Photo by Tracy O

Generally, our legal system goes at its own moderate pace.  If you are owed money, collecting it can seem painfully, unbelievably slow.   When  a collection lawsuit is filed and served, it usually takes at least a year to get to trial, then additional time to finalize the judgment and to lien on the debtor’s property.  Throughout this long and often expensive process, there is always the risk of the debtor transferring away assets, pulling whatever equity he may have out of his property, leaving the state, or filing bankruptcy.

However, under the right circumstances, California law does allow some relief that can usually be acquired within about a month. This procedure, called a Pre-Judgment Attachment, is generally available (subject to some rare exceptions and nuances) where all of the following are true:

1. the money is owed under a written or oral or even an implied “contract”(e.g. most often loans or business leases, or elsewhere as well);
2. the debt is for a specific dollar amount (one that can be arithmetically calculated from the terms of the agreement) which is more than $500;
3. the debt is not already secured by real property having sufficient equity to cover the debt;
4. where the debtor is a “natural person”(as opposed to a corporation or an LLC), the debt must arise from that person’s business, trade or profession, rather than from personal, family or household expenses.

If these criteria are met, and there is a collection action filed, or about to be filed, an ancilliary motion is also then filed requesting an immediate Pre-Judgment Attachment on the debtor’s property, which, once granted, can be recorded against real or personal property of the debtor.  The amount of the Attachment is set by the amount of money owed plus estimated costs and attorneys fees, if fees are allowed, minus any payments made.

This procedure is not available in small claims court, but it is available even where the contract provides for binding arbitration.

Once recorded or, in some cases, filed, the amount owed is secured as a lien on that property, and that Attachment has priority over all subsequently filed or recorded liens, making it difficult for the debtor to refinance his property or to transfer it away.  As a practical matter, this Attachment puts the debtor on notice that he is going to have to eventually pay this debt, and often puts so much financial pressure on him that the case settles.

The debtors property subject to Attachment can include: real property, business receivables, equipment, farm products and inventory, money judgments in favor of the debtor, if arising out of the debtor’s trade, business or profession, cash on hand in the debtor’s business, trade or profession, money in accounts over the first $1000, negotiable stock or securities, most community property, even oil, gas or minerals to be extracted.

If the debtor is an individual (as opposed to a corporation, partnership or LLC), some property is exempt from a Pre-Judgment Attachment, most often specific assets in limited amounts exempt under California or federal law, wages, and income or assets necessary for the debtor family’s living expenses.  Under most circumstances, even if the debtor later files bankruptcy, this Attachment secures the debt on the property.

In summary, a Pre-Judgment Attachment provides some relief from the long delays that often occur in collection actions by promptly placing a lien on the debtor’s assets, securing those assets until judgment can be entered.  More often, placement of the Attachment forces the debtor to settle promptly.

Written by Basil Plastiras, Partner at Plastiras & Terrizzi

What types of advisors you need depends on the industry and your aspirations for the business.  However, most businesses will need a CPA, an attorney, a lender, a marketing consultant, and an insurance broker at a minimum.  As your business grows, the list of professionals on your “team” will grow, to include technical experts,

While most businesses will not have any of these individuals on staff, you will need to establish a good working relationship early on with these professionals so that you can always turn to them for advice and guidance.

Ask Around for Recommendations.

The first thing you should do is to ask others who they use as an accountant, as a lawyer, or as an insurance broker. Ask everything you can think of, including others who have businesses in your same industry. In other words, ask your competitors.

You may find that there are a handful of individual professionals in your area who are the best-known experts on your industry. You can benefit immeasurably from having someone with experience and expertise in your industry who can help guide you through similar hurdles that others who have come before you have overcome.

Of course, if you ask your competitors who they use as an accountant or a lawyer, they may not want to tell you to maintain a competitive advantage, but I think it’s more likely you will find they are happy to pass along a recommendation of a trusted professional they like and trust.

Conduct Internet Research.

After you have gotten a few recommendations of individuals, you should do some “opposition research” on your potential team members. See what information you can dig up on your potential team members.

Don’t stop at just checking out their websites, but also check common review websites such as Yelp to see if there is any negative feedback on these folks. You may save yourself a lot of time and headache by finding out early on that a potential team member has a reputation for sloppiness or rudeness.

Go with Your Instinct.

Whoever you choose to join your team, you are going to need to trust intimately. Only you know who will be the best fit for your personally in terms of your personality and what types of people compliment your skill set. So no matter how many people have recommended a particular professional, you need to be sure you can trust them. If you get a bad feeling about the person, you will end up not using them as much as you need to.

Trust, But Verify.

You will need your team to work well without your constant direct supervision. Follow the “trust, but verify” theory. Trust that your team members will act in your best interest, but verify the work they produce for you.

This doesn’t mean reviewing all work product coming out of your team members. But it does mean not taking such a “hands off” approach that you never review the work your team members are doing.

If you need even more tips regarding assembling a team of small business advisors around you, you may want to check out 7 Tips for Assembling a Team of Trusted Advisors for your Business by John Corcoran.

All these bankruptcy filings are affecting not just the people filing bankruptcy, but also their creditors.

While most people who declare bankruptcy do so as an absolute last resort, sometimes the debtor has regular income or valuable assets that could be used to pay off a portion of the debts.

If you are owed money by someone who declared bankruptcy recently, it does not mean you have no chance of recovering on the debt.  You still have options for pursuing money owed to you.

Here are the steps you should follow if you are a creditor and someone who owes you money has declared bankruptcy.
Automatic Stay Stops All Collection Activities

The first important lesson is that when a debtor files for bankruptcy protection, all collection activities must stop.  That means even if you were trying to collect on a $10,000 personal loan, you must stop all phone calls, emails or direct contact to pursue the debt. However, that does not mean you cannot continue to try to get your money back through the courts.  In a sense, the fight simply shifts from the streets to the courthouse.

Determine if Your Debt is Secured or Unsecured

Debt can be secured by property or unsecured, and it is treated differently in bankruptcy court if it is secured or unsecured. Chances are you already know whether your debt is secured or unsecured so I won’t dwell on this, but it’s worth asking yourself first if your debt is secured. Real estate loans and commercial equipment loans are generally secured, while credit cards or personal loans tend to be unsecured.

Is the Debtor filing Chapter 7 or Chapter 13?

There are two main kinds of bankruptcy filings which entail the majority of individual bankruptcy filings: Chapter 7 and Chapter 13. A Chapter 7 filing is a total liquidation where most of the debtor’s personal assets are sold off to pay the creditors. In order to qualify for a Chapter 7, a debtor must make very little to no income.

Chapter 13: Repayment Over Time

If the debtor earns too much money to qualify for a Chapter 7, then they generally file for a Chapter 13.  A Chapter 13 filing allows an individual with substantial debts, but regular income, to file for bankruptcy protection and doesn’t automatically eliminate the debtor from eligibility. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.

File A Proof of Claim

In order to protect your claim, you need to file a “Proof of Claim.”  The deadline for filing a proof of claim varies so you want to be sure to file the Proof early to ensure you do not waive your right to your property. Creditors in Chapter 7 and 13 cases generally must file their Proof of Claim 90 days from the date first set for the meeting of creditors.

California has a new law currently under consideration which may change the way the state regulates sports agents.

In light of the USC football program’s two-year bowl ban due to recruiting violations and North Carolina, South Carolina and Florida acknowledging that the NCAA is investigating their athletic departments, it’s no wonder the state is looking at changing the way it regulates sports agents.

SB 1098, by Sen. Ellen Corbett, has passed the state Senate and is currently being considered in the state Assembly.  For the first time, California would be able to decide who becomes a sports agent and the state would have the ability to deny or revoke a person’s authority to act as an agent.

The law is California’s version of the Uniform Athlete Agents Act (UAAA), which has been enacted already by 38 states.  It would replace the existing Miller-Ayala Athlete Agents Act, the California law that currently regulates sports agents in the state.

The UAAA was drafted at the urging of the the National Collegiate Athletic Association (NCAA), which wanted to create more uniform regulations that would subject all sports agents to the same rules regardless of the state in which they solicit and recruit athletes.  The NCAA, which has been criticized for not doing more to regulate sports agents, also wanted to cut down on sports agents who used inappropriate recruitment techniques.

The bill does not dramatically overhaul the way agents operate. It does, however, make a number of significant changes.

The most significant differences concern registration requirements and the ability of the state to deny or revoke a person’s authority to act as an athlete agent. Existing law only requires a person who wants to act as an agent to file information with the California Secretary of State’s office, but to date there has been no  body or state agency that can prohibit a person from acting as an agent.

That means someone who wanted to become the next Leigh Steinberg, Scott Boras, or Drew Rosenhaus didn’t have much standing in their way (except, of course, a roster of famous athletes).

SB 1098 would require a sports agent to obtain a certificate of registration from the Department of Industrial Relations (DIR), which already regulates talent agents.  The bill would also prohibit anyone from acting as an agent without a certificate, and would give DIR the power to revoke a certificate for specific reasons.

The bill would also:

• provide greater detail on what information must be included in a contract between a player and a sports agent, including information relating to the basis and method of calculating compensation.
• Permit a student athlete to rescind a contract within 14 days of signing the contract.
• Require an agent to disclose the fact that they are a registered agent to a student or professional athlete.
• Give a professional athlete, student athlete or educational institution a right to sue an agent for damages resulting from a violation of the requirements of the new law.
• Requires an agent to create a trust fund for any salary or funds received on behalf of a professional athlete.

Sports agents may have a reputation for being only concerned with showing athletes the money. If SB 1098 passes, it should at least help to reduce that reputation, if it doesn’t eliminate it entirely.

Related Reading:

1. The 5 Biggest Mistakes of Parties Who Represent Themselves in Court Without A Lawyer
2. How to Fight Back if Someone Who Owes You Money Declares Bankruptcy
3. Six Step Plan to Choose the Right Form for Your Business

The Emergency Mortgage Relief program will make more than $1 billion in federal funds available to families about to lose their homes. Homeowners may borrow up to $50,000 if they can show they have a reasonable prospect of resuming mortgage payments within 24 months.

To be eligible, homeowners must be at least three months delinquent and the lender must have begun foreclosure.  There also must be a “reasonable prospect” that the homeowner can resume payments, and the loan must be on their primary residence.

San Francisco Chronicle columnist Kathleen Pender wrote a very thorough analysis of the program in her column in today’s S.F. Chronicle, although she points out in her column that there are many unanswered questions. Pender has a knack for sifting through huge, multi-faceted legislation and finding nuggets which haven’t previously received a great amount of media attention.  She does a great job of explaining these provisions in clear and understandable language.

The program will be administered by the Department of Housing and Urban Development, and was designed after a Pennsylvania state program which has provided 41,500 homeowners with $433 million in aid since 1984.

The legislation calls for the program to be fully implemented by October 1, 2010.

Read more about the program here and here.

John Corcoran is an Associate with Plastiras & Terrizzi law firm in San Rafael, California (Marin County).  He advises clients on real estate matters, small business issues, estate planning, and general civil litigation.  He may be reached at jcorcoran@ptlegal.com or (415) 472-8100 x211.

The case is significant because the number of medical marijuana dispensaries around the state has grown significantly, with many cities such as Los Angeles experiencing major growing pains.  If Anaheim’s ordinance is not preempted, then it will likely lead to a number of additional cities banning dispensaries entirely.

Earlier this month, the California Court of Appeal, Fourth District, Division Three, vacated

the submission of the parties and re-submitted the matter for an additional 30 days, meaning a decision may not arrive until as late as August 18, 2010.  It has already been nearly a year since oral argument was heard last September 2009.

We will report on this significant decision when the court delivers its ruling.

Additional information on the case can be found here.

John Corcoran is an Associate with Plastiras & Terrizzi law firm in San Rafael, California (Marin County).  He advises clients on real estate matters, small business issues, estate planning, and general civil litigation.  He may be reached at jcorcoran@ptlegal.com or (415) 472-8100 x211.

First, the California Court of Appeal recently decided a case which may have far-reaching impact on mortgage lenders as they communicate with clients.

In Garcia v. World Savings Bank 183 Cal.App.4th 1031 (April 9, 2010), the Court of Appeal held that a mortgage lender’s verbal agreement with a borrower to postpone a foreclosure sale could be enforceable, even absent consideration for the lender’s promise to postpone.

The Court of Appeal’s decision in this case sends a shot across the bow of mortgage lenders which are currently taking heat from lawmakers.  California in particular has been ground zero of the real estate meltdown, with the Golden State accounting for 23 percent of the nation’s total foreclosure activity in the first quarter of this year.

Other significant recent legislation relating to the real estate crisis includes:

• SB 1275 (Leno), which passed the Senate and is currently in the State Assembly, would provide additional protections for homeowners working their way through the loan modification process so they can potentially avoid foreclosure. This legislation prevents lenders from foreclosing on a home while a borrower is being evaluated for a loan modification. If a loan modification is not a viable option for a homeowner, loan servicers must provide borrowers with a detailed explanation why they are being denied.
• SB 1329 (Leno), which is also in the Assembly having passed the Senate, would strengthen the rights of California seniors who live in residential care facilities. This bill, sponsored by California Advocates for Nursing Home Reform, ensures that vulnerable care facility residents and their loved ones are notified when their home is being threatened. With such notification, they will be better able to carefully plan for a possible move and avoid dangerous last-minute evictions.
• SB 1178 (Corbett), which passed the Senate on May 10, 2010, would extend deficiency judgment protections for homeowners who have refinanced. This means if a homeowner refinances and later defaults, they will have the same protections against deficiency judgments as they had with their original loan under state law.

John Corcoran is an Associate with Plastiras & Terrizzi law firm in San Rafael, California (Marin County).  He advises clients on real estate matters, small business issues, estate planning, and general civil litigation.  He may be reached at jcorcoran@ptlegal.com or (415) 472-8100 x211.

Are you facing a foreclosure? Considering bankruptcy or a short sale?

If that sounds like you, you should obtain legal advice regarding your individual options.  In order to help homeowners and individuals who are experiencing financial difficulties with the loss of a job or a pending foreclosure, Plastiras & Terrizzi is announcing a new discounted rate one-time consultation with an attorney to answer questions, evaluate options, and strategize a unique approach tailored to your personal situation.

While the consultation will focus on your concerns and questions, your meeting may include any of the following topics:

• Short sale options
• Deed in lieu of foreclosure
• Loan modification options
• Bankruptcy – both Chapter 7 and Chapter 13
• What happens to  my debt if the bank forecloses on my home?
• Can my mortgage lender go after my paycheck?
• Tricks for negotiating with your bank
• Legal options including litigation

The consultation with an attorney from Plastiras & Terrizzi will include a one-time, 45-minute meeting either in person or via phone for a $275 $225 flat fee.*

In order to be sure the consultation is as productive as possible, please bring with you copies of all relevant documents and correspondence between you and all of your mortgage lenders, or send copies to our office prior to the meeting if doing the consultation by phone.

While we encourage loan modifications when feasible, our firm does not handle negotiations with creditors or mortgage lenders. However, we often assist clients in determining whether or not such loan modifications are likely to be successful.

To set up an appointment, call us today:

*  This information may be considered advertising in some jurisdictions under applicable laws and ethical rules. The material above has been prepared by Plastiras & Terrizzi. The material is for informational purposes only and does not constitute legal advice.  Plastiras & Terrizzi does not perform loan modification services or other loan forbearance services for residential real estate or collect advance fees for helping negotiate residential loan modifications.

The article stated:

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

This is consistent with what I have seen throughout San Francisco and the Bay Area.  In my experience advising clients on various real estate and land use issues, I have seen numerous wealthy homeowners with properties and mortgages far north of $1 million who have fallen upon hard times.  For many of these homeowners, their own option is to stop paying their mortgages.  Sometimes homeowners are fortunate to have many years of ownership and equity built up, so they have options such as selling the property.

When they don’t have equity, then they need to consider attempting a short sale or a loan modification.  Unfortunately, due to the passage of SB 94 this past fall, homeowners attempting a loan modification are very unlikely to be able to hire an attorney to advise them on how to accomplish a modification.  That leaves a short sale or simply walking away as the most likely option.

Read the full article here.

John Corcoran is an Associate with Plastiras & Terrizzi law firm in San Rafael, California (Marin County).  He advises clients on real estate matters, small business issues, estate planning, and general civil litigation.  He may be reached at jcorcoran@ptlegal.com or (415) 472-8100 x211.

In order to create an LLC for a film production, the managers/producers need to produce three documents, which include an LLC Operating Agreement, a Private Placement Memorandum (PPM), and a Purchase Offer or Purchase Agreement.  These are very complex documents requiring a great amount of detail and should be produced by an attorney with experience forming LLCs.

LLC Operating Agreement

The LLC should have a thorough Operating Agreement which dictates the structure, members, voting procedures, and other details concerning operation of the LLC.  The Operating Agreement will spell out in detail the role of Members and the Manager(s), explain how profits and losses are handled, dictate the number of Members that may join and how much they must contribute to join, list existing members at formation, and generally spell out the purpose of the LLC.

Investors should review the Operating Agreement carefully.  One issue of concern is how expenses will be handled, given that in most circumstances there are one or two manager/producers who will be producing the film, while potentially dozens of passive investors will not be involved in day-to-day decision-making. The danger is that the manager/producer could run up the gross costs, thereby reducing the net profits for the film.  For example, the producer could spend thousands of dollars traveling around to film festivals promoting the film and staying at 4-star hotels and eating at 4-star restaurants. All of these costs will reduce the amount of net profits after deducting for expenses. On the other hand, the investors (the “Members”) may want the producer to go around to numerous film festivals so that they can network and sell the film at a bigger profit than they could have gotten by staying close to home.

Finally, the Operating Agreement should explain the circumstances under which an investor can sell, transfer or assign their interest in the production, explain termination and dissolution of the LLC, and when and how the investors can amend the Operating Agreement.

Private Placement Memorandum (PPM)

The PPM is a document that explains all the pro’s and con’s of investing in this particular film project, with a heavy emphasis on the con’s. This document is intended to outline the risks of investing. It is designed to make sure the investor is fully informed about the risks that they may lose their investment, and to protect the producers from being sued later by investors who never got paid back their investment, which frequently happens in film production. The PPM should include disclosures about what the project is, an explanation of how the production will operate, how the investment funds will be spent, what kinds of investors should invest, risk factors, limitations on selling their shares, estimated production budget summary, etc.  In short, the PPM provides an extra layer of comprehensive disclosures which makes sure the investment is as transparent as possible.

The PPM offering is usually held open for a limited period of time, often under a year.  The PPM is designed to comply with state and federal securities laws which can be very difficult to satisfy, so be sure to work with an attorney to make the required filings with the SEC and register in jurisdictions outside of California if necessary.

Purchase Offer

The Purchase Offer is the contract for the actual purchase of a share or shares of the film production.  The Purchase Offer also often provides investors and producers with the option for whether the funds invested will be immediately available, or only available after all funds are raised. Typically, the investor’s funds go into an escrow account which only become available to the producer after all funds for the film have been raised. The Purchase Offer is generally a much shorter document which summarizes a number of the disclosures which are provided in greater detail in the PPM.

The above may sound simple and straightforward, but it’s important to understand that forming the legal entity for an independent film production is fraught with pitfalls and risks.  This is one area where no producer should cut corners. If putting together an independent film was easy, a lot more people would leave their jobs and give it a shot.  The best bet is to consult an attorney for detailed advice to make sure the production is well constructed and the film is given its best chance at becoming a hit.

John Corcoran is an Associate with Plastiras & Terrizzi law firm in San Rafael, California (Marin County).  He grew up around the movie industry as the son of a TV film critic, and briefly worked in the industry before going to law school. He advises clients on various small business, real estate, and civil litigation matters.  John may be reached at jcorcoran@ptlegal.com or (415) 472-8100 x211.