Requesting a Writ of Attachment
A creditor must submit a written application and supporting documents to the court when, or after, the complaint is filed. The court will decide whether to issue a writ of attachment at a hearing, which is generally held at least 15 days (longer in federal court) after copies of the creditor’s application papers are served on the debtor. The debtor normally has an opportunity to file opposition papers five days (longer in federal court) before hearing. In determining whether to grant an application for a writ of attachment, the court will look at two issues: (1) whether the creditor is asserting the type of claim for which writs of attachment are available; and (2) the probable validity of that claim. Writs of attachment are only available for claims which are: based on a contract, express or implied; unsecured or under-secured by real property; and for a fixed or readily ascertainable amount in excess of $500. A creditor can only obtain a writ of attachment against an individual debtor if the debt arose out of the individual’s trade, business or profession. This special requirement does not apply when a writ of attachment is sought against corporate debtors, etc.
Probable Validity of a Claim
In order to establish the probable validity of the claim declarations must generally be filed with the attachment application. A declaration is a written statement by a witness signed under penalty of perjury. For writs of attachment, the declarations must establish that there was a contract with the debtor (or that goods were sold to the debtor, etc.), that the debtor failed to make the required payments, the amount of the debt, the absence (or diminution in the value) of real property security, etc. Documents, such as the underlying contract, purchase orders and invoices are often attached to the declarations as exhibits. We often ask our clients to prepare a statement listing the debtor’s payments, the amount of accrued interest and the amount of the total indebtedness.
Ex-Parte
In certain extraordinary circumstances, the court will grant an application for a writ of attachment on an ex parte basis, with little or no notice to the debtor. To obtain a writ of attachment on an ex parte basis, the creditor must either establish that there is a danger that the assets will be concealed if notice is provided, or that the debtor is generally not paying its undisputed debts. It is generally very difficult to obtain a writ of attachment on an ex parte basis. When a court is unwilling to issue a writ of attachment on an ex parte basis, it will sometimes issue a temporary protective order (“TPO”). In a TPO, the court orders the debtor not to sell or transfer certain assets except as permitted in the TPO. The TPO generally remains in effect until the application for a writ of attachment can be heard on a noticed basis.
Bond
Before the court actually issues a writ of attachment, an undertaking or bond must be filed with the court. The amount of the bond is generally between $2,500 and $7,500. These bonds can generally be obtained from private companies for a small fee. In the case of foreign businesses, bonding companies generally require a cash deposit for the full amount of the bond. In those cases where a cash bond is not required, the bonding company will require a financial statement from the client. Any deposit (but not the fees) provided to a bonding company is returned when the case is settled or the creditor prevails.
Levy
To obtain the attachment lien, the writ of attachment must be levied on the debtor’s property. Levy of the writ of attachment is performed by the sheriff or marshal or - for certain types of property - a registered process server (who is paid directly by the credit grantor) should be employed to perform the levy since they are more responsive (but more expensive) than the sheriff or marshal. The method of levy required varies depending upon the type of property being seized. In the case of a bank account, for example, the process server need only deliver certain papers to the bank branch where the account is located. For other types of property, levy of the attachment can be much more complicated and expensive.
Wrongful Attachment
Because of the danger of liability for wrongful attachment, a writ of attachment should only be sought when the creditor has a strong claim. If a creditor loses at trial after it has levied its writ of attachment against the debtor, it will be liable for statutory wrongful attachment and may be liable for common law wrongful attachment. Likewise, if a creditor attaches property which cannot lawfully be attached, it may also be liable for wrongful attachment. If the debtor can prove damages, the creditor will forfeit its bond. A creditor may also be liable for damages caused by the debtor’s loss of the attached property when a wrongful attachment occurs. A writ of attachment can also precipitate a bankruptcy filing. A debtor faces the loss of essential assets, such as the use of its bank accounts, when a creditor obtains a writ of attachment. Without the use of these assets, the debtor may have no choice but to file for bankruptcy. Often, however, a writ of attachment does nothing more than hasten the bankruptcy filing. The writ of attachment simply forces the financially distressed debtor to take a realistic view of its situation earlier than it would have otherwise. Moreover, bankruptcy does not automatically preclude recovery from the debtor.
Benefits
The risk of wrongful attachment or threats of a bankruptcy should not automatically deter a creditor with a strong claim from seeking a writ of attachment. In many cases, an attachment is essential to ensure that assets will still be available when the creditor ultimately obtains a judgment. In addition, a writ of attachment encourages early settlement. Faced with the potential loss of working capital, many debtors seek an early settlement when they realize that the alternative is the loss of their payroll account or other essential assets.
