Thursday, March 27, 2014

Bankruptcy: Rendering Judgments Useless Since 1800

As always, before reading this post please review my disclaimer by clicking on the link above or by clicking on this link.  As always, any legal principles discussed apply only to the Commonwealth of Virginia.

Introduction

One day, in the course of your business dealings, you sign a contract with someone.  They breach that contract, you sue them and you win a substantial judgment.  You've ready my blog post about how to actually collect on a judgment, and filed to garnish the other party's wages.  Then, all of the sudden, you receive a notice that the other party has filed for bankruptcy.  So, your questions become, what must you do now, and what does the bankruptcy mean for your judgment?

Before I begin this post, I would point out I am not a bankruptcy attorney.  As a result, this post will not be getting into the details of every rule and exception that applies in bankruptcy.  Nonetheless, there are some rules that every civil litigation attorney must know about bankruptcy, and every person involved in civil litigation should know.  I will be covering those today.

The Automatic Stay

The first, and probably most important, thing that you need to do when you get that bankruptcy filing notice is ensure that you are honoring what is known as the "automatic stay."  When a person files for bankruptcy, no person is allowed to take any legal action against that person, or any action to collect on a debt against that person (except within the context of the bankruptcy case itself).  This is called the "automatic stay" because anything that is already in progress gets stayed (delayed indefinitely).

Now, this is very important to understand because the penalties for violating the automatic stay can be serious.  You, yourself, can be fined a substantial amount of money if you knowingly violate the automatic stay.  Now, of course, the key word there is "knowingly."  You cannot violate the automatic stay until you know about it, so if the bankrupt person fails to ever send you notice, then that's on them.  Bankruptcies are rarely filed pro se, however, and any decent bankruptcy attorney is going to make sure every relevant person is notified.

Once you are notified, it is on you to make sure you are not violating the automatic stay, not on the court, not on the bankrupt individual.  If you have an ongoing lawsuit against a person, you need to inform the court about the bankruptcy immediately, where the court will then halt the proceedings.  In the garnishment example I listed above, that is a legal action to collect on a debt, so you must immediately file with the court to dismiss the garnishment proceedings.

Now, as a practical matter, while I used the word "knowingly," the word actually used in the Bankruptcy Code for violation of the automatic stay is "willingly."  This is a bit of an important distinction because this means you can still be ok if you are knowingly violating the automatic stay but that violation is not willful.  Say you get the notice while you are horribly ill and can't make it to the courthouse for two weeks to let them know - then your violation of the automatic stay is not willful, and you should be ok.  Nonetheless, it is always in your best interest to honor the automatic stay as fast as possible.

Next Steps

Your next step is to monitor the bankruptcy case.  The easiest way to do this is to go to http://www.pacer.gov and sign up to get an account.  Once you do, you can follow all the filings in the relevant bankruptcy case.  This is important, because if the case is dismissed without a "discharge," then the case has no effect on your judgment and you can get right back to your garnishment as soon as the case ends.  It will also help you make sure that the debt to you is listed properly (for example, if you have recorded your judgment in the judgment lien docket and the debtor owns real property in the county where you recorded, your judgment should be listed as a secured debt, not an unsecured debt).  If you do notice an error with how your judgment is treated, you should contact the debtor's attorney and the bankruptcy trustee to let them know.  Chances are the debtor's attorney will amend their "schedules" to get it right.  If they don't, however, you may wish to consult with a bankruptcy attorney about challenging the bankruptcy filing.

Should I Attend the Meeting of Creditors?

One thing you will see in your bankruptcy notice is information about a "meeting of creditors."  This is a meeting at the bankruptcy trustee's office where creditors can go, if they wish, and ask the debtor questions to try to find out if the debtor has any assets that were not properly disclosed.  Unless you know the debtor pretty well and have an idea of questions to ask, attending the meeting of creditors is generally not worth it.  For me, in all my time handling collections matters, I've attended a meeting of creditors once.

Should I Object to the Discharge?

Now, one of the toughest decisions to make is whether to let the debt go to discharge, or to fight the discharge of your debt.  The fact is, for judgments, most judgments can be and will be discharged, so there is usually little value in fighting your discharge unless you believe you fit into one of the few nondischargeable categories.  These include things like your judgment being for unpaid student loans, or a debt accumulated due to fraud of false representation.  In the contract example I started with, unless you can prove that the person never intended to pay you when he signed the contract, chances are your debt is fully dischargeable.  Nonetheless, this is again an area where you may wish to consult with a bankruptcy attorney before deciding for sure.

Effect of a Discharge on my Judgment

So, let's say you don't object, and the case goes as most individual bankruptcies go - there is no non-exempt property to distribute, and the creditors get nothing, while all debts are discharged.  When a debt is discharged, that means it is no longer considered owed, and you cannot attempt to collect it.  This is true for judgments regardless of whether or not the judgment was secured by a lien.  Once the judgment is discharged, it is (almost, see below) completely uncollectable.

What About the Lien?

So, let's say you're one of those rare judgment creditors who happened to have a judgment debtor who owned real property and you recorded your judgment prior to the bankruptcy filing.  That gives you a lien on the debtor's property.  Liens are not automatically discharged in bankruptcy, and unless avoided (I will get to that in a moment), your lien will survive the bankruptcy.  What that means is, while you cannot take action to collect on your judgment anymore, the lien remains, so when, eventually, the debtor sells his property, he will have to satisfy your lien.

Now, the exception to this rule is if your lien is "avoided" in bankruptcy.  Bankruptcy allows a judgment debtor to avoid judicial liens in certain circumstances.  Unfortunately, those circumstances are almost always applicable when someone is bankrupt (for example, one of the circumstances is basically having minimal equity in the real property).  That being said, the debtor must actively move to avoid the lien, so failing to take that active step allows the lien to remain.  Further, there may be grounds for you to oppose the avoidance of your lien, so if such a motion is filed, you should really consult with a bankruptcy attorney.

Conclusion

As an attorney who practices collections law, bankruptcies are generally the bane of my existence.  I would estimate anywhere between 30-50% of my collections cases in any given year end with the debtor declaring bankruptcy and my client never seeing a dime as a result.  Nonetheless, options do exist to help protect you.  If you are involved in a collection and fear a bankruptcy may be coming, please feel free to call (703)281-0134 or e-mail me at SLeven@thebaldwinlawfirm.com to set an initial consultation to see if this a good matter for us to represent you.  Our initial consultations are free for up to half an hour!

Thursday, March 20, 2014

Another short hiatus

Hi all.  Looks like my household has been hit by some form of illness/plague, so as I'm barely able to work at the moment, a blog post just isn't happening.  Stay tuned for next week's post, though!

Thursday, March 13, 2014

Appeals in Virginia: A Brief Overview of the Appellate Process in Virginia

As always, before reading this post please review my disclaimer by clicking on the link above or by clicking on this link.  As always, any legal principles discussed apply only to the Commonwealth of Virginia.

Introduction

Most people with even the most basic of knowledge of our court system know that when you lose in a trial court, the option exists to appeal the ruling to the higher court.  Unfortunately, most people's knowledge starts and ends there.  Many people do not know when to appeal, to what court to appeal, or how an appeal actually functions.  I hope to begin to discuss that today.

The topic of appellate litigation is very complicated, and will probably warrant many posts from me.  For my first post on the topic, however, I wanted to do a quick and dirty overview.  As a result, know that this post is very limited in terms of what it covers.  Today I will be covering what you appeal to what court, what kind of lawyer you need in each court, what kind of hearing or trial will happen at the appellate level, and appeal bonds (an amount you have to pay to appeal).  I will also cover the difference between appeals "of right" and "petitions for appeal."

What Kind of Attorney Should I Have?

While it may not be obvious, not every trial attorney actually practices appellate litigation.  Moreover, there are many rules and procedures in the various appellate courts that would make it very dangerous to hire an attorney who does not have much experience in appellate practice.  As a result, it may be worth it to consider hiring someone who actually calls themselves an appellate litigator.  There are two kinds of appellate litigators - ones who exclusively do appeals, and ones who regularly do appeals, but also do trials.  The ones who exclusively do appeals will generally know the ins and outs of the appellate system better.  The ones who do both will have less thorough knowledge of the appellate litigation system, but still usually enough to get through the pitfalls, and can bring the benefit of knowing more about the specific fields of law in which they do trial practice.

As an attorney who practices both appellate and trial litigation, I will admit to being biased in favor of such attorneys.  Nonetheless, some of the exclusively appellate litigation attorneys I know are unbelievably good at what they do - and best of all, if it's an area of law they are unfamiliar with, they'll usually tell you up front.  Ultimately, you have to decide what is best for you.

As a final note, I am discussing here appeals to the Court of Appeals and Supreme Court of Virginia, not appeals to the Circuit Court, for reasons that will become obvious below.

Who Appeals to What Court?

As you may glean from above, in Virginia we have three courts that can be considered "appellate courts" - your local Circuit Court, the Virginia Court of Appeals, and the Supreme Court of Virginia.  Hovering over them all, of course, is also the U.S. Supreme Court.

Practically any judgment can be appealed.  There are exceptions, and the rule that a judgment must be "final" (a rule probably worthy of its own post) before it can be appealed make some rulings practically unappealable, but at the end of a case, you can pretty much always file an appeal.  Appeals go as follows:

Any criminal or civil case from the Juvenile and Domestic Relations District Court gets appealed to the local Circuit Court.  Any criminal case from the General District Court gets appealed to the local Circuit Court.  Any civil case from the General District Court, where there is a difference of at least $50 between what the appellant wants and what was awarded, gets appealed to the local Circuit Court.  Any decision by a Virginia or local administrative agency (not including the Workers Compensation Commission) gets appealed to the local Circuit Court.

Any criminal case except for death penalty cases in the Circuit Court gets appealed to the Court of Appeals.  Domestic Relations (family law) cases in the Circuit Court get appealed to the Court of Appeals.  Decisions by the Circuit Court on appeals of administrative agency rulings get appealed to the Court of Appeals.  Any decision by a Circuit Court regarding the medical or mental health treatment of a prisoner gets appealed to the Court of Appeals.  Some decisions by the Circuit Court relating to religious freedom issues get appealed to the Court of Appeals.  Finally, any ruling from the Workers Compensation Commissions gets appealed to the Court of Appeals.

Any imposition of the death penalty in the Circuit Court gets appealed to the Virginia Supreme Court.  All civil cases in the Circuit Court other than domestic relations (family law), administrative agency appeals, and prisoner health treatment decisions get appealed to the Virginia Supreme Court.  Finally, all decisions by the Court of Appeals can be appealed to the Virginia Supreme Court.

Lastly, any Virginia Supreme Court decision, Court of Appeals decision where a petition of appeal was denied by the Virginia Supreme Court, or Circuit Court decision where a petition of appeal was denied by the Court of Appeals and/or Virginia Supreme Court, can be appealed to the United States Supreme Court.

Appeal "of Right" vs. "Petition for Appeal"

So, reading the above, you might think our appellate courts get somewhat flooded by appeals.  This is not the case, however, because many appeals are not appeals "of right," but rather petition appeals.  An appeal of right is an appeal that the appellate court must hear - so they get a full blown appeal in front of them.  A petition for appeal, however, allows the court to decide, usually based on the decision of a small number of judges, whether or not a case warrants hearing a full appeal.  The denial of a petition, then, has no precedential value for the future, and does not mean the appellate court is saying the lower court got it right - just that it does not wish to hear the appeal.

So, which cases are appeals "of right" versus "petitions"?  The basic breakdown for that is as follows:

All appeals to the local Circuit Court are appeals of right.

Appeals to the Court of Appeals of domestic relations cases, administrative agency decisions, and appeals from the Workers Compensation Commissions are appeals of right.  All other appeals to the Court of Appeals (including criminal convictions) are petition appeals.

Appeals to the Virginia Supreme Court from the imposition of the death penalty are appeals of right.  All other appeals to the Virginia Supreme Court (including non-domestic relations civil cases) are petition appeals.  It's also worth noting that in order for a petition for appeal from the Court of Appeals to the Virginia Supreme Court to be granted, the Virginia Supreme Court must additionally find that the issue from the Court of Appeals is one of significant importance and precedential value to Virginia law - so Court of Appeals cases are very rarely successfully appealed to the Virginia Supreme Court.

Finally, while the system is not identical federally, the United States Supreme Court is almost entirely a "petition" type system.  They hear less than 1% of all cases appealed to them, so your chances of getting heard are pretty slim.  Moreover, you have to have an issue relating to federal law (so not "the court is misinterpreting this state law") to even get considered by the Supreme Court.

Types of Appellate Hearings

So, the next question to consider is - what kind of hearing will there be on appeal?  Appeals to the United States Supreme Court, Virginia Supreme Court, and Court of Appeals are very similar.  An attorney will appear before a panel of judges and make arguments for a set period of time.  Evidence will not be taken, witnesses will not be on the stand - usually the clients aren't even there.  This is one of the reasons why having an appellate litigator as your attorney - it requires a different skill set than a trial litigator.

Appeals to the Circuit Court are different.  These appeals are called trials "de novo."  In other words, you have a whole new trial in the Circuit Court.  The Circuit Court is not even supposed to be told what happened in the lower court (though usually they can figure it out) and nothing from the lower court can be used as evidence, except for prior inconsistent statements if a witness says something in the Circuit Court after having said something different below.  This is why continuing to have a trial lawyer at the Circuit Court generally makes sense.

Appeal Bonds

One of the realities of the modern court system is that our court administrators, legislators, and just about everyone else wants to decrease the volumes of cases.  As a result, we have a built-in system that helps discourage appeals, but also strongly favors plaintiffs over defendants in civil cases.  This is the appeal bond system.

In any appeal, you must pay an appeal bond.  This is money paid to the court so that it is available if the court rules against you on appeal.  For plaintiffs, this bond is usually pretty low - about $100-200 in appeals to the Circuit Court, and $500 in appeals to the Court of Appeals and Virginia Supreme Court.  For defendants, however, they generally have to pay the full amount they were ordered to pay by the lower court in appeals to the Circuit Court (if you just lost a child support ruling, for example, which found you now owed an arrearage of $50,000, you've got to come up with $50,000 to appeal that ruling).  Appeals to the Court of Appeals and Virginia Supreme Court can still be bonded at $500, but that does not suspend the lower court order (so garnishment of your wages can still happen).  If you want to actually suspend the order, you again have to come up with the full amount.

Conclusion

Today's post covered some of the very basics in appellate litigation in Virginia.  In the future I hope to delve into more detail about the various types of appeals to the various courts.  If you are planning to file an appeal, or defending against an appeal, and would like some legal assistance, please feel free to call (703)281-0134 or e-mail SLeven@thebaldwinlawfirm.com to set up a consultation.  Our initial consultations are free for up to half an hour!

Thursday, March 6, 2014

Virginia Step-Parent Adoption: Completing the Family

As always, please review my disclaimer before reading this post by following the link above or by clicking on this link.  As always, any legal principles discussed apply only to the Commonwealth of Virginia.

Update (4/27/18):  Some of the information contained in this post is now outdated due to changes in the law.  Please see my 2018 Relevant Changes in the Law post for details.

Introduction

In today's world, more and more children are growing up with step-parents.  Step-parents often feel like full parents, yet frequently no one else treats them that way.  Fortunately, for the right situations, the law in Virginia makes it fairly easy for a step-parent to actually legally adopt their step-child.  This can be a very life-affirming, enriching decision, and is one of the most rewarding practices I have engaged in during my legal career.  In today's post, I hope to discuss what situations warrant a step-parent adoption, how the process differs from a "normal" adoption, and some considerations.

When A Step-Parent Can Adopt

The situations in which a step-parent can adopt a minor step-child are laid out in Virginia Code Section 63.2-1241.  There are two conditions required for a step-parent adoption.  First, the spouse of the step-parent (so, the biological or adoptive parent of the child whose marriage makes the step-parent a step-parent) must consent to the adoption and indicate that consent by actually joining the step-parent's petition.  The second condition is that one of the following eight situations must apply:
  1. The second birth parent or adoptive parent is dead,
  2. The second birth parent or adoptive parent consents to the adoption,
  3. The second birth parent is the father of the child and he denies paternity,
  4. The first birth parent is the mother and she swears under oath that she does not know who the father is and that his identity cannot reasonably be discovered,
  5. The child is the result of surrogacy and the second birth parent consents to the adoption,
  6. The step-parent's spouse is the adoptive parent of the child, was unmarried at the time of the adoption, and as a result there is no other parent,
  7. The child is at least 14 years old and has lived in the step-parent's home for at least five years, or
  8. The second birth parent or adoptive parent does not consent to the adoption, but the Circuit Court, after a hearing, determines that the second parent's refusal to consent to the adoption is contrary to the best interests of the child.
Now, it should be noted that by far the most common situations for step-parent adoptions are situations 1 and 2 above, but it is worth noting that the other possible situations exist.  Because of their infrequency, I will not cover situations 3 through 7 in this blog post, but the process I describe below will be largely similar for those situations - there just may be one or two minor differences.  While situation 8 is also rare, it is the only one that likely requires a court appearance, and so I do think it is worth covering briefly.

Second Parent Refuses Consent for Adoption

The adoption of your child by someone else terminates your rights as a parent of that child.  As far as the law is concerned, you are no longer that child's parent.  You get no visitation rights, no elder support rights, no inheritance rights, no hospital visit rights, and the list goes on.  As a result, for many parents, the thought of a child's step-parent (who is a step-parent due to marriage with the other parent) is not something the parent can support.  Unless situation 7 above applies, however, the parent's refusal to consent to the adoption will probably prevent the adoption.  Even if situation 7 does apply, the parent can still step in and object, and there is a reasonable chance they can still prevent the adoption.

There is a public policy in Virginia that it is always in a child's best interest to have a relationship with both parents, and "primary consideration" is given to the birth parents.  This means that, where there is no consent, the court will likely not approve a step-parent adoption, removing one of the biological parents from the picture, unless there is some evidence that the other parent is actually unfit to remain a parent.  This could be something like abuse, neglect, or desertion.  If the other parent hasn't utilized his visitation in 8 years, then that's one thing.  If the other parent is still a part of the child's life, however, either with or without court-ordered visitation, it is just extremely unlikely a court will find that the refusal of consent was not in the child's best interest.

As a result, the main reason that this situation is so rare is that adoptions in this situation are rarely successful.  If the other parent cares enough to object, the chances are the other parent has remained involved enough to prevent the adoption and so no adoption will even be attempted.  If the other parent is so uninvolved in the child's life as to warrant an adoption over that parent's objection, usually the other parent will either consent to the adoption, or not respond to the petition for adoption (which gets treated as consent).

Process Basics

A step-parent adoption, process wise, is dramatically different from a "normal" adoption.  There is no home study done, no guardian ad litem appointed for the child, no report from the Department of Social Services, rather the process is extraordinarily simple.  Specifically, the step-parent and the step-parent's spouse must submit their petition to the circuit court for the county or city in which they reside, along with evidence that one of the eight conditions above applies (death certificate for 1, signed affidavit of other parent for 2, etc.), a draft Final Order of Adoption, a completed Virginia State Form VS-21, and the applicable filing fees.  As long as all paperwork is completed properly, unless the Court feels that further investigation is required (very rare), the Final Order of Adoption should be signed and returned to you within a matter of three or four weeks.  The adoption is official as of the date of signing the Final Order of Adoption, and like all adoptions in Virginia the records of the adoption are sealed.

Some Considerations:  Child Support

One of the first things you need to be aware of before deciding to do a step-parent adoption is the adoption's effect on child support.  If your spouse is receiving child support from the child's other parent, you should be aware that the other parent will be in his or her rights to terminate child support immediately upon the completion of the adoption.  This is because once that parent is no longer legally considered a parent, that parent's duty to support the child ends with the ending of that person's parentage.  If your family relies on child support to help make ends meet, this is something to seriously think about before doing a step-parent adoption.

Some Considerations:  Other Relatives

Another factor to consider is that step-parent adoption is different from other adoptions in terms of its impact on other family members.  Specifically, in a normal adoption, family members of the parent(s) giving up the child are also no longer considered family, and as such have no family rights at all.  Virginia Code Section 63.2-1215, however, carves out an exception for step-parent adoptions.  In the case of step-parent adoptions, only the rights of the other parent are terminated, but the rights of that parent's family members are not - meaning that, legally speaking, the child retains his or her former grandparents, uncles, aunts, siblings, etc.  This is important because those family members retain the right, if they believe the situation warrants it, to sue for visitation with, and even custody of the child.  The child, however, also retains his or her inheritance rights from those family members, along with hospital visitation rights, and other legal advantages given to familial relationships.  It is also important to note that this exception largely does not go the other way.  The child, specifically, will not owe any duty to those family members that he or she may have without the adoption.

A Note About Adult Adoption

So, let's say you decide you can't afford to give up child support, or the other parent objects to the adoption and you know you cannot win over that parent's objection, but you still want to adopt the child some day.  Most people do not realize that you actually can, in some circumstances, adopt as your legal child an adult.  There are legal benefits to a parent-child relationship that extend beyond the minority of the child - hospital rights, inheritance rights, tax treatments, etc. - and as a result, Virginia has created laws that allow for adult adoption.

There are four situations in which an adult adoption is allowed, two of which apply here.  Specifically, adult adoption is allowed by a step-parent who has acted "in loco parentis" (in place of the parents) for at least three months, or by a step-parent (or other adult, for that matter) in whose house the child had resided for at least three months prior to turning eighteen.

Now, if one of those conditions is met (and pretty much any step-parent who would want to do an adult adoption will at least meet one of them), because the child is now considered an adult, the court's paternalistic instincts are gone.  Instead, only one question is asked - does the child consent to the adoption?  If the answer is yes, the adoption will be approved no matter who else objects, even if both natural parents object.  The only exception would be if it is proven that the child, while an adult, still lacks the mental capacity to make such a choice (a very hard thing to prove).  If the answer is no, then the court is absolutely barred from granting the adoption.

Conclusion

While the process for a step-parent adoption in Virginia is easy, the paperwork is complicated and hard to get right.  As a result, it is a good idea to have an attorney when going through this process.  If you are interested in a step-parent adoption, or in objecting to a step-parent adoption, please feel free to call (703)281-0134 or e-mail me at SLeven@thebaldwinlawfirm.com to set up an initial consultation.  Our initial consultations are free for up to half an hour!