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Creditor's Rights Va v1


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What are general creditors?
Creditors that have no lien of any type
What are lien creditors?
Creditors who possess an interest in some specific property of the debtor
What are the 3 types of lien creditors?
1) statutory lien creditor: c'or who obtains a lien on d'or's property by virtue if a statute (e.g., 2 types of mechanic's liens)
2) Judicial lien creditor: C who obtains a lien on D's property by use of legal process (typically through execution)
3) Consensual lien creditor: C who obtains a lien on D's property by virtue of D's CONSENT (e.g., mortgages, Art 9 security interests)
What is a mechanic's lien and when does it attach?
-It is a lien that attaches by operation of law when a contract is made and work is done, or materials furnished, to enhance the value of property
-Use of materials furnished and labor extended creates the lien
What are the two types of mechanic's liens?
1) Mechanic's lien on personal property: person who improves or repairs personal property at the request of owner has a lien on that property until paid (need not be a mechanic)
2) Mechanic's and materialman's lien on real property: all persons who perform repair, construction, or improvement of any bldg/permanent structure have a mechanic's lien thereon for the value of their services
What are the 2 ways a mechanic's lien on personal property are created? Are there any limits?
1) at owner's request (limited to "just and reasonable charges)
2) at request of non-owner in lawful possession (e.g., car lessee) limited to $625
What are the two types of ways that a mechanic's lien on personal property is enforced?
1) Self-help sale (ONLY if property that doesn't exceed $5000 in value)
2) Sheriff's sale (if property > $5000)
What is a self-help sale? What steps must be followed in a self-help sale?
-One way of enforcing a mechanic's lien on personal property
1) If lien debt is not paid within 10 days after it's due, AND
2) Value of property affected by lien doesn't exceed $5000, THEN
3) the lienor (repairer) may sell the property at public auction (but must publicly advertise the time, place, and terms)
What is a sheriff's sale and what steps must be followed to effectuate?
-Another way of enforcing a mechanic's lien on personal property
1) If value of property is more than $5000 but doesn't exceed $15,000, may petition GDC of county/city where property located and court will order sheriff to sell
2) If value exceeds $15,000, party w/ lien may petition Circuit Court of county/city where property is located and court will order sheriff to sell
3) In both cases C must give notice to D
Who is elegible for a mechanic's or materialman's lien on real property?
-All persons performing labor or furnishing materials for construction, removal, repair, or improvement of any building or permanent structure (incl. bldgs and land)
1) General contractor (direct contract w/ owner; can be multiple on one project)
2) Subcontractor (contract w/ GC not owner)
3) Sub-subcontractor (contract w/ subcontractor not owner or GC)
Generall, how is a mechanic's or materialman's lien on real property created?
-A lien is not enforceable until it has been perfected (see perfection details in other card)
What specifically must a general contractor do to perfect a mechanic's/materialman's lien on real property?
1) File a memorandum of mechanic's lien in clerk's office within:
90 days of the completion of work (or from when work is terminated)
2) Memorandum must set forth:
a) name of the owners
b) verified amount of the claim
c) intent to claim a lien, AND
d) description of the property
What specifically must a subcontractor or sub-subcontractor do to perfect a mechanic's/materialman's lien on real property?
1) Comply with the gen contractor's perfection requirements (memo w/i 90 days of completion/termination stating: name of owners, verified amt of claim, intent to claim lien, description of the property), AND
2) give notice to owner of the amount/character of his claim, AND
3) give notice to general contractor

1) GC perfection reqts (memo w/i 90 days stating owner, amt of claim, intent to claim, description of prop) +
2) Written notice to owner (amt/char of claim) +
3) Notice to GC
What are the limits on a subcontractor's mechanic's/materialman's lien on real property?
Limited to the amount owed by owner to the GC at the time owner receives notice from subcontractor
May a subcontractor benefit from a general contractor's mechanic's/materialman's lien?
Yes if he gives written notice to the owner before owner pays GC
Can a general contract or owner be held personally liable on a subcontractor's lien?
-General remedy = sale of property
-There are ways to hold the GC personally liable
How is a mechanic/materialman's lien on real property enforced?
-Bring a suit in equity
1) SOL reqs it be brought within 6 months from the time the memorandum of lien was recorded, OR within 60 days of the time the work is completed or terminated, whichever is later
-Expiration of SOL extinguishes the lien
Who has priority between a mechanic's lien and other lienholders?
1) Prior lien takes priority over subsequent mechanic's lien
2) Subsequent lien is inferior to mechanic's lien IF improvements commenced BEFORE the subsequent lien obtained
Who has priority between mechanic's lienholders?
GR: all are equal
EX: Special rules
1) sub has priority of GC but on if filed his own lien
2) lien of laborers and those providing materials for sub have priority over sub
3) lienors furnishing labor take priority over materialmen (to the extent of the labor performed 30 days preceding the date of performance of the last laborer--all labor up to 30 days before the end)
Can contractors waive liens?
GR: yes
EX: GC cannot waive a sub's lien w/o authority
What property is not subject to mechanic's/materialman's lien?
1) public buildings (not incl. churches)
2) leased property, where lessee orders repairs/improvmements
What is the value of pre-judgment attachment of property?
If done before or during a lawsuit, P can use it to obtain priority on attached property (establishes jurisdiction over a nonresident)
Is a lien created when a party attaches before judgment?
Yes, a contingent lien with priority dating from the time of attachment is created
What happens to a pre-judgment contingent lienholder upon receiving a judgment?
P becomes a creditor with priority dating from the time of attachment
What are the grounds for attaching property pre-judgment?
1) D is nonresident or a foreign corporation
2) D has made or is about to make a fraudulent conveyance
3) D has or is about to remove his property from the state (doesn't apply to movements in the ordinary course of business)
4) D has or is about to conceal his property with intent to hinder/delay creditors
What is the process of attachment?
1) File a sworn petition for attachment seeking a writ of attachment
2) Post bond
3) Judicial ex parte determination of the ground
4) Judicial issuance of attachment
5) Sheriff levies on property
What are the general pre-judgment attachment bond requirements?
-must be an approved surety, caseh bond, or property bond
-surety, cash = FMV
-property or sheriff takes possession = double FMV
How does the sheriff levy tangible property?
1) if D in possession: (a) serve a copy of attachment OR (b) if P requests, take possession of the property
2) If third party in possession, sheriff must levy by serving a copy of the attachment

(always okay to serve a copy of attachment with tangible/intangible property)
How does the sheriff levy intangible property?
1) Sheriff serves third party with a copy of attachment
How does the sheriff levy real estate?
1) Sheriff serves anyone in possession of the real estate with a "copy of attachment" and the "return" sufficiently describing the real estate (when, where, what he levied and/or seized)
2) If owner is a BFP for value, file a memo of "lis pendens" in the clerk's office of the Circuit Court in which the property is located
What happens to a contingent lien when final judgment is entered?
-the contingent lien is consumated and the plaintiff can follow the procedure for obtaining a judgment lien
How can a general (non-secured) creditor become a judgment creditor?
He must sue
What is the duration of a judgment creditor's rights?
-He may enforce his original money judgment for 20 years from the date of judgment rendered
-Judgment extinguishes the underlying claim and gives rise to new debt-represented by the judgment itself
How can a judgment creditor extend his rights?
-Filing a motion to extend, OR
-Obtaining a new judgment by suing on the original judgment
How can a judgment creditor enforce an out of state judgment?
By domesticating it
-C must register the judgment in the office of the clerk of court, AND
-Notify D of the registration in writing

--After domestication, just like a VA judgment
When does a judgment lien on real estate attach?
-through/at a public act called "docketing" in the city/county where d'or own the property
-automatic docketing occurs in the county/city where the judgment is rendered

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