During a court case between a debtor (defendant) and a creditor (plaintiff), an attachment may be used. However, before an attachment can be issued, the court may ask for an attachment surety bond. The debtor’s property can be seized in order to pay off the debts of a judgment owed to the creditor. For this reason, a bond may be filed in order to ensure the debtor would be legally and financially protected if they are found to be not at fault.
The three parties of this bond include the obligee, the principal, and the surety company. The obligee is the court that is requiring the principal to be bonded. The plaintiff (principal) must be bonded in order for an attachment to be granted. The surety company is the party that underwrites and ensures the bond.
The Attachment Surety Bond is an agreement between the three parties that the principal (creditor) will act accordingly with the requirements outlined in the bond. If the court rules in favor of the creditor, the bond will simply become null and void.
The creditor must be bonded in case the debtor’s property is wrongfully damaged during the court case. If this happens, a claim can be filed against the bond to cover the damages. If the court rules in favor of the debtor, then the debtor will be protected by the bond. The creditor would then have to pay all legal costs and fees for the debtor and return the property to the debtor.
As stated before, the court requires the creditor to be bonded. The bonding requirements state that during the course of a trial, the creditor will act legally according to what is stated in the bond.
It is a good idea for the principal to be informed on all requirements before applying for a bond. If the principal acts against the bond and a claim is filed, then the surety company will pay for all paid claims which the principal must pay back to the surety.
The cost for the bond is also referred to as the bond premium. The bond premium is the one cost that the surety company sets. All other fees that are related to the bond are set by the obligee. The bond premium is only a small percentage of the bond amount.
In most cases, the bond amount is twice the amount claimed or twice the estimated value of the property to be attached. The bond amount is set by the obligee, not the surety company. Usually, the judge will set the bond amount according to the specific case. The bond amount is the amount of coverage the surety company will pay out to the party harmed if a claim is filed against the bond.