One of the remedies that a party holding a judgment in its favor gets paid is the attachment of bank accounts. In a rare piece of good fortune, a judgment creditor was able to identify a bank account of the judgment debtor which at one point had over $450,000.00 in it. The creditor promptly issued the pleadings necessary to have the bank account attached and the proceeds paid to it. Unfortunately, it found out that the bank that held the deposit account was also a lender to the judgment debtor. Further, not only did the bank have common law setoff rights for its loan against the account, it also had a security agreement that covered the account. Even though the bank allowed other monies to come out of the account after the attachment pleadings were received, the Court of Appeals held that the lender could safely do this without waiving its security interest. (The Court did not address whether or not this action would have waived the common law right of setoff. Lenders need to keep that in mind when reviewing this case.) 
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Banking and Financial Industry Blog
Protect Yourself From Identity Theft
Tuesday, November 22nd, 2011According to an article from the Indiana Banker’s Association, more than 10 million Americans become victims of identity theft each year. Thieves will steal names, Social Security numbers or credit card information to commit fraud or other crimes. Personal information is as good as gold to criminals, who will go to any means to get it. (more…)
Collecting Your Judgment
Thursday, October 20th, 2011Creditors feel victorious when they finally win the big case and obtain a judgment against a debtor for money owed to the creditor. However, if a deficiency remains after any collateral for the debt has been sold and the proceeds applied to the debt, collecting the rest of the judgment may be the hardest part of the lawsuit. (more…)
Major Changes to Bankruptcy Proof of Claim Process
Monday, October 17th, 2011Effective December 1, 2011, the Proof of Claim form that will be filed in bankruptcies will change. If the Proof of Claim form that you are using is currently a single page, the form is out of date and you should start using the new form prior to the December 1, 2011 implementation date. (more…)
Court Rules that Guarantor Not Released From Liability Because of Integration Clause and Lenders Have No Duty to Advise Prospective Borrowers to Obtain Counsel
Tuesday, August 30th, 2011In a recent decision, the Indiana Court of Appeals held that an integration clause contained in a guaranty of one loan did not release the guarantor from his liability of a separate loan. The Court also held that absent special circumstances, a financial institution is not required to advise a client to seek legal counsel in connection with a commercial transaction. (more…)
Collateral Must Be Carefully Described in Security Agreements
Thursday, August 25th, 2011Often times when lenders are structuring a transaction, they contemplate that only certain of the borrower’s property will be used to secure the loan. In such situations, borrowers generally require that the security agreement be limited to the actual collateral. A problem may arise, however, when lenders take a security interest in collateral that may later be designated by the borrower. (more…)
Environmental Cost Savings: Reuse and Recycle Land and Materials
Tuesday, August 16th, 2011Reusing land and recycling materials are more than socially responsible business decisions. Businesses that reuse and recycle are saving money. Indiana’s Brownfield and Recycling Programs provide technical assistance and funding resources to help identify opportunities and develop cost saving solutions. (more…)
A Financial Face-Off: Bank Loans vs. Mechanic’s Liens
Thursday, August 11th, 2011A contractor and construction lender were recently pitted against each other in a priority contest, and the lender won. The contractor filed suit in Indiana to collect what it was owed on a construction project from the owner. The owner had borrowed money from a bank to fund the construction project, and the loan was secured by a mortgage on the real estate. The mortgage was recorded before the contractor began work. When the contractor was not paid for its work, the contractor recorded a mechanic’s lien against the property. (more…)
Indiana Case Reinforces the Importance of Naming the True Lender in a Foreclosure Action
Thursday, July 28th, 2011A case recently decided by the Indiana Court of Appeals addressed a mortgage which contained the phrase: “This Security Instrument is given to Mortgage Electronic Registration Systems, Inc. (“MERS”), (solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns), as mortgagee.” The mortgage listed the Lender’s address as the address designated to receive notice. A subsequent mortgagee foreclosed on the property, named Lender as the defendant, and Lender filed a disclaimer of interest. The trial court entered a default judgment in the foreclosure suit and the property was sold. A month after the property had been sold, MERS assigned the MERS mortgage to Citi. Citi petitioned the court and asked that the judgment and sale be set aside due to the fact that MERS was not provided notice of the foreclosure action. (more…)
Bill Introduced To Restore Fairness To Bankruptcy Venue Rules
Tuesday, July 19th, 2011Under current law, corporations have been able to engage in significant “forum shopping” to file their bankruptcy cases in locations far away from their principal business activities. While this allows the debtor to choose a Bankruptcy Court that it perceives to be more favorable to management, it also has the effect of placing significant burdens on creditors, employees and customers who actually did business with the bankrupt entity back where they were principally located.
On July 14, House Judiciary Chairman Lamar Smith, a Republican from Texas, and John Conyers, Jr., a Democrat from Michigan, introduced the Chapter 11 Bankruptcy Venue Reform Act of 2011 (H.R.2533). The change proposed by the act would require corporations to file their Chapter 11 Bankruptcy Petitions in the judicial district where they have their principal place of business or assets.
This makes sense as a matter of fundamental fairness. If a company is going to avail itself of the protection of the Bankruptcy Code, at a minimum, it should be as convenient as possible for the other stakeholders who will also be required, often against their will, to participate in the bankruptcy process initiated by the debtor. Further, given that at least some of the forum-shopping debtors have chosen to file their reorganization cases in places like New York, the costs of participation in the bankruptcy process may go down significantly.
I would anticipate that the act will face criticism from the Bankruptcy Bar that has benefited from the forum shopping loopholes, but I am hopeful that Congress will act favorably upon the legislation.
Author: Andrew C. Ozete (bio)
Phone: 812.452.3582
email: aozete@bamberger.com