I am not a lawyer, I am a Judgment and Collections Broker. This article is my opinion, based on my experience in California, and laws vary in each state. If you ever need legal advice or a strategy to use, please contact a lawyer.
Most of the time, except for bank and job levies, the only way to recover a judgment is through the courts and Sheriffs (or levying officers, which are sometimes registered process servers); to levy and then have a Sheriff selling your judgment debtor’s assets.
Levies are usually relatively simple because they do not require court hearings. When the debtor is employed and gets paid a wage, or has a bank account, those assets may be reached with regular (and simple) kinds of third-party levies.
Bank account levies are a one-time seizure of the judgment debtor’s money. A wage garnishment is an ongoing levy of part of the debtor’s income. Most third-party levies are one-time levies, however they do not have to be.
Sometimes debtors have assets stashed with third-parties, where some debtor owes your debtor. Third-party levies can usually reach debtor assets possessed or controlled by third-parties.
The first step in a third-party levy is figuring out who is paying your judgment debtor, or has assets belonging to your judgment debtor. The next step is to figure out the best way to attempt to levy those assets.
When the debtor is self-employed, or gets income from royalties, trusts, or distributions; an assignment order might be needed. Assignment orders are relatively complex, and require a court hearing.
In California, one gets a writ of execution, then fills out some judicial council forms, then provides a letter of instruction and gives a check to the Sheriff, and sometimes also to a registered process server. Then, the levy is served on the third-party person or entity that would one day be paying the judgment debtor.
Many types of money and assets held by third-parties that are owed to your judgment debtor, can be levied. For example, payments to an independent contractor, rents, commissions, bonuses, and tips.
It is also possible to have the Sheriff levy unusual property. Examples are vehicles at the repair shop, and pets in a boarding kennel, if you arrange and pay for storage, and proper handling of the property. Everything depends on cooperation from your local Sheriff.
When the debtor owns property, and renters pay them, a third-party levy can be used to garnish rent payments, however this requires proper instructions to, and assistance from, your local Sheriff.
The (Third Party Levy/Rent Levy) is served on one or more tenants. The Sheriff can collect the rent directly from the tenant(s) as a payment toward satisfying the judgment. Make sure you do not ask the Sheriff to over-collect, because legally you can only recover what is owed.
If the Sheriff agrees, a third-party levy can last as long as is required. Some Sheriffs will continue to collect rent payments as long as they have a valid writ on file and money is still due.
A tenant cannot be evicted for failure to provide the landlord/manager with the monthly rent if a court or a Sheriff mandates that the tenant gives the rent to you or the Sheriff, instead of the landlord.
When you get a third-party levy served, the third-party could claim the assets belong to them, not your debtor. Or, a different third-party to your judgment debtor’s third-party, might claim the assets belong to them. (See California CCPs 720.130 and 720.230.)
If a third-party makes a claim with the Sheriff, the Sheriff will halt the levy, and give the creditor a chance to quickly pay cash, or post a bond (file an undertaking) with the Sheriff or the court, for the value of the (currently disputed) claim.
If the creditor does not provide cash or a bond, and does not have a restraining order in effect, the Sheriff will release the assets back to the party that filed the claim. If the creditor does successfully pay the an undertaking, the assets already levied upon may be sold, or delivered by the Sheriff.
After a third-party claim is made, and either a creditor’s restraining order is in effect, or the creditor purchased a bond or provided cash; the third-party claimant must quickly arrange for a court hearing.
The third-party claimant usually has the burden of proof, that the assets belong to them. If the creditor is claiming a fraudulent transfer, then the burden of proof shifts back to the creditor.
At the court hearing, the court decides the validity of the third-party claim, and that decision can be appealed. If the third-party claim is upheld by the court, the creditor does not get paid.