Has anyone ever owed you money? Most of us have at some point been faced with an unpaid debt. After exhausting all traditional methods of debt recovery, the next logical step is to use our legal system to further pursue collection.
After winning a judgment, for a lucky few the debtor will pay. Unfortunately, for the greater majority a judgment ends up being nothing more than a useless piece of paper. And you’re not alone – nearly 80% of all civil judgments are unsatisfied. Unless you understand how to locate assets and enforce it – after the final bang of the judge’s gavel it may all have been for nothing. No need to despair… If you’ve won a judgment, there are many powerful legal tools at your disposal to force an unwilling debtor to pay.
In most states you can garnish wages and/or seize a variety of assets: Automobiles, recreational vehicles, bank accounts, income or property in the possession of third parties, business income and equipment, and real or personal property.
There are many means of asset discovery available to judgment holders. One common tool would be a consumer or business credit report. A credit report provides an enormous quantity of information about the debtor’s current and previous addresses, assets and financial health. In addition, it will provide leads to other sources who have information about your debtor. If necessary, you can use a subpoena to order them to give you information.
Another useful tool is a debtor examination. You may compel a debtor to appear in court to produce documents and answer your questions about assets. Aside from the obvious benefit of a debtor examination, consider how terrifying it is to be ordered to appear in court! Failure to appear can result in a bench warrant. In addition, a Turn Over Order may be used to seize any assets, including cash-in-pocket, jewelry or other items on the debtor’s person.
Above all else, the debtor examination is a terrific legal intimidation tool. You can use this procedure to examine third parties who may have knowledge about the debtor’s assets. Just imagine… The mother-in-law, the mistress, or an ex-spouse! I can think of no faster way to persuade a debtor to find a way to pay you.
It goes without saying that you can seize real and personal property; however, this can be an expensive and time-consuming endeavor. Nevertheless, sometimes this may be useful even if your only goal is to make your debtor pay you voluntarily. If your debtor possesses an enormously large ego, you might seize his new Corvette, or his classic muscle car. If your target runs a successful data processing business, you might want to seize the main computer server – effectively bringing the business to a screeching halt. Starting to get the drift?
Before proceeding, you’ll want to determine the amount of equity in the property, the cost involved, and whether or not it’s worth your while to go through with it. Your due diligence should include:
• Contacting the County Clerk-Recorder in the county where the property is located to find out if there are any senior liens on the property.
• Allowing for any partial exemptions of the equity in the asset.
• Deducting any loan or mortgage balance.
• Cost: When property is seized for sale, it must be stored in a proper facility until the sale, which may require a deposit.
After the seizure, the debtor is notified that a sale will take place unless he or she pays you. If the sale proceeds, expect to get about 10 cents on the dollar of the property’s value.
A long-term alternative would be to record a Judgment Lien in the county where property is, or may be located. Liens are enforced at the time the debtor attempts to sell, refinance or acquire property. Liens have a ‘pecking order’, so if a lien was recorded ahead of yours, any equity goes first toward the senior lien holder and whatever is left goes to the next in line.
If your debtor owns a retail business you can use either a Till Tap or a Keeper. With a Till Tap, a levying officer (the sheriff) will collect any money found on the premises. A Keeper will to collect the money and then stay behind the register for 8 or more hours. If your debtor has a high profile business this is sure to send her running for the checkbook!
A Third Party Levy orders the person/company/whoever that has the money to give it to you, instead of your debtor. Let’s assume your debtor has non-traditional income. Perhaps cash under the table for babysitting, or income from rental properties. Try to think outside of the box on this one and find the actual source – and intercept it. He’s doing landscaping for Joes’ Motel? Then Joe’s Motel is your target.
These are just some of your basic tools of judgment recovery. A word of advice: Arm yourself with as much knowledge about the debtor before you find yourself in this position. If you already know where the assets are, you’ll be 10 steps ahead of the game. If you’re going to lend money, write an agreement and get financial information and a social security number. If you have rental property use a thorough application and verify the information before renting. Copy any checks you receive. Keep canceled checks that you have written – these reveal the bank account number of the depositor. Protect yourself ahead of time and you’ll save yourself a lot of potential grief down the road.
Christina Smiley is the founder of Sierra Judgment Recovery. She has been providing professional judgment recovery training since 1997.