Protecting your Client’s Assets on Appeal

When appealing a money judgment, one of the critical steps that needs to be taken early on is deciding how to stay the judgment from being enforced by the prevailing party. Otherwise, the prospective appellant’s assets may be handed over before they even get the chance to have their appeal heard. In the worst instances the chance of recovery of those assets may be small upon a favorable appellate decision and in other cases it can be very costly.

While some jurisdictions have automatic stays, they are generally short such as in federal district courts that have a 30 day automatic stay. To stay enforcement beyond that, most courts require some form of security to protect the judgment creditor. One of the most common forms is an appeal bond also referred to as a supersedeas bond. Appeal bonds are provided by surety companies (i.e. insurance companies) through surety agents and in effect guarantee on behalf of the appellant to pay the judgment plus costs and interest if the judgment is affirmed or the appeal is withdrawn or dismissed.

The intent of this article is to help attorneys understand the various timing elements involved in securing an appeal bond so that they can assist their client to ensure the stay of enforcement is granted and their client’s assets are protected during the appeal.

When to Initiate the Process?

The first and most important thing to know is it’s never too early to begin. Most people by nature don’t want to waste others’ time, but when it comes to appeal bonds, time allows a surety agent to explore the best possible options for securing the bond. This means you can start discussions with an agent even before a judgment is entered. All the surety agent really needs to have is a rough idea as to the judgment amount and financial makeup of the appealing party to form basis for the conversation.

Collateral or No Collateral?

Given the nature of what these bonds guarantee, they are conservatively underwritten by surety companies based on the financial wherewithal of the applicant relative to the bond required. Large, well-capitalized corporations and high net worth individuals can often qualify for these bonds without collateral by simply providing their guarantee if they have liquid assets well in excess of the bond amount, because surety companies can feel confident that they will pay the judgment on their own without involving them if there is an adverse decision on appeal. For those situations where the bond amount represents a large portion of the applicant’s liquid assets and net worth, surety companies will generally require collateral.

In most instances an experienced surety agent can determine relatively quickly whether collateral will be necessary or not. If no collateral is going to be required in say the case of a well-capitalized U.S. based public company, then a preliminary approval for the bond generally only takes 24 to 48 hours.

If the client is a foreign based publicly traded company, approval may take a little longer depending on the country in which they are domiciled. Not all surety companies have the ability to provide bonds to foreign corporations, which reduces the options to choose from, and those sureties that do work internationally sometimes vary in their views on which countries they feel comfortable taking indemnity agreements in.

When collateral is required, the timeframe for securing the bond can vary widely based on the type of collateral used. In the next few sections we will explore the nuances and timeframes related to the various forms of collateral that surety companies will accept.

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When time is of the essence, cash can be a good option. The quickest way to post cash is to wire transfer it directly to the surety company, and in doing so, a bond can generally be secured in a matter of a couple days.

Another option for posting cash is using a surety that partners with a brokerage firm where the client can invest the cash in certain limited asset types to earn interest. This involves setting up an account at the brokerage firm and pledging the account to the surety, which can take anywhere from 5-10 days on average. 

Cash can sometimes be used as a bridge until another form of collateral can be put in place. For example, we have had instances where a client wants to use a letter of credit, but cannot secure one in the time necessary. So we arranged for the client to post cash with the surety and once the letter of credit was prepared, we substituted it for the cash and returned the cash to the client.

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Irrevocable Letters of Credit

Irrevocable letters of credit (ILOC) are provided by banks, and they guarantee to the bond company to make funds available to be drawn upon in the event there is a claim under the appeal bond as a result of an adverse decision by the appellate court. Letters of credit can vary significantly in the time it takes to secure them. Businesses and individuals with well-established banking relationships and lines of credit, can often secure them quickly within a week or two. 

For those appellants that do not have a well-established relationship or where the amount of the appeal exceeds their existing bank credit facility, they will need to apply to the bank just as they would do for any other loan. As you can imagine, this process can be much more time-consuming ranging anywhere from a few weeks to a couple months. 

Surety companies need to approve the bank that will be issuing the letter of credit. Large national banks are almost always approved, but sometimes smaller community banks can be an issue if they have weaker financials. In these instances the surety agent may need to talk to multiple surety companies before they can find one that will accept the bank. If no surety will except a particular bank, this can cause delays as it may mean the client needs to start the letter of credit application process from scratch with a new bank. 

One last thing to be aware of is all surety companies have their own irrevocable letters of credit forms, which need to be provided to the bank. On rare occasions, the bank may want to make changes that are not acceptable to the surety, and this may require looking for a different surety company by the agent or a different bank by the client. 

So as you can see, getting a jump on the process is important to ensure the letter of credit can be issued by the bank in the timeframe necessary for the bond to be filed with the court before any automatic stay expires.

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Real Estate

Whenever real estate is being considered as a potential form of collateral, it is very important to start the process as early as possible, because out of any form of collateral, it can be the most complex and it almost always takes the longest to get into place. Part of this is due to the nature of real estate itself. It varies greatly between the type of property, the location, and the perceived value by surety company. Added to this is the fact that there are very few surety companies in the marketplace that will consider taking real estate as collateral.

The best place to start with a surety agent when real estate is going to be used is to have the client submit a personal financial statement listing the properties, their estimated value, and all mortgages. Also, if the properties have rental income, it is helpful to get a more detailed description of the property including the number of units, percentage occupied, and a schedule of rents, expenses and net cash flow.

It generally takes a couple days to get a preliminary approval from a surety company based on proposed properties as collateral. From there, the surety companies will do a title search and get an appraisal. We have run into situations where something unexpected comes back on a title report, and it can take days or even weeks to clear the title.  

The time it takes to get an appraisal of real estate can vary widely depending on whether the property is residential or commercial. Single-family residential properties generally take about 5-7 business days. Multifamily residential and commercial properties can take anywhere from 3 to 5 weeks depending on the type of property, location, etc.

One other option for clients to consider is using their real estate to secure an irrevocable letter of credit from their bank to use as collateral for the surety instead of posting real estate directly with the surety. If the client has an existing banking relationship, their bank may be able to approve a letter of credit quicker than the surety can take the property as collateral. 

While there are probably more potential areas in real estate that can cause delays than any other form of collateral, it is fortunately relatively easy to address early on by starting conversations with a surety agent right away. It can also be a very important option, because there are many individuals and businesses that have a significant portion of their net worth tied up in real estate.

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Marketable Securities

Similar to real estate, there are very few surety companies that will accept marketable securities as collateral for appeal bonds. When considering marketable securities, the first step is to supply the surety company with the client’s most recent brokerage account statement showing their investments. 

If those investments are acceptable to the surety company, they will need to review a copy of the brokerage’s account control agreement. All brokerages have different agreements, and some language may be unacceptable to the surety company. The timeframe for putting the collateral in place and issuing the appeal bond essentially depends on how long it takes to get that agreement executed.


Third Party Guarantor

On occasion there are situations where an appellant may not qualify for an appeal bond on their own financial strength, but they have an interested third party willing to indemnify the surety or even post collateral. In these instances, the bond company will need the same type of financial information from the third party, and if collateral is being proposed, the details on that collateral. Vetting this as a possibility early on will help avoid any unnecessary delays.

Find an expert

Surety bonds account for roughly 1% of the overall insurance industry and appeal bonds are roughly 1% of the surety industry. It’s a niche just like certain areas of the law, and as a result, it’s important to find an expert. Picking a surety agent that specializes in appeal bonds will save you and your client time and aggravation, because they will know the right place to start the process, get to the bottom line quickly, and move you through it efficiently and effectively. 

It’s also important to pick one surety agent that you feel most comfortable with to handle the bond. Sometimes people are tempted to talk to several surety agents, but that will generally slow down the process because the agents spend their time approaching the same surety companies that another agent may have already talked to, and surety companies will only work with one agent on a particular bond.


Benjamin Franklin once said, “Lost time is never found again.”, and while I’m certain he wasn’t describing a situation involving an appeal bond, it is definitely applicable. Unfortunately, there are situations where a judgment gets enforced, because the client waits too to secure a bond or they work with an agent that is not an expert in appeal bonds. As Benjamin Franklin also said, “An ounce of prevention is worth a pound of cure.” This statement is especially true given the high stakes of getting an appeal bond in place in a timely manner.


Dan Huckabay


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