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How to Collect a Judgment
You won your judgment and now it's time to be repaid. Judgment enforcement requires a lot of time and money. If possible, you should try and settle with the debtor. Some debtors will never settle, and some are scoundrels. But if settling is an option, consider settling for 50% of what is owed. (It may cost you that much to enforce over time.)
Unfortunately most debtors won't actually settle (pay you money). If they won't settle, you have to decide, are you going to enforce the judgment yourself? Or will you find a judgment enforcer? Judgment enforcers (specialists, lawyers, or agencies) are easy to find, however, most charge 50% because judgment enforcement is not easy or cheap. Some wish to first try to enforce their judgment themselves.
If you are going to enforce a judgment yourself, the most important thing to remember is to be polite, have patience, and use common sense. That way if you make a mistake, most likely, it will not be too costly.
There are laws on what you can and cannot do to enforce a judgment. Each state has its own laws. California has the California Code of Civil Procedures (CCPs). The CCPs for enforcement related law starts in the 700s.
There are many State and Federal laws concerning the debtor's privacy. For example, you can't pass out flyers telling neighbors how much money the debtor owes you.
Among the many laws are California's Rosenthal laws (CCPs 1788-1788.30 and 1812.xxx). Federally, there are FDCPA (Fair Debt Collection Practices Act) laws, detailed at www.ftc.gov, and the GLB Acts (U.S.C. Section 1692, 6801-6809), and related laws.
You have to be careful and polite when you communicate with your debtor. As an example, here is a portion of the Rosenthal text that Judgment Enforcers must send to debtors on their first written communication to them:
"The state Rosenthal Fair Debt Collection Practices Act and the federal Fair Debt Collection Practices Act require that, except under unusual circumstances, collectors may not contact you before 8 a.m. or after 9 p.m. They may not harass you by using threats of violence or arrest or by using obscene language."
"Collectors may not use false or misleading statements or call you at work if they know or have reason to know that you may not receive personal calls at work. For the most part, collectors may not tell another person, other than your attorney or spouse, about your debt. Collectors may contact another person to confirm your location or enforce a judgment. For more information about debt collection activities, you may contact the Federal Trade Commission at 1-877-FTC-HELP or www.ftc.gov."
Again, being polite, having patience, and using common sense will go a long way.
Does the debtor have any assets? That is the most important question. If a debtor does not have assets (or cannot borrow or get assets as a gift), the judgment cannot be enforced. Here are some warning signs that should make you think twice about rushing to spend time and money enforcing your judgment.
1) If the debtor has filed for bankruptcy, stop everything, until you know for sure that you can proceed.
2) Especially if the debtor is old, be aware; disability, pensions, and social security funds cannot be attached.
3) If the debtor has no job and no income.
4) If the debtor has no assets such as cars or a home.
5) If the debtor has a lot of other judgments against them.
6) If the debtor is a company that has stopped operating.
7) If the debtor is in jail or overseas or dead.
Even if the debtor has some of the above warning signs, it does not always mean you should give up. It just means you should think twice about trying to collect from your debtor now. Judgments are good for a long time. Maybe their bankruptcy attempt won't succeed. Maybe you can go after an old person's estate.
If the economy improves, maybe you can go after the debtor later. What a Judgment Enforcer might do, if there are no assets, is to wait 6 months and check again.
If you think your debtor has or can get some assets to pay you, you can bring the debtor and third-parties to court to answer questions and supply copies of documents. This is called an order of examination. This can be expensive, as you have to pay the court, and pay a process server to personally serve each person that must appear in court.
The first examination is usually the debtor themselves. Sometimes the debtor just does not show up. Sometimes the court cares, sometimes not. Sometimes the court will let you pay more, for a warrant for the debtor's arrest. In a few counties in the US, the sheriff will pick up a debtor and bring them to jail. In most counties, the sheriff is too busy to enforce civil bench warrants.
Even if the debtor shows up, sometimes the debtor lies. Sometimes when you demand documents, the debtor says the dog ate their homework. Most of the time the judge only cares if the debtor answers questions, not that their answers are the truth. The debtor can say their social security number is 007-00-0000, and most judges won't make the debtor change their answer.
One defense against a lackadaisical debtor, is in certain situations, you can examine third-parties if you can show they probably control or possess (in some way) the debtor's property. Perhaps you can make the debtor's spouse, parents, kids, business associates, customers, and/or landlord appear in court. That kind of "pressure" (hassle factor) may cause the debtor to find the money to pay you.
Besides "pressure" on the debtor via third-party examinations, or the production of documents, you might learn where the debtor works, banks, or where they keep an asset.
The main concept of enforcing judgments is the law does not allow you to directly seize any of the debtor's assets. You can't take their assets, but the sheriff can (if you fill out the right paperwork and pay the fees.)
If you find a job or a bank account, you can pay the court for a writ (permission to levy/seize assets) and then pay the sheriff and possibly a process server to take (e.g) 25% of their wages, or levy their bank account. You can only get back what is owed you - no more.
If they own property, you can record a lien. In today's economic climate, recording a lien does not mean you will be paid. If they own any other assets, like a car or an expensive TV, you can pay the sheriff to sell them at an auction.
Having the sheriff seize and sell property has some drawbacks: It is expensive, things don't sell for full value at sheriff auctions, the debtor may claim an exemption. The property may be financed or leased which reduces the chance you will see any money.
Every action to enforce a judgment costs money, and you should document what you spend on a court-endorsed form. In California, a MC-12 form is used.
Sometimes recording liens, dragging people to court, or doing a levy of the debtor's assets, can result in an immediate payoff or a settlement discussion. Sometimes the first levy pays off your judgment in full.
Sometimes the debtor has no money. Perhaps their relative or friend or credit card might help them pay. Sometimes just starting an enforcement procedure leads to a payoff. With more court procedures, you might be able to levy the wages of the spouse of a debtor.
The debtor can file for bankruptcy. Sometimes when you try and levy their wages, there is another levy ahead of yours. Sometimes the debtor has nothing in their bank account or can challenge your levy with a claim of exemption.
Some judgment enforcements go quickly, some take many years. Offers to settle can appear at any time. This is just a summary of enforcement issues. Your local court, especially a small claims court, has information and perhaps workshops too. There are many books and web sites to learn more.
Some useful web sites to learn more are at:
www.JunkFax.org and www.courts.ca.gov/selfhelp.htm.
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