The Fastest Way to Secure and Collect a Debt

January 9, 2012

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

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How to Assemble a Team of Trusted Small Business Advisors

July 13, 2011

Any small business owners knows that it is vitally important when running your own business to assemble a top-notch team around you. No matter how skilled you are, you need a team of trusted small business advisors if the business is going to be a success.

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.

 


Creditors Can Recover Money Owed in Bankruptcy

October 10, 2010

U.S. bankruptcies are on the rise nationwide.  In fact, U.S. consumer bankruptcies could top 1.6 million this year.  The most common reasons for filing personal bankruptcy are bad mortgage debt, credit card debt, medical bills and divorce.

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. Read the rest of this entry »


Look Out, Jerry Maguire: New California Law Would Change Rules Regulating Sports Agents in California

August 2, 2010

Hey Jerry Maguire: help me, help you.

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.
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Congress Approves $1 Billion for Homeowners Who Need Help Paying Mortgages

July 29, 2010

Homeowners facing a job loss or health problem who need short-term help making mortgage payments will be pleased to know that Congress included a $1 billion provision in the Wall Street reform bill which is aimed at helping homeowners with their mortgages.

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.

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Update: Still No Decision on Major Medical Marijuana Case

July 26, 2010

Earlier this year, we reported on the case of Qualified Patients Association v. City of Anaheim, which is pending with the California Court of Appeal.  The case concerns whether the City of Anaheim’s ordinance banning medical marijuana dispensaries is valid, or if it is preempted by California’s Compassionate Use Act and Medical Marijuana Program (also known as Prop. 215, which passed in 1996).

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

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Verbal Promise by Mortgage Lenders May Be Enforceable

July 25, 2010

There has been significant activity recently which may impact mortgage lenders’ practices which contributed to the current real estate downturn.

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

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