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One way that a judgment can be recovered is to use it to credit bid. Under certain auction circumstances, one might be able to credit bid for a debtor's property.
A credit bid is a chance for some or all of your secured claim or judgment against a person or entity, to be exchanged for the debtor's assets, if and when their assets become available for sale at an auction.
At an auction sale, you may be able to show up at the auction and instead of bidding with cash, you can place a bid using credit from your judgment, or from your secured claim.
An example where one may be able to credit bid, is if one paid the Sheriff to levy and auction a judgment debtor's property. At the time of the auction, one could use the amount owed on their judgment, to pay for most of the cost of winning the property at the auction.
Credit bidding for a debtor's property (for example, a vehicle or real estate), can only happen at a (Sheriff or bankruptcy court) auction for that property, for creditors having a secured interest in that property. To credit bid means just that. You are using the judgment to back up your auction bid. Let's say the writ is currently $100,000.00. You bid along with the others and stop at $10,000.00. Your judgment is now reduced to $90k, and you smile.
Make sure credit bidding is allowed, with your local court and Sheriff. In some places and situations, one cannot credit bid. In other places, to credit bid, there must be another person at the auction, bidding with cash (or a cash equivalent). The laws vary by state, and just like some court clerks have never seen a satisfaction of judgment form, some Sheriff offices have never heard about credit bidding. Ask them to look it up because credit bidding is permitted most everywhere.
Credit bidders have a big advantage at auctions, because most attendees that bid must be able to immediately present the auctioneer with cash or a cash equivalent, for example a cashier's check.
Note that many judgment debtors who ignored you before will do almost anything to stop a Sheriff auction of their property, including crying, falsifying documents to send to the Sheriff, forging your name, filing for bankruptcy, and promising to pay if you call off the auction. There have been cases of auction paperwork being taken off a clerk's desk, so make sure more than one staffer knows about your upcoming levy situation.
Never release a lien, cancel an execution or auction, or delay a collection activity for a mere promise to pay. Always remember "show me the money". Never give the judgment debtor anything in writing, they could use what you give them against you later.
If the asset being auctioned are big, meet with the Sheriff office long in advance and make sure they know you well, and ask them to call your phone number if they get any paperwork to call off or delay the auction.
Credit bids are not cash. In California, credit bidding at Sheriff auctions are covered by CCPs 701.590 and 701.560. In California, one usually needs to make a cash deposit, to be able to credit bid at a Sheriff's auction.
In most auctions situations, you have to pay a lot of cash, in addition to what you can credit bid. One example is the expense of a debtor's claim of exemption. One cannot credit bid for the amount of that exemption, which by law must be paid to the debtor.
Usually, the opening bid price is what is owed for loans on the property, plus the debtor's exemption. If there are no bidders at an auction, what happens next depends on the situation. Sometimes, the property is returned to the debtor. For this reason, always attend the auction. If the opening price is (e.g.) 3 million dollars, and nobody bids, wait a little bit, and offer (e.g.) $10,000. If they say they need 3 million and they cannot go lowers, explain you are the creditor and are credit bidding, and you have got the OK from the Sheriff to credit bid before the auction. This may or may not work, it should work, but it is certain that nothing is certain.
When the auction involves expensive assets, there is a very good chance there will be existing lenders or lien holders. One must take are there is sufficient equity in the property, and you will have to take care of anyone ahead of you, for example the first mortgage. You can make creative deals with your position, you do not always have to get a full payoff.
I have heard from lawyers that I know, that lawyers, when credit bidding for their clients, do not have to pay any cash upfront. At the auction, sometimes several people will bid on the item which is a complication if you are credit bidding. If that happens, you have a choice of telling them you intend to buy it there by credit bidding and maybe they will walk away, and you get it at a lower price: or they may bid up the price so the high bidder has to to pay more for it, and you get more.
For property auctions, when the auction concludes, and you were the high bidder by credit bidding, in a month or a bit longer, and you can trade the deeds with your judgment debtor for cash.
For vehicle auctions, If you win the auction, the Sheriff will give you a bill of sale, to bring to your Department of Motor Vehicles. Sometimes you must pay a big usage tax to the DMV. In California, and perhaps other states, the State Board Of Equalization exempts usage tax on involuntary vehicle transfers. You might be able to get a tax exemption certificate to bring to the DMV and avoid paying the usage tax.
In California, one prints this PDF form. Fill it out, then brings the form (no fees required!) to the DMV with a copy of judgment, the assignment, the sheriff receipt, and the writ. I know a judgment enforcer, who paid the Sheriff to levy a judgment debtor's car that he really wanted. At the auction, he paid the other bidders $500 each to walk away, so he was the sole winning bidder on the car for a very good price.
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