virginia Code §§43-4, 43-7 and 43-9 provide for the perfection of the lien by general contractors, subcontractors, and laborers and suppliers. In each section the creditor must file a memorandum of lien at any time after the work is commenced or material furnished, but not later than 90 days from the last day of the month in which he last performs labor or furnishes material, and in no event later than 90 days from the time such building, structure, etc., is completed, or the work thereon otherwise terminated. The memorandum must contain specific information as set forth in the code (and there are forms in the code), and must be filed in the clerk's office in the county or city in which the building, structure etc., or any part thereof is located. The memorandum shall show the names of the owner of the property sought to be charged, and of the claimant of the lien, the amount and consideration of his claim, and the time or times when the same is or will be due and payable, verified by the oath of the claimant, or his agent, including a statement declaring his intention to claim the benefit of the lien, and giving a brief description of the property on which he claims a lien.
In next month’s edition we will explore suits to enforce the lien.
We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.
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Foreclosure: Deed in lieu of Foreclosure |
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In certain cases it may be more practical for the lender to seek or accept from the borrower a deed in lieu of foreclosure rather than incur the expense of foreclosure – this is at the lender’s discretion. If the lender agrees, in return for voluntarily surrendering the property, the borrower will seek either partial or complete satisfaction of the debt.
Considerations. Before accepting the deed in lieu of foreclosure, the lender must consider many matters:
a. Value of the property vs. the amount of the debt.
b. Other debts on the property. A deed in lieu of foreclosure does not extinguish prior or junior liens or encumbrances. Thus the lender, in accepting the deed, accepts the property with the liens. It is possible for the lender to structure the deed in lieu of foreclosure so that it does not release the deed of trust so as to preserve a future foreclosure to extinguish subordinate liens.
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Looking for more Creditor News articles? Check our our Creditor News Blog! |
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Lafayette, Ayers, & Whitlock, PLC is a full-service creditor’s rights firm. While many attorneys do “collections”, few attorneys have the trained expertise and staff to represent creditors in all four areas of Creditor’s Rights—Collections, Bankruptcy, Real Estate and Foreclosure. We do, and, we represent credit unions, banks, loan companies, homeowner associations, doctor’s offices, landlords, small businesses and individuals. In Creditor News we will explore all four areas of Creditor’s Rights.
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Meet the Attorneys of Lafayette, Ayers & Whitlock, PLC |
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Edward S. Whitlock, III, Esq. - Editor
Eddie is a Richmond native with a concentrated law practice in creditor representation. His practice focuses on creditor’s rights (Collection, Bankruptcy, Real Estate, and Foreclosure), but also includes the general practice of law (Business and Will & Estate Planning). Eddie holds a B.A. (1984) in Political Science, and a Juris Doctor (1987) from the University of Richmond. He is the former Chief of Admin/Military Law for the 329th Support Group (Area) in the Virginia Army National Guard. Eddie is the former President of both the Henrico County Bar Association and the Virginia Creditors’ Bar Association. He is the chair of the Virginia State Bar’s Fee Dispute Resolution Program, and a former member of the Virginia State Bar’s Disciplinary Committee. He is a board member of the Henrico Economic Development Authority. He is the Vice President of Home Loans for KOVAR Corporation. He is also a former director of Henrico CASA, and a former adjunct professor of criminal law at J. Sargeant Reynolds Community College.
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Jennifer W. Fischer, Esq. - Co-Editor
Jennifer concentrates her practice in creditor representation (Collection, Bankruptcy, Real Estate, and Foreclosure), but also Business and Will & Estate Planning. Jennifer holds a BS (2011) in business administration from Christopher Newport University, and a Juris Doctorate (2014) from University of Richmond, T.C. Williams School of Law. She was admitted to the Virginia State Bar in October 2014. She is a board member for the Virginia Creditors' Bar association and the Henrico County Bar Association.
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CREDITOR NEWS© 2023. This newsletter is prepared and published by Edward S. Whitlock, III, Esquire, and Jennifer W. Fischer, Esquire, and is provided free of charge. The information contained in this newsletter is general in nature. It is intended to be helpful but does not, and is not meant to, replace consultation with an attorney in connection with a legal problem. Readers needing legal advice should retain competent legal counsel. |
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Lafayette, Ayers & Whitlock, PLC www.lawplc.com
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