2012 BASIC SKILLS IN VERMONT PRACTICE & PROCEDURE. Debtor-Creditor Law

Transcription

1 Vermont Bar Association Seminar Materials 2012 BASIC SKILLS IN VERMONT PRACTICE & PROCEDURE Debtor-Creditor Law August 23 & 24, 2012 Windjammer Conference Center South Burlington, VT Faculty: Jennifer Emens-Butler, Esq. Tavian M. Mayer, Esq. Grace B. Pazdan, Esq.

2 Debtor-Creditor Law The Creditor s Perspective August 23, 2012 Vermont Bar Association Tavian M. Mayer Mayer & Mayer South Royalton, Vermont tavian@mayerlaw.com

3 General Considerations Dignity and respect for all FDCPA 15 U.S.C p Consumer Fraud Statute 9 V.S.A r Attorney General Consumer Fraud Rules

4 Sources of Law Vermont Vermont Statues Annotated: Title 9 - Commerce and Trade Title 27 - Property Title 12 - Court Procedure Vermont Rules of Civil Procedure Federal -Title 11 United States Code: Bankruptcy -Federal Rules of Bankruptcy Procedure -Vermont Local Bankruptcy Rules

5 Exemptions Real Estate Homestead: own and occupy 27 V.S.A. 101, $125, Limitations Consensual liens After Acquired Property In re June Lewis -In re Holly Nunn

6 Exemptions 12 V.S.A 2740 LIST OF EXEMPTIONS The following is a list of potentially applicable rights of a debtor to exemption from trustee process, attachment, or other seizure to satisfy a court judgment. This list contains only the more common exemptions. It is not intended to be exhaustive. For more information, contact an attorney. 1. Social Security and Supplemental Security Income (SSI) (42 U.S.C. 407 and 1383) 2. Veteran's Benefits. (38 U.S.C. 5301) 3. Unemployment Compensation Benefits. (21 V.S.A. 1367) 4. Pension Benefits. (29 U.S.C. 1056(d); 45 U.S.C. 231(m); 5 U.S.C 8346), also, self-directed retirement accounts, not to exceed $10,000 per debtor. (12 V.S.A (16)) 5. Workers' Compensation Benefits. (21 V.S.A. 687)

7 Exemptions Welfare or Public Assistance Benefits. (33 V.S.A. 124) 7. Insurance Payments from Fire Insurance, Life Insurance, Disability Insurance or Annuity Contracts; Fraternal Benefit Society Benefits. (8 V.S.A ,4478; 12 V.S.A. 3020) 8. As to wages: 75% of disposable earnings, or 30 times the federal minimum wage, whichever is greater. (If this is a consumer credit transaction, the exemption is 85% of disposable earnings or 40 times the federal minimum wage, whichever is greater.) (12 V.S.A. 3170; Vermont Rules of Civil Procedure 4.2). 9. A debtor's homestead, up to a limit of $125,000 in value. (27 V.S.A. 101) 10. A debtor's interest, not to exceed $700 in value, bank deposits or deposit accounts of the debtor. (12 V.S.A (15)) 11. A debtor's interest, not to exceed $2,500 in aggregate value, in a motor vehicle or motor vehicles. (12 V.S.A 2740(1))

8 Exemptions A debtor's interest, not to exceed $5,000 in aggregate value, in professional trade books or tools of the profession or trade of the debtor or a dependent of the debtor. (12 V.S.A. 2740(2)) 13. A wedding ring of any value, or a debtor's interest, not to exceed $500 in aggregate value. In other jewelry held primarily for personal, family or household use of the debtor or a dependent of the debtor. (12 V.S.A. 2740(3), (4)) 14. A debtor's interest, not to exceed $2500 in aggregate value, in household furnishings, goods or appliances, books, wearing apparel, animals, crops or musical instruments that are held primarily for the personal, family or household use of the debtor or a dependent of the debtor. (12 V.S.A. 2740(5)) I5. A debtor's aggregate interest in any property not to exceed $400 in value, plus up to $7000 or any unused amount of the above-described exemptions for motor vehicles, tools of trade, jewelry or household items. ( 12 V.S.A. 2740(7)) 16. All other exemptions for a debtor as set forth in Title

9 Attachments Pre Judgment- V.R.C.P. 4.1 Real estate, personalty On notice or ex parte Reasonable likelihood of success on the merits No bond or other security available to satisfy any judgment rendered Ex Parte, if

10 Replevin Pre Judgment -V.R.C.P. 4.2 Utilized when property is to be recovered from debtor upon a perfected security agreement Usually for secured parties who cannot effectuate self help repossession of secured property as provided by UCC, Article 9 Bond can be required Cannot be used on a mobile home residence if pre judgment

11 Trustee Process Pre judgment/post Judgment - V.R.C.P. 4.2 Utilized when debtor s property is in the hands of a third party Bank deposits, money owed Trustee process against wages is a specialized form, with federal caps on how much can be protected by debtor. Limited to post judgment situations.

12 Judgments How to obtain them? Jurisdiction, both Vermont and FDCPA obligations Chain of title, if not original creditor Affidavit of amounts due Affidavit of non-military service, SSCRA Military downloads required SSN is a critical number Interest: pre judgment if liquidated amount Attorney s fees if provided by contract or statute

13 Judgments How to enforce? V.R.C.P. 69 Executions, Writs Serve the Judgment Order and the Writ Interest accrues at 12% simple, 9 V.S.A. 41a Interest, costs, fees? What gets paid when? Post judgment discovery against debtor and on occasion against third parties.

14 Liens Consensual- mortgages and security interests under Article 9 Statutory Tax liens Contractor s [ mechanics ] Liens 9 V.S.A et seq. Very particular, and must get it exactly right. Notice of lien in land records; writ of attachment obtained and recorded and judgment recorded; final judgment recorded.

15 Liens Judicial Liens usually arising from recording of final judgments 12 V.S.A. 2901, et seq. Final Judgment, certified to be a true copy and that the judgment is final and recorded in land records where debtor owns property or may come to own property. Enforcement usually through foreclosure

16 Executions Judgments, Writs, Sheriffs Bank attachments, trustee process and liens DMV provision on non renewal of MV license for judgment arising from uninsured accidents. Renewal of Judgments 12 V.S.A. 506 Must be by action within the 8 years allotted Change here, believe to be on continuation of attachment. Old style was you had to have your renewed judgment recorded before the 8 years ran. Now believe sufficient to record the complaint that seeks to renew the judgment.

17 Debtor-Creditor Law The Creditor s Perspective August 23, 2012 Vermont Bar Association Tavian M. Mayer Mayer & Mayer South Royalton, Vermont tavian@mayerlaw.com General Considerations Dignity and respect for all FDCPA 15 U.S.C p Consumer Fraud Statute 9 V.S.A r Attorney General Consumer Fraud Rules Sources of Law Vermont Vermont Statues Annotated: Title 9 - Commerce and Trade Title 27 - Property Title 12 - Court Procedure Vermont Rules of Civil Procedure Federal -Title 11 United States Code: Bankruptcy -Federal Rules of Bankruptcy Procedure -Vermont Local Bankruptcy Rules

18 Exemptions Real Estate Homestead: own and occupy 27 V.S.A. 101, $125, Limitations Consensual liens After Acquired Property In re June Lewis -In re Holly Nunn Exemptions 12 V.S.A 2740 LIST OF EXEMPTIONS The following is a list of potentially applicable rights of a debtor to exemption from trustee process, attachment, or other seizure to satisfy a court judgment. This list contains only the more common exemptions. It is not intended to be exhaustive. For more information, contact an attorney. 1. Social Security and Supplemental Security Income (SSI) (42 U.S.C. 407 and 1383) 2. Veteran's Benefits. (38 U.S.C. 5301) 3. Unemployment Compensation Benefits. (21 V.S.A. 1367) 4. Pension Benefits. (29 U.S.C. 1056(d); 45 U.S.C. 231(m); 5 U.S.C 8346), also, self-directed retirement accounts, not to exceed $10,000 per debtor. (12 V.S.A (16)) 5. Workers' Compensation Benefits. (21 V.S.A. 687) Exemptions Welfare or Public Assistance Benefits. (33 V.S.A. 124) 7. Insurance Payments from Fire Insurance, Life Insurance, Disability Insurance or Annuity Contracts; Fraternal Benefit Society Benefits. (8 V.S.A ,4478; 12 V.S.A. 3020) 8. As to wages: 75% of disposable earnings, or 30 times the federal minimum wage, whichever is greater. (If this is a consumer credit transaction, the exemption is 85% of disposable earnings or 40 times the federal minimum wage, whichever is greater.) (12 V.S.A. 3170; Vermont Rules of Civil Procedure 4.2). 9. A debtor's homestead, up to a limit of $125,000 in value. (27 V.S.A. 101) 10. A debtor's interest, not to exceed $700 in value, bank deposits or deposit accounts of the debtor. (12 V.S.A (15)) 11. A debtor's interest, not to exceed $2,500 in aggregate value, in a motor vehicle or motor vehicles. (12 V.S.A 2740(1))

19 Exemptions A debtor's interest, not to exceed $5,000 in aggregate value, in professional trade books or tools of the profession or trade of the debtor or a dependent of the debtor. (12 V.S.A. 2740(2)) 13. A wedding ring of any value, or a debtor's interest, not to exceed $500 in aggregate value. In other jewelry held primarily for personal, family or household use of the debtor or a dependent of the debtor. (12 V.S.A. 2740(3), (4)) 14. A debtor's interest, not to exceed $2500 in aggregate value, in household furnishings, goods or appliances, books, wearing apparel, animals, crops or musical instruments that are held primarily for the personal, family or household use of the debtor or a dependent of the debtor. (12 V.S.A. 2740(5)) I5. A debtor's aggregate interest in any property not to exceed $400 in value, plus up to $7000 or any unused amount of the above-described exemptions for motor vehicles, tools of trade, jewelry or household items. ( 12 V.S.A. 2740(7)) 16. All other exemptions for a debtor as set forth in Title Attachments Pre Judgment- V.R.C.P. 4.1 Real estate, personalty On notice or ex parte Reasonable likelihood of success on the merits No bond or other security available to satisfy any judgment rendered Ex Parte, if Replevin Pre Judgment -V.R.C.P. 4.2 Utilized when property is to be recovered from debtor upon a perfected security agreement Usually for secured parties who cannot effectuate self help repossession of secured property as provided by UCC, Article 9 Bond can be required Cannot be used on a mobile home residence if pre judgment

20 Trustee Process Pre judgment/post Judgment - V.R.C.P. 4.2 Utilized when debtor s property is in the hands of a third party Bank deposits, money owed Trustee process against wages is a specialized form, with federal caps on how much can be protected by debtor. Limited to post judgment situations. Judgments How to obtain them? Jurisdiction, both Vermont and FDCPA obligations Chain of title, if not original creditor Affidavit of amounts due Affidavit of non-military service, SSCRA Military downloads required SSN is a critical number Interest: pre judgment if liquidated amount Attorney s fees if provided by contract or statute Judgments How to enforce? V.R.C.P. 69 Executions, Writs Serve the Judgment Order and the Writ Interest accrues at 12% simple, 9 V.S.A. 41a Interest, costs, fees? What gets paid when? Post judgment discovery against debtor and on occasion against third parties.

21 Liens Consensual- mortgages and security interests under Article 9 Statutory Tax liens Contractor s [ mechanics ] Liens 9 V.S.A et seq. Very particular, and must get it exactly right. Notice of lien in land records; writ of attachment obtained and recorded and judgment recorded; final judgment recorded. Liens Judicial Liens usually arising from recording of final judgments 12 V.S.A. 2901, et seq. Final Judgment, certified to be a true copy and that the judgment is final and recorded in land records where debtor owns property or may come to own property. Enforcement usually through foreclosure Executions Judgments, Writs, Sheriffs Bank attachments, trustee process and liens DMV provision on non renewal of MV license for judgment arising from uninsured accidents. Renewal of Judgments 12 V.S.A. 506 Must be by action within the 8 years allotted Change here, believe to be on continuation of attachment. Old style was you had to have your renewed judgment recorded before the 8 years ran. Now believe sufficient to record the complaint that seeks to renew the judgment.

22 FORECLOSURE IN VERMONT Basic Skills Training 8/23/12

23 Foreclosure Law in Vermont Relevant law found at 12 V.SA , 12 V.S.A (foreclosure mediation) and VRCP 80.1 Types of foreclosure in Vermont Strict Foreclosure Foreclosure by judicial sale Foreclosure by non-judicial sale (commercial properties) Residential foreclosures by judicial sale unless plaintiff can prove defendant has no equity and plaintiff requests strict foreclosure Foreclosure is an equitable remedy (See Merchants Bank v. Lambert, 151 Vt. 204 (1991))

24 Foreclosure Procedure I. Summons & Complaint II. III. IV. Verified Answer Default/Summary Judgment Motion Judgment Order & Decree of Foreclosure V. Redemption Period VI. VII. VIII. Certificate of Non-redemption Foreclosure Sale Confirmation/Request for Deficiency * Where applicable, foreclosure mediation can occur any time before certificate of non-redemption

25 Standing Requirements VRCP 80.1(c) now requires Plaintiff to allege standing and attach proof of standing US Bank Nat l Assoc. v. Kimball, 2011 VT 81, holds that to prove standing Plaintiff must show it held the mortgage note prior to filing Under Rule 80.1(g), court cannot grant judgment until Plaintiff files Certification of Counsel attesting that counsel: Communicated with a representative of the plaintiff The representative personally reviewed plaintiff s documents, records, summons, complaint, affidavits in support of foreclosure; The representative has confirmed both the factual accuracy of the filings and the accuracy of the notarizations contained therein

26 Foreclosure Judgment Defendant must file Verified Answer alleging defenses to avoid Default Judgment Plaintiff can move for summary judgment 10 days after service of Answer If Court grants Default/Summary Judgment, clerk takes accounting and Court issues Final Judgment Order & Decree of Foreclosure Order will include: Final accounting of amounts owing Date by which property must be redeemed - typically 6 months from entry of judgment for owner-occupied property Date by which sale must be conducted (statutorily 6 months from end of redemption)

27 Redemption Period Usually 6 month period after foreclosure judgment entered Defendant can redeem interest in property by paying debt in full Plaintiff can request shorter period During Redemption Period the Defendant can: Stay in the home; Refinance (unlikely); Get a loan modification or other workout agreement; Sell the property; File Bankruptcy Chapter 7 Chapter 13

28 Non-Redemption (Strict Foreclosure) In Strict Foreclosure case, if defendant fails to redeem property by end of the Redemption Period: Court issues Certificate of Non-Redemption Plaintiff takes full legal & equitable title to property Plaintiff can get 10 day writ of possession to evict homeowner

29 Foreclosure Sale/Auction In foreclosure by judicial sale, if defendant fails to redeem by end of Redemption Period: Court issues Certificate of Non-Redemption Plaintiff can schedule foreclosure sale with: 30-day post-redemption period notice of sale to defendant w/specific date, time and location of sale 3-weeks of advertising in local newspaper But defendant can redeem by paying debt in full any time prior to foreclosure sale (second redemption period) Plaintiff can request writ of possession any time after redemption period expires (court has discretion)

30 Order of Confirmation: Deficiency or Surplus If property is sold at auction for less than defendant owes, plaintiff can ask the Court for a deficiency judgment at time of Confirmation Defendant may be judgment proof; or Debt could be discharged through bankruptcy * National lenders/servicers almost never seek deficiency If property is sold for more than is owed on the mortgage, court will order plaintiff to pay surplus to defendant at time of Confirmation

31 Foreclosure Mediation 12 V.S.A. s

32 Who Qualifies? Statute s provisions apply only to loans on primary residences subject to the federal Home Affordable Modification Program (HAMP) guidelines Participating mortgage servicers (K w/fed) (Contracts & Agreements) GSE loan (loan backed by Fannie Mae, Freddie Mac, VA, FHA) loan look up tool at: and

33 What is HAMP? HAMP is a loan modification program implemented by Obama administration in 2009 to deal with foreclosure crisis Today, about 90% of all mortgage loans are serviced by a HAMP-participating servicer Participating servicers agree to comply with all program guidelines in exchange for $$ incentives Administration estimated that it would save about 3-4 million homes within 3 years; reality is only about 1 million Program is set to sunset Dec. 31, 2013

34 Basic Eligibility Criteria ( Primary Residence (4 or fewer units) Mortgage equal to or less than $729,750 Financial hardship Mortgage originated before January 1, 2009

35 HAMP Tier 1 & Tier 2 Additional Eligibility Criteria for Tier 1 Original loan payment must be more than 31% of current gross monthly income Additional Eligibility Criteria for Tier 2 Non-Fannie or Freddie Loan Homeowner does not qualify for Tier 1 or defaulted on a Tier 1 modification For both Tier 1 and Tier 2: Homeowner must pass Net Present Value (NPV) Test to qualify for modification NPV test tells the servicer whether owner/investors will benefit more from foreclosure or loan modification Borrower NPV tool found at

36 HAMP Tier 1 Modification Capitalize all that s accrued (except for late fees) to determine unpaid principal balance PITIA (principal, interest, taxes, insurance, and association fees) reduced to equal 31% of the borrowers monthly gross income By lowering interest rate to as low as 2%; Increasing term to as much as 480 months; Deferring up to 30% of unpaid principal balance Fixed for first 5 years After first 5-year period, steps up 1% per year until it hits the Freddie Mac rate at the time of modification (currently 3.66%) Late fees (that normally go to servicer) must be waived Must not require a release or modification fee Must escrow for taxes and insurance

37 HAMP Tier 2 Modification Capitalize accrued interest, escrow, and fees to get unpaid principal balance Fix interest rate at Freddie Mac Rate (rounded to nearest.125%) +.5% Extend term by 480 months and reamortize If Loan-to-Value (LTV) is > 115% forbear the lesser of: 30% of the modified unpaid principal balance, OR Amount needed to bring LTV to 115% Post-modification DTI must be between 25% and 42% (not the standard 31% for HAMP Tier 1) Post modification Principal & Interest payment must be reduced by at least 10%

38 Timing Court must refer case to mediation if eligible homeowner: Enters an appearance in the foreclosure case; OR Requests mediation prior to four months after judgment Unless bank agrees, mediation must be completed prior to the end of the redemption period

39 Mediation Requirements Lender/mortgage servicer must: Consider all available foreclosure prevention tools, including HAMP Produce for homeowner & mediator: Documentation of its consideration of all available foreclosure prevention tools; and HAMP NPV inputs and outcome Homeowner must make good faith effort to get financial documents to lender and mediator 20 days prior to mediation Lender/mortgage servicer pays for mediation

40 Mediation Requirements Cont d Parties that must participate in mediation: Counsel for Plaintiff Homeowner, and counsel if represented Plaintiff or mortgage servicer Plaintiff or its mortgage servicer must have: Real time access to homeowner s account info and records necessary to consider foreclosure prevention options AND Ability and authority to perform the HAMP NPV Mediator can permit a party to participate by phone or allow a nonparty that would assist in mediation Unless otherwise agreed, mediation must take place in the county where the foreclosure action was brought

41 Post-mediation Mediator must file report within 7 days Upon receipt of report, the Court shall determine whether the mortgage servicer complied with: All of its obligations under the mediation statute; and Any modification obligations under HAMP Court can impose sanctions, including prohibiting foreclosure sale if either: the mediator reports failure to attend, mediate in good faith, or provide required documentation or; Court finds noncompliance with mediation statute or HAMP Mediator cannot be required to testify in any hearing under this section