Post-Judgment Recoveries Available to a Judgment Creditor

Gurstel LogoPART 4 of the series What to Expect when Retaining a Collection Attorney to Assist in Recovery of Delinquent Accounts.

Today’s guest blog was contributed by Lisa H. Haster, Esq., Of Counsel/Marketing Director for Gurstel Law Firm P.A. Over a series of 4 blogs, she is walking our readers through the processes that can be expected before, during and after retaining a collections attorney to assist in recovery of delinquent accounts. The series includes:

  1. When to engage an attorney and why?
  2. What exactly is a judgment and how does it benefit me?
  3. The process a file undergoes when it is placed with a collection agency or attorney
  4. Recoveries that are available to a business once it obtains a judgment. 

In Part 3 of this series, we explored the process a file undergoes when it is placed with a collection agency or attorney. This week we’ll explore the various post-judgement remedies available to aid in recovery of an account once a judgment is obtained. 

Obtaining a Judgment

If you’ve obtained a court-ordered judgment without retaining a collections expert, congratulations are in order. However, don’t give yourself too much credit. Judges often joke that obtaining the judgment is the easiest part of the recovery process. It’s executing on that judgment and collecting against it that is the difficult part. Experienced collection agencies and collection law firms can assist judgment creditors in navigating the process.

State law dictates the post-judgment remedies available to a judgment creditor. It is important to know the fundamentals of the post-judgment statutes of the state where the judgment was taken prior to commencing any post-judgment action.

Post-judgment remedies are either served directly on the judgment debtor or they are served on a third party who is requiring them to provide information regarding assets.

Some of the remedies available that are served directly on a judgment creditor (depending on state law) include:

  • Serve officers of the business with post-judgment discovery. A post-judgment discovery is a set of legal pleadings seeking information, primarily with the hope of uncovering assets from the debtor. The officer is required by law to respond within the time prescribed. In some jurisdictions if the officer fails to respond, the judgment creditor may petition the court, asking the officer to show cause why he/she did not respond. The judgment creditor also may seek judgment against the officer personally. As you can imagine, this can become a very powerful tool, because the officer’s personal assets and credit are at risk.
  • Perform a post-judgment deposition. The post-judgment deposition is also known as a debtor’s exam. An officer of the business is served with a notice of the deposition and is required to appear and provide answers to questions regarding assets that are laid out in the pleadings served along with the notice. Much like post-judgment discovery, if an officer fails to appear for the deposition, the judgment creditor can seek recourse from the courts forcing the officer to show cause why she/he failed to appear and seeking judgment against officer personally.
  • Seek the debtor’s tax return. This is another form of discovery that can unveil the financials of the business.

Post-judgment remedies available that are served on a third party include:

  • Perform a bank levy. The judgment creditor serves a summons on the bank where the business does its banking, ordering the bank to disclose the funds held in the businesses’ accounts and freezing the funds until the time proscribed by law has passed, thereby allowing the funds to be released to the judgment creditor in order to satisfy the judgment.
  • Perform a wage garnishment on an officer of the business (there are times in certain states when you can obtain a judgment against an officer for failure to respond to a garnishment disclosure) The wage garnishment is served upon the employer. The garnishment summons directs the employer to disclose the amount of money being paid to the employee and requires him/her to withhold a certain percentage of wages (dependent on state law). If the debtor fails to serve an objection to the garnishment, the funds will be released to the judgment creditor. If an objection is served, the parties will likely need to appear at a court hearing to determine whether the withheld funds are exempt from garnishment or rightfully and lawfully belong to the creditor.
  • Engage the sheriff.some cases, utilizing the sheriff can be a very persuasive tactic. Sheriffs tend to be intimidating when they show up at a business. Once a writ of execution is received by the creditor, the creditor can instruct the sheriff to go after tangible property belonging to the debtor. For example, the sheriff obtains the writ from the creditor directing him/her to go to the debtor’s place of business and take any money that is in the cash register, in order to satisfy the judgment.
  • Merchant/Third-party attachment. The creditor may serve most any third party who it believes pays the debtor. This could include tenants or customers of the debtor, a line of credit and more. The third party is served and, much like a wage garnishment, those funds must be withheld by the third-party and paid to the judgment creditor in order to pay down the judgment balance.

Judgment creditors also have the ability to attach to property in the following ways:

  • Place a lien on real property-once a judgment is obtained. In some jurisdictions, the judgment will attach to a piece of real property. This muddies the title for the debtor, thereby making it difficult to sell the property, creating a real motivation to get the judgment paid.
  • Place a lien on equipment or materials. Again, placing a lien on equipment or materials prevents the debtor from selling the equipment or using the materials, because the judgment creditor has an interest in the equipment or materials.

As you can see, there is an arsenal of tools judgment creditors have available to them when executing on a judgment. However, post judgment execution statutes require a significant knowledge base for businesses wanting to execute on a judgment. The best advice that can be given is that your business leave collections to the professionals who take compliance seriously and are less likely to place your business at risk of exposure to liability.

Now you understand the complexity of the post-judgment execution process. You realize that you need to hand off any judgments your business has taken and leave the execution up to an experienced collections agency or collections lawyer.

Thank you for following this 4 Part Series, “What to expect when Retaining a Collection Attorney to Collect on a Delinquent Account.” For additional information on collecting delinquent accounts, grab a copy of our free e-Report: What Most Businesses don’t know about the Recourse that’s Available to Them when a Customer Refuses to Pay. .

Lisa_Gurstel  Lisa A. Haster, Esq.

Categories: collection industry resources, Commercial collections, Compliance, Debt Collection, garnishment, Guest Blogs, judgment to collect debt, Legal Judgment, NL Insider, Outsourcing, Post-judgment execution tasks, tax refund garnishment, Vendor compliance

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