Suit for judgment
When you win a lawsuit, the judgment usually follows. However, getting a judgment is not a guarantee of payment. In essence, it is a ruling by the court that the debtor has to pay. Next, it is time to collect.
When the judge gives you the ruling, the judgment still isn’t quite yours. The judgment still has to be issued by the court clerk. This will usually take from 2 to 4 weeks, but with budget cutbacks by the government, it can take as long as 4 to 6 months. When the judgment has been issued, it has to be then recorded at the state level. It also needs to be recorded in the county where the debtor owns property.
In roughly one-third of the collectible lawsuits in which we secure a judgment, the borrower agrees to repay without the need to do court issued judgment collection practices. The amount to be repaid is negotiable and there might even be a payment plan. Since the collection effort for a court-ordered judgment can be a lengthy procedure, includes extra costs and delays when money is collected, the best payment is a voluntary one. What if the debtor still doesn’t pay? Once the court has issued a judgment, there are a number of effective ways of collecting.
Using the courts to collect a judgment
There are a number of ways to proceed through the courts in an effort to collect a judgment. There are costs involved and they can be time-consuming. We’ll take a closer look at each one.
If requested, the court can issue a garnishment or bank levy, but you will have to find out where the bank account is located. The levy should be served at the bank location where the account was opened, not at a different branch location. A sheriff or marshal or other court-appointed authority has to deliver the levy. With this approach, it might be a long time between when the court issued the levy to the time it gets delivered. You will be permitted to get any money available on the day the levy is issued by the authorities. It will not be automatically applied on any days that follow. Therefore, if your timing is right and there is plenty of money in the account the day it is served, you will hit pay dirt. However, if there are limited funds on that day, the process will have to be repeated which could take 3 months or more. Furthermore, if there is a lien of money in the bank account or by the state or federal authority with a tax lien, then the bank won’t seize the money for your bank levy.
Voluntary payment is always the preferred method since this process is so time-consuming.
Any person named in the judgment can have their wages garnished if requested. The employer will have to make the garnishments, or reserve part of the employee’s income and send this money to the court every month which will then be paid to the judgment creditor. In order to get the garnishment, you need to know where the debtor is employed. The debt collection lawyers have to go to court and ask for the garnishment and once the court approves, the garnishment will be issued to the employer. The amount of the employee’s wages that can be garnished is limited by law, based on the idea that the employee needs a big portion of their wages to pay for shelter and food.
Do you know the customers of the judgment debtor? Do you know how and where they get paid for the products or services they provide? The best way to go might be to get the money before it goes to the judgment debtor. Merchant accounts are included and the benefit of doing it this way is that once it is served, it will keep going until the judgment is fulfilled. This is usually a complex and time-consuming procedure and should only be used if the creditor thinks that there will be steady income via these various sources.
Does the judgment debtor have a retail store? If so, the keeper can place a do “till tap” on the store. In essence, this is taking any funds coming in out of the cash register. The keeper has the option to show up in the store and requests cash payment from all customers and the keeper will get to keep the cash. No credit cards or checks. Although this is a costly procedure, the keeper can add the cost to the judgment and might eventually be recovered.
If business is slow or customers won’t do cash transactions, a significant amount might not be recoverable, however, it might push the debtor to do “voluntary” payments. Having a keeper in the store is an uncomfortable situation and sends a bad message to employees.
When the judgment is registered in the county where the debtor owns real estate, it is as effective as putting a lien on the property. Should they try to refinance or sell the property, a judgment will pop up when the records are searched. The judgment will have to be dealt with first or the transaction will not be completed. But if there isn’t any equity in the property, the creditor probably won’t recover any funds. The debt collection lawyer can request from the court that property along with other assets like furniture, fixtures and inventory be sold. This process can be complex and costly with the creditor usually having to advance large sums of money. The expenses are added to the judgment and might be recoverable, however, clients aren’t eager to invest the large sums of money required unless the chances of recovery are very high.
The key to doing court-ordered judgment collection efforts is having information on the debtor’s assets and income. If we don’t have that, then the first step in the process is to conduct a debtor exam. The debtor is to appear in court with their banking information as well as other information regarding their assets and income so we can get the information needed to do levies, garnishments, etc.
The Key to collecting a judgment
The most important part of carrying out court-ordered judgment collection undertakings would be having details of the debtor’s possessions and revenue. In cases where we don’t have those details, then the starting point in the procedure would be to perform a debtor examination. The debtor has to show up in the courtroom with their banking details along with other specifics about their possessions and earnings so we are able to obtain the info required to do levies, garnishments, etc.
The debt collection lawyer must first of all schedule the examination by the court, which involves processing charges. After that, the debtor must be personally served with notice that the exam, even if they are an official of the debtor company or someone that has personal legal responsibility. In cases where we have no idea exactly where the debtor lives or is employed, then we are not able to serve the debtor. Fees apply for every effort by the process server to serve the person in debt, therefore these expenses can accumulate. If the debtor isn’t served within the required period of time, then the examination has to be rescheduled and we need to attempt to serve the later examination court date, once again requiring more fees. When the debtor shows up in court, but did not come with the necessary details, the examination has continued to a future date. This might take place a number of times, for instance, if the debtor fails to show up. Therefore, although the court is on our side, the borrower could make the procedure complicated and extend it out several months or even years.
Arrest Warrants – That’s Motivating!
In cases where a debtor routinely fails to show up for debtor examinations, we are able to ask that the judge serve an arrest warrant. Occasionally we just obtain a bench warrant, meaning the local authorities will not set off to make an arrest. Alternatively, if an officer ever questions an individual, for instance, through a traffic stop, the warrant will pop up and they can go to jail. Certain jurisdictions will proactively attempt to place the debtor under arrest. There is not any jail time, however the judge states they have to show up or there might be further repercussions.
Considerations in collecting a judgment
With the challenges of the judgment collection procedure, as well as the valuable time it usually takes from the submitting of the lawsuit to receiving payment, careful thought has to be given whenever considering litigation. We thoroughly assess all the details we are able to put together to ascertain the chances of a favorable outcome, not just in being successful in the lawsuit but also in collecting the debt. The money owing has to give good reason for the possible expenditure in out of pocket expenses and retainers. Once we advise that the suit be submitted, we feel there is a 70% or better chance of collecting the debt. In the meantime, we would like our clients to understand the challenges and time delays in cases where we need to proceed with litigation. This could influence their decisions once settlement offers and payment plans are presented both pre and post litigation.