Select Page

Debtor Creditor Rights
University of Iowa School of Law
Bauer, Patrick B.

Part 1 – Collection Remedies
3 hour exam; 1/3 essay and 2/3 MC; 1/3 debt collection and mortgages; 2/3 Art 9. See Cases: 219-231 (Bauer CLE)

1. Intro – If you don’t pay, I can take it away
a. Judgment-proof = Misnomer – can get a judgment against them, just can’t enforce it!

RE

PP

Consensual Lien – agree to give pp interest
– cumulative remedies (NC lien + UCC remedies)

Mtges – d agrees to give c a property interest in RE

Art 9 – revolutionary when passed – built on mtges

N-C Lien – c uses legal process to get lien
– unsecured cà legal processà secured C

Judgment Liens
Execution Liens
§ Lien

Execution liens
§ Lien

b. Goals: Get D to pay; solve disputes btw D and C; avoid fraud; dist assets fairly; coordinate the C recovery
c. Bankruptcy: Collective remedy (v. orderly procedure – automatic stay)
i. bankruptcy is good at final 2 goals: dist’ing assets fairly and coordinating C recovery
ii. all disputes solved at once
d. State law: first in time = first in right!
i. State law’s solve disputes dispute by dispute – bad at final 2 goals!
ii. State law is dominant system! If liquidation of assets appears imminent, D may then file bankruptcy
1. Diligent c’s will always prefer state system – faster, cheaper, local, & lawyers know more
e. Unsecured C: general C’s – don’t have a spec piece of property that they can look to get paid
i. Choices: threats, lumping it, going to court and getting judgment (becoming secured)
f. Unsecured à Secured C: via getting liens (available to all c’s – min collection rights guaranteed to anyone)
g. Vitale– P had 6k judgment against D (bar lessee). Sheriff only got 1levy (for $740) out of a scary bar.
i. H1: levy requests were reasonable; amercement = sheriff must pay debt! (but P just gets new J!)
1. Insert sheriff into this process b/c we’re worried about lobster schemes – conversion!
h. Collection agencies allow smaller c’s to behave like larger c’s – most debts collected by bargaining (threats)
i. Prob 1.1 (p.17) – lisa borrowed $1k from Jeff to buy lawn furniture. Jeff wants $ or furniture!
i. Unsecured c’s can’t engage in self-help! He has no right to her property!
1. File a complaint – $200 filing fee à Personal service (find Lisa) à Must prove it just as you would prove any K action à etc, Get judgment à levy à lien
2. Risk that Jeff will lose suit! Risk that Lisa is judgment-proof! Too costly, too timely
ii. Advice: threaten Lisa that you’re going to take her to court, garnish wages, etc. Or LUMP IT

2. Judgment Formalities
a. Right to Cure for Default under a Consumer Credit K (Ch. 537)
i. § 537.5109 – Default (under terms of consumer credit K) is defined as:
1. failure to make a payment w/I 10 days of time req’d by agreement, or …
a. Must allow 10 days to elapse bf can even call it a default for cc transactions!
ii. §537.5110 – Cure of Default (under terms of consumer credit K)
1. 3 – D has right to cure unless c has given d notice to cure for a prior default w/I 365 days or D has given C collateral in payment of the debt
2. 4.a – After10 days, c must send notice to d and give d right to cure under §537.5111 – c must give d 20 days to cure b/f initiating legal action. Thus, 30 days b/f can even file suit!
3. 4.c – d may cure default by … curing restores D original rights – as if no default occurred.
4. 7 – if c fails to give notice, ct shall dismiss action w/o prejudice
iii. §537.5111 – Notice of Right to Cure – gives specifics (must be in writing) and sample notice form

b. Attorney’s Fees – if cc trans – can’t fee shift = each party must bear own costs

c. Default Judgments
i. IRCP 1.971 – Default [Judgment] = whenever a party: doesn’t answer, doesn’t go to trial …
ii. IRCP 1.972 – Procedure for Entry of Default – if in default, and not disabled or not a prisoner, the clerk shall enter the default in accordance w/ procedures below:
1. C must make written application to clerk to enter default w/ copy of notice
2. C must 1st give 10 days notice (by mail) to D that c is going to file a default judgment
a. in cc transaction, this is in addition to 30 days that elapsed in Art 5
iii. IRCP 1.975 – Published Service –can’t get default by published service! Must have personal service
iv. IRCP 1.973 – Judgment on Default shall be rendered as follows:
1. If have sum certain (easy for clerk to calc) + affidavit re: amount à enter judgment
2. However, if a car accident, must go through more diff process!
v. § 537.5114 – Complaint – if cc trans, complaint must have proof: allege facts of debt, amnt requested, how amnt was calc’d, and affidavit that this is really what’s owed (holds C accountable)
vi. §521 – Protection of Military Service Members Against Default Judgments
1. req’s anyone asking for a default j to file an affidavit saying whether d is in the military
2. if don’t know –post a bond; if it turns out d is in the military, then d can use bond indemnify d
vii. IRCP 1.961- Notes– clerk can’t enter any judgment based on a note until note is first filed w/ clerk for cancellation — Clerk tears up note and then records judgment in record book!
viii. IRCP 1.962 – Affidavit of Identity – c must file affidavit stating d’s name, occupation, and residence
ix. Prob 1 – D owes bank $5k. Bank filed in IA d ct seeking judgment. D failed to respond. What steps must bank take to get DJ? Is there anything that you need to ask bank about D or this transaction?
1. Steps: IRCP 1.972 – application and notice. 10 days after both = default. Verify complaint via affidavit that this is what is owed (1.973), file affidavit of D’s identity (1.962)
2. Q’s: is Danny in military (§ 521)? A prisoner (1.972)? Was D personally served? Was there collateral/was it secured? Is this a business loan? CC trans – right to cure?

d. Post-judgment Interest -After judgment is entered, interest accumulates — Incentive for d to pay!

e. Foreign Judgments – Can’t fork what you can’t find
i. §1738 – Full Faith and Credit
ii. “Domesticate” or “Register” the Judgment!
1. 626A.2 – Filing of Foreign Judgments – Must take copy of judgment to clerk of court where property is and register it! Judgment will have same effect as if it were made in that county.
a. Iowa sheriff has no authority to carry out NY’s laws!
2. 626A.3 – Notice of Filing – Upon filing the foreign judgment, the clerk shall mail notice to d
a. NO EXECUTION until 20 days after the clerk has filed judgment
i. 20 day opportunity for d to be hiding stuff!
3. 626A.4 – Stay (of enforcement of foreign judgment) – if d can show an appeal is pending…
4. 626A.6 – Optional Procedure – c can still bring an action to enforce c’s judgment
iii. F law – v. similar process – governed by §1963
iv. Prob 2:IA D owes NY D $. C sued for breach and personally served D when he was in NY w/ notice of a NY lawsuit. C obtained a $ judgment. D owns no prop in NY but does own 400 acres in Iowa.
1. 626A.2 – file a copy of NY judgment in office of the clerk of district ct in the farmer’s county.
2. 626A.3 – file an affidavit of D’s (and C’s) last known address (clerk will then mail notice to D)

3. Post-Judgment Remedies
a. Judgment Liens – creatures of state law!
i. Lien = property interest on debter’s right in property (d may not actually own property) that must be satisfied bf property is available for the satisfaction of unsecured creditors
ii. Getting a Lien
1. §624.24 – When JL Attaches to Prop (District Court)
a. “if RE and J are in same county, lien shall attach from date of entry into docket ….”
i. When judgment issued in county where property is = lien is automatic!
1. vs. PP – its the execution that creates the lien!
ii. JL attaches to all of d’s RE in that county!
b. “if, RE is in a diff county, lien does not attach until a C files a copy of judgment in the district ct in the county were the property is”
i. If J issued in county A, must “docket” J in county B of clerk’s office
2. § 1962– Lien – every judgment rendered by a district ct in that state shall be a lien on the property located in such state in the same manner…. as a ct of that state
a. F law, whatever rules are in your state, you have to follow those laws for F court!
b. in county w/ both f and state cts à 2 lien indices
3. Hypo: does my potential spouse have a lien?
a. Look in county ct houses in every county spouse owns property, AND
b. If spouse has prop in county where F district ct sits, look in F dist ct (Linn, i.e.)
4. Hypo: judgment in district of MT but debtor has property in Polk Cty, IA
a. § 626.A – domesticate J then pursue lien – do all once –just talking to clerk!
5. §624.25 – App Ct – app ct J must be docketed w/ clerk of ct where prop is to create lien!
6. §624.26 – Docketing Transcript – clerk shall docket transcript as if rendered in its own ct
7. prob. 3:C has a IA Northern D. ct judgment against D. D owns 20 ac

d for what D has, and D has already sold property!

vii. Boundaries of Judgment Liens:
a. Categorical: RE – includes after-acquired RE in that county!
i. Exception: §624.24a – Support Judgments also get liens on pp!
1. FFC shall be afforded to a lien arising for overdue support entered by ct in diff state. Lien attaches on date when notice of lien promulgated by Sec of HHS is filed w/ ct where pp is. Lien applies prospectively as of date of attachment, attaches to any pp D acquires, and doesn’t retroactively apply to chain of title for any pp D disposed of bf lien
b. Geographical: only in county where file judgment
c. Temporal: 10 years and can renewal
2. If fall outside these boundaries – can still use execution lien!
a. If want to go after pp – execution lien
b. If year 11 and forgot to renew – execution lien
c. If didn’t file in county where … – execution lien

Normal

Child Support

Certain RE FC’s (D’s HS/ Farm)

Actionability (SOL)- how long you have to docket judgment ?? Same as executibility! HOW LONG JUDGMENT LASTS!!!

20 years § 614.1.6

infinity

2

Lienability – from moment docket judgment, how long lien will last. Place in line!

10 years § 624.23(1)

10 years

2

Executability – how long you can levy on RE (how long you have to issue writ of execution on lien). Judgment is still a judgment – but lien must arise from levy.
Note: WRIT of execution only lasts 120 days!

20 years § 626.2

Infinity

2
§ 615.1

b. Executions and Execution Liens(assign 3)
i. Mechanics of Getting Writ of Execution
1. Writ of Praecipe – an order to the clerk to issue a writ of execution
2. § 626.7 –upon judgment, c can demand clerk to issue execution writ immediately
a. FRCP 69 – Execution – execution procedure shall be via procedure of state where d. ct that rendered the J is except that any US § governs to extent that it is applicable
i. Procedures govern by state law – 120 days, etc, but U.S. Marshall goes out and rounds up property!
ii. Limitation: “state law governs, except where another F § supersedes”
1. State law: can execute immediately, but, under FRCP 62a – can’t execute until 10 days after judgment!
3. § 626.2 – W/in what counties – county A can direct county B sheriff to execute (vs. JL).
a. Can execute on RE in other counties – but won’t have a lien until then!
i. Can, of course, docket the judgment in diff county!
b. What if judgment is in diff STATE? NE judgment and want to execute on IA prop?
i. Must docket the judgment! NE sheriff won’t come to IA! F issue!
ii. IA law will govern – that’s where th property is!
4. Writ of Execution – req’s sheriff to levy
5. Writ of Execution only lasts 120 days
a. § 626.16 –every officer who receives an execution shall provide a receipt and make suff return of execution b/f the 120 days of its issuance
IRCP 1.1019 – Endorsement – officer shall endorse execution day/hour the officer gets it; But failure to endorse doesn’t impair execution