Know Surety Bonds.com
Court bonds are a general term for all bonds and undertakings required of participants in a lawsuit permitting them to pursue certain remedies in the courts. Court Bonds can generally be broken down into 2 distinct catergories:
Civil Court Bonds
Civil Court Bonds are required by the court at significant point in litigation process (such as granting an Appeal or allowing another to take possession of certain assets involved in the case). The Civil Bond protects the opposing party from any loss suffered as a result of the court’s having temporarily granted the privilege.
Fiduciary Bonds (aka Probate Bonds) are usually required by a court when an individual, or corporation are appointed in wills, deed of trust, guardians or conservators of minors or wards of the court to take control of the property and/or manage, transfer and distribute the assets in accordance with the court’s orders. These bonds guarantee that the interest of those concerned will be properly safeguarded.
What are some of the benefits of obtaining a court bond?
- Court Requirement– In some instances, the courts will mandate that a bond be put in place before a court action can be pursued or delayed.
- Better than the cash alternative– Some courts, in lieu of a bond will take cash security. Therefore the principal, if they qualify for the bond will not have to use their cash reserves to post the security.
- Avoidance of bureaucratic management of security: In the event that the principal has the funds to post the security in lieu of the bond, it is not recommended, as those funds will now be in the management of the courts and when the case is resolve, it might be extremely cumbersome to apply for those funds to be returned.
How are court bonds underwritten?
* Each surety company has their own guidelines and criterias for underwriting a court bond. But in general court bonds are underwritten under 2 classifications:
1) Non-Collateralized: Bonds such as a receiver bonds or attachment bonds will be underwritten based on the principal's credit profile and financial position and if their credit profile and financial position qualifies them for the bond, the principal's indemnity is enough to obtain the bond.
2) Collateralized: Certain bonds such as appeal bonds or release of a mechanic's lien bonds will require collateral regardless of the principal's credit profile and financial position.
******** In submitting the initial request for bonding, the following information should be included to insure a quicker response.
1) A complete court bond application - Will provide a basic overview of the bond being requested, as well as information on the principal requesting the bond.
2) Copy of the court documentation - This court documentation will provide information as to the case and let the surety determine the strength of the principal's chance of prevailing in the case.
3) Bond requirement document - Court issued document that states the type of bond that is needed and in what amount. This is among the most important document as it verifies to the surety that the bond requested is indeed required and validates the amount.
4) Business Financial Statements: If the principal requesting the bond is a corporation, provide the most recent year business financial statements (balance sheet and income statement). In addition to the business financial statement, a personal financial statement of all the owners of the corporation should be provided as well.
5) Personal Financial Statement: If the principal(s) is an individual, provide a personal financial statement for the principal(s).
6) Current Bank Statements: If the corporation or individual's financial statement has a high declaration of short term/liquid assets (cash, stock and securities), current statements to verify these assets should also be provided.