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#2083655 - 06/15/16 08:11 PM Can legal requests attach to pledged funds?
Cher Offline
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Joined: Oct 2003
Posts: 98
Florida, USA
Can levies, garnishments etc. attach to funds that are pledged as loan collateral?

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#2083693 - 06/16/16 01:52 AM Re: Can legal requests attach to pledged funds? Cher
Rocky P Offline
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Florida
That would be regulated by your note, security agreement, and particular state laws.
It would be best checking with your bank counsel.
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#2083892 - 06/16/16 08:44 PM Re: Can legal requests attach to pledged funds? Cher
Elwood P. Dowd Offline
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Next to Harvey
There is no "across the board" answer.

Technically, IRS regulations and procedures require you to pony up the collateral and then file a request to get it back. However, gracious bunch that they are, the IRS will usually let you provide them with your documentation and they will just review it to assure that your security interest is properly perfected.

Described as if it were generic, there would be similar process with a claim from a state court; i.e. you cannot omit the disclosure of the debtor's asset simply because you list it as collateral for a loan. However, there is no presumption that their claim is stronger than yours. You would acknowledge the asset and state your claim in your response to the court. The garnishor could request copies of your documentation in response.

In any case, if you have not properly perfected your security interest, you lose.
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#2083944 - 06/17/16 03:09 PM Re: Can legal requests attach to pledged funds? Cher
Rocky P Offline
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Ken, an additional comment.

Once (Edge Act Bank, Miami area) we had a $1MM loan secured by our own CD's in our vault. (Collateral 20 x $100K and 1 x $500K CD's - $2,500K total for a $1 MM loan) The LO because of the size, asked an attorney for comment, and they came back with 5 pages of potential exceptions. All were based on prior tax liens, origination of funds (drug, laundering, unreported cash entering the US, etc.) other potential prior encumbrances.
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#2083982 - 06/17/16 04:31 PM Re: Can legal requests attach to pledged funds? Rocky P
Elwood P. Dowd Offline
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If I were being paid $300 an hour I could readily come up with a 6 page list. The above is what you get for free. wink
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#2084000 - 06/17/16 05:12 PM Re: Can legal requests attach to pledged funds? Cher
Rocky P Offline
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Ken, he virtually said the same thing you did, but at $300 an hour and the report double indented, 1.5 spacing, large margins, etc. But in essence the same thing.
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#2084035 - 06/17/16 06:27 PM Re: Can legal requests attach to pledged funds? Cher
Richard Insley Offline
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...And here, folks...we have reached the logical conclusion that Ken's advice is worth $300 per hour! grin
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#2084066 - 06/17/16 07:07 PM Re: Can legal requests attach to pledged funds? Cher
John Burnett Online
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At least!
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#2084081 - 06/17/16 07:40 PM Re: Can legal requests attach to pledged funds? Cher
BrianC Offline
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I hope Ken will accept a post-dated rubber check from me as payment for services previously rendered.
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#2084125 - 06/17/16 10:34 PM Re: Can legal requests attach to pledged funds? Cher
Andy_Z Offline
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If Ken will take a check, let's go $400 hr. and show our sincere gratitude.

This is the powerof networking. It won't represent you in court, but it's good to know.
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#2084183 - 06/20/16 03:32 PM Re: Can legal requests attach to pledged funds? Cher
rlcarey Online
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Galveston, TX
That is why lending on your own CDs is not risk free.

Me: Get a credit report
LO: Why???? - we are fully secured and it is waste of time and money.

See Rocky's reply and above. I know one bank that it took five years to get the money on a $5MM loan to a customer secured by their own CD because he had previous IRS liens. Small bank, the charge-off in the meantime almost cratered the bank.
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