Code of Virginia

Creating a Report: Check the sections you'd like to appear in the report, then use the "Create Report" button at the bottom of the page to generate your report. Once the report is generated you'll then have the option to download it as a pdf, print or email the report.

Code of Virginia
Title 8.01. Civil Remedies and Procedure
Chapter 18.1. Assignments for Benefit of Creditors
1/19/2021

Chapter 18.1. Assignments for Benefit of Creditors.

Article 1. Assignment of Property.

§ 8.01-525.1. Recordation; notice of sale; preferences prohibited.

Whenever a deed of assignment for the benefit of creditors is executed, the deed shall be recorded. If no notice of the sale has previously been given, the trustee named in such deed, or the one substituted in the manner prescribed in this article, before selling under the deed of assignment, shall, at least 10 days before the sale, notify each of the creditors named in the deed by certified mail, return receipt requested, advising of (i) the execution of such sale; (ii) when, where, and how the sale will be held; (iii) the terms of such sale; and (iv) whether or not the deed provides that acceptance shall be in full satisfaction. No creditor shall be preferred in the deed except those given a lien or preference by law, or those having a valid lien upon the property conveyed, or some part of such lien, and those having a lien shall be preferred only to the extent of the value of the property upon which they have a lien.

1924, p. 657; Michie Code 1942, § 5278b; Code 1950, § 55-156; 2019, c. 712.

§ 8.01-525.2. Substitution of another trustee by creditors.

A majority of the unsecured creditors in number and amount of the assignor may agree in writing upon a trustee different from the one named in the deed of assignment, and upon petition to the court that would have jurisdiction if an action were brought against the assignor, such agreed trustee may be substituted in lieu of such named trustee with all of the rights, powers, and duties conferred upon such named trustee in the deed of assignment. The clerk of the court where the deed of assignment is recorded shall record such order presented by one of the parties and shall include a reference to the order book and page where such deed is recorded, together with the name of the substituted trustee, and shall make proper indexing. The substitute trustee shall reside in the county or city in which the property that is conveyed in the deed of assignment or the greater portion thereof in value is located.

1924, p. 657; Michie Code 1942, § 5278c; Code 1950, § 55-157; 2014, c. 330; 2019, c. 712.

§ 8.01-525.3. Procedure to question claim of creditor.

Any creditor of the assignor who questions the validity of any other creditor's claim, or the trustee if he questions the validity of any claim, may file, within 30 days after the recordation of the deed, a petition against the creditor whose claim is questioned in the court that would have jurisdiction if the action was brought by the creditor whose claim is questioned against the assignor, and the burden of proof shall be upon the creditor whose claim is questioned. Upon the filing of such petition, the court may order the party whose claim is questioned to appear to defend such claim and the court shall determine the matter in a summary way.

1924, p. 658; Michie Code 1942, § 5278c; Code 1950, § 55-158; 2019, c. 712.

§ 8.01-525.4. Provision to bar further claim by creditors who accept deed.

Any deed of assignment may contain a provision to the effect that those creditors who accept such assignment do so in full satisfaction of their respective claims and shall be forever barred from further recovery of any balance.

1924, p. 658; Michie Code 1942, § 5278d; Code 1950, § 55-159; 2019, c. 712.

§ 8.01-525.5. Compensation of trustee.

Every trustee referred to in this article shall receive reasonable compensation for services.

1924, p. 658; Michie Code 1942, § 5278d; Code 1950, § 55-160; 2019, c. 712.

Article 2. Assignment of Salary, Wages, or Income.

§ 8.01-525.6. Petition for assignment of salary, wages, or income for the benefit of creditors.

Upon petition of a debtor for the assignment of his salary, wages, or income to a trustee for the benefit of his creditors, a judge may appoint a trustee, subject to the supervision and order of the court, to receive such salary, wages, or income of such debtor and pay off the obligations due by such debtor as provided in this article, provided that a majority of the creditors have provided written consent of such assignment to the court. If the debtor is employed on a salary or for wages, the written consent of his employer is required.

1936, p. 523; Michie Code 1942, § 5278e; Code 1950, § 55-161; 2005, c. 839; 2019, c. 712.

§ 8.01-525.7. Trustee; rights and duties; compensation.

A trustee appointed pursuant to § 8.01-525.6 shall make written reports to the court as required by the court. The trustee may charge a fee of five percent of such salary, wages, or income received and disbursed by him; however, no public officer or employee who receives a full-time salary and who acts as trustee under this article shall retain such fee for his personal use.

The trustee, upon being appointed, shall give written notice to any person, firm, or corporation who may owe the debtor any salary, wages, or income, and upon receiving such notice such person, firm, or corporation shall pay to the trustee any salary, wages, or income that are owed to such debtor, at the time it would otherwise be due to the debtor.

The trustee may compromise and settle any claims against the debtor when he believes such compromise shall be for the benefit of all the creditors.

1936, p. 523; Michie Code 1942, § 5278f; Code 1950, § 55-162; 2019, c. 712.

§ 8.01-525.8. Resignation of trustee.

The trustee may resign at any time after accounting for all funds in his possession, and the court may appoint another trustee.

1936, p. 524; Michie Code 1942, § 5278i; Code 1950, § 55-163; 2019, c. 712.

§ 8.01-525.9. Debts; order of payment.

The trustee shall immediately upon receipt of such salary, wages, or income, or at such other time as the court may direct, disburse the funds as follows:

1. The trustee shall first pay to the debtor directly, or for his benefit as the court may direct, any amount the debtor may be entitled to as exempt by law if he is a householder and head of a family or, if he is not a householder or head of a family, then such amount for the necessities of life as may be agreed upon by the creditors in the assignment. Nothing in this subdivision shall prevent the trustee from paying to the debtor a greater amount than is exempt by law if agreed to by the creditors and approved by the court.

2. The trustee shall next pay, according to such funds as he has in his possession, a pro rata share of the balance to all the creditors on an equal basis or in such proportions as the creditors may agree.

1936, p. 524; Michie Code 1942, § 5278g; Code 1950, § 55-164; 2019, c. 712.

§ 8.01-525.10. Exemption from garnishment, levy, or distress.

When the assignment is executed and approved by the court and the trustee has been appointed and notice given to the creditors listed in the assignment, such assignment shall be deemed legal and binding upon all creditors and such salary, wages, or income shall be exempt from garnishment, levy, or distress during such time as the assignment is in existence. Such assignment shall have priority over all liens subsequently obtained.

1936, p. 524; Michie Code 1942, § 5278h; Code 1950, § 55-165; 2019, c. 712.

§ 8.01-525.11. Termination of assignment by court.

The court may, at any time, upon a motion stating that the terms of the assignment are not being complied with, order the debtor and trustee to appear before the court, and the court may, if the evidence justifies, or, in its discretion, declare the assignment null and void. When such action is taken by the court, a written notice shall be sent to all persons named in the assignment.

The court may, on its own motion, revoke the assignment whenever it determines that the ends of justice are not being attained.

When the assignment has been fully complied with, the court shall discharge the trustee and notify the employer of the debtor, if there is one, that the debtor is entitled to receive his entire salary, wages, or income directly.

1936, p. 524; Michie Code 1942, § 5278i; Code 1950, § 55-166; 2019, c. 712.

§ 8.01-525.12. Clerk to preserve assignment; fees.

The clerk of the court wherein any assignment is filed, as otherwise provided by law, shall maintain the court records of such assignment, together with all reports of the trustee, and shall keep an index of all such assignments. For filing the assignment, the fee as prescribed in § 17.1-275 shall be charged.

1936, p. 524; Michie Code 1942, § 5278j; Code 1950, § 55-167; 1994, c. 432; 2019, c. 712.