Judgment debtors are sometimes required to post cash or a letter of credit as collateral to the surety company to obtain an appeal or supersedeas bond. This article runs through fundamental differences between these two collateral options and what a bond principal or attorney providing representation should know. For information on bond applicants who might qualify without the need for any collateral, please see our other articles.

When is collateral needed for an appeal bond?

While supersedeas bonds can be issued without the need for collateral, sometimes collateral is required. If any uncertainty about a bond principal’s ability to pay a judgment exists, 100% collateral will be required by the surety. While this is the standard, there are exceptions and partial collateral can sometimes be arranged for high appeal bond amounts, but in general full collateral must be posted.

Which collateral option is faster?

Appeal bonds with 100% cash collateral can be issued within a day. A wire transfer is a much faster process than providing a letter of credit as collateral. Wire transfers are easy and a bond agent should be able to quickly provide you with the associated details and documentation to sign after a brief phone call or e-mail. Premiums are low, especially while we are in a soft surety market.

For letters of credit, not all sureties accept the same issuing banks, so if going the letter of credit route, the surety must approve your preferred bank. After a surety has agreed to the bank, you will be provided specific LOC wording to follow – each surety has its own format. But here is where the process slows because banks operate at their own speed, and do not always appreciate the urgency you might have for posting an appeal bond. Their pace will largely depend on your relationship with your bank and your ability to get them to move quickly.

Which type of collateral is easier?

The hardest part of cash collateral is coming up with the cash, but the process is relatively simple. Arranging for a letter of credit is always the most cumbersome part of an appeal bond, but exactly how cumbersome is determined by your bank’s policies. In either case, you’ll need to sign an application and possibly a collateral receipt (to verify that you know where your cash is sitting), and your attorney will need to prepare the appeal bond language. These elements are standard and will be quick.

How can I get a supersedeas bond?

Obtaining supersedeas bonds with collateral can seem like a daunting process but an experienced appeal bond agent can guide you through it. These bonds can be time-sensitive so reach out to an agent early to discuss your case. The right person can give you all the insight you might need in a brief, five-minute conversation. You can find the contact information for our court bond specialists on our Appeal Bonds page.

Written by Conway Marshall
Conway Marshall is a Court Bond Specialist and can be reached directly at (504) 581-4277 or cmarshall@internationalsureties.com