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What Is a Court Bond?
“Court bonds” is a blanket term for a few different bonds that are required by courts in a range of cases. Individuals or entities may be asked to post such bonds in order to guarantee their financial strength and trustworthiness.
The most common court bonds are appeal bonds, which are required from a litigant who appeals a court’s judgment, and fiduciary bonds– also known as probate bonds– which are necessary when a fiduciary is appointed by a probate court.
Just like other kinds of surety bonds, court bonds constitute a three-party contractual agreement. The principal is the entity required to post the bond, usually a fiduciary or an appellant. In the general case, the obligee is the respective court, and the surety is the bond underwriter that guarantees for the principal.
The purpose of court bonds is to protect the obligee in case the principal of the bond does not fulfill their duties, and transgresses from the agreement settled in the bond. Court bonds are used to decrease the chances of financial losses, and to guarantee compliance with court decisions.
Who needs to obtain a court bond?
A court bond may be required from a variety of individuals in different situations that all relate to court proceedings.
Anyone assigned to take care of another person’s property or finances may be required by a probate court to post a fiduciary bond. It guarantees that the caretaker will not take advantage of their position, and will perform their duties faithfully, according to the requirements of the court.
A person who wants to appeal a judgment to a higher court is often required to post an appeal bond before the appeal is made. The bond is needed in order to prevent misuse of the appellate system through insubstantial appeals, and to guarantee that the appellant will follow the initial court decision.
Are there different types of court bonds?
There are two main types of court bonds. Each of them is described in detail below.
When probate courts appoint a fiduciary, they require this person to obtain a fiduciary bond.
A fiduciary is someone who has been chosen to manage the property, assets, or finances of a person who is deceased, disabled, or otherwise incapable of doing so by themselves.
Trustees, executors and guardians are alternative names for a fiduciary, and the bond can be identified according to the specific role the fiduciary takes. Thus, these bonds might also be referred to as probate bonds, estate bonds, guardianship bonds, custodian bonds, trustee bonds and executor bonds.
Fiduciary bonds protect the persons whose property or assets are assigned to a fiduciary from any potential dishonest practices. They guarantee the honest performance and conduct of the appointed fiduciary. In case there is a proven claim on any misconduct committed by the fiduciary, the affected parties can be compensated up to the penal sum of the bond.
A court might require an appellant to post an appeal bond– also known as a supersedeas bond– before this person is allowed to appeal a court judgment.
The goal of appeal bonds is to regulate the flow of appeals to the appellate system, so that the option of making an appeal isn’t abused. They guarantee that appellants will follow the initial court ruling, and pay all due costs in case they lose the appeal.
Appeal bonds are considered high-risk, because of the uncertainty involved in court cases. Thus, they are not easily obtained by all applicants. An appellant needs to provide a minimum 100% collateral. If the person does not win the appeal, the claimant is reimbursed through this sum.
How much does a court bond cost?
The cost of court bonds is calculated differently from the usual surety bond cost formulation. The principal’s personal credit score is less important than it is in other cases. Instead, other factors come into play, which relate to the specific court case and the type of bond required.
In the case of fiduciary bonds, the probate court that handles the case sets the surety bond amount, in consideration of the size of the property or finances that will be handed to the fiduciary.
The appointed person must then cover a percentage of the bond amount, called the bond premium. For fiduciary bonds, the usual rates are between 1% and 3% of the bond amount. Rates below 1% are not uncommon in cases of higher bond amounts asked by a probate court.
The cost of appeal bonds is formulated differently. This kind of bonds requires posting at least 100% collateral, which is set depending on the court case. Additionally, the appellant needs to pay a bond premium, which is also particular to the case.
Can I get a court bond with bad credit?
Depending on the type of court bond that you need, you might be able to get the bond even with bad credit.
If you are required to post an appeal bond, there is no option for bad credit bonding, as it is considered high risk bonding and a minimum 100% collateral is required.
As for fiduciary bonds, in some cases it might be possible to get bonded with bad credit, but only for applicants with minor financial problems.