We tend to think of winning a case and securing a judgment as the end of the legal process. Until faced with attempting to collect on a judgment, we rarely consider the process of how one actually collects such money.
Imagine you fought a long, hard battle to secure a civil money judgment. The time for appeal has passed and your judgment is final. How do you get your money? It can often be difficult to get the losing party to part with their money, even in the face of a final judgment ordering them to pay. The battle to recover money that is rightfully yours can be an even longer and more arduous process than winning the judgment itself and, at the end of the day, a judgment is nothing without the ability to enforce it.
Luckily, collecting a judgment can be made less daunting by understanding the processes by which it is done. The following is a brief description of how to determine what property a judgment debtor has and how different types of property can be reached to satisfy a money judgment.
This article does not discuss the exemptions to property that can be reached to satisfy a judgment. Suffice it to say for these purposes that there are certain types of property, such as social security payments, that a judgment creditor cannot reach to satisfy the judgment. This discussion focuses only on the ways to determine what is in the judgment debtor’s possession and how one could theoretically reach it.
Keep in mind that this is only an overview and you should consult an attorney who is familiar with collecting judgments if you are faced with this situation.
How Do You Know What The Judgment Debtor Has?
Discovery is the process by which you gain information from the opposing party. The discovery process post-judgment is very similar to the discovery process in a civil action. You can send the judgment debtor written questions (known as interrogatories) and request from them relevant documents (known as requests for production or inspection demands) in the same manner as discovery in a civil action.
It is important to note that interrogatories cannot be sent to third persons. Third persons must be examined, as discussed briefly below, or the debtor’s interest in property in their possession or control garnished. In addition, although a judgment creditor can issue a subpoena duces tecum to a third party (a subpoena is a formal document that orders an individual to appear or produce documents at a specified time and place; a subpoena duces tecum is a request for documents), it may only do so after having obtained a court order for the third party’s examination.
Order of Examination
An examination of a judgment debtor or third party is the post-judgment equivalent of a deposition (a process by which a person is asked questions under oath outside of court). An examination can be used to identify property in the possession or control of the judgment debtor or a third person and to require the debtor or third person to turn over property to the levying officer. A levying officer, generally a sheriff or marshal, seizes and sells the property to raise money to satisfy the judgment.
Upon service of an examination order, the judgment debtor is required to appear in court to provide information to aid in enforcement of the money judgment.
Conducting an examination has some significant advantages. For instance, service of the order of examination generally creates a one-year lien on all of the debtor’s non-exempt property, including property in which the judgment debtor has an interest but that is not in his or her possession or control. A lien is a process by which you can take possession or force a sale of the debtor’s property to satisfy the judgment.
In addition to the examination, you can subpoena documents showing the debtor’s assets and liabilities at the same time as the examination order (or sooner). Alternatively, the judgment creditor may serve the debtor with a notice to produce documents and other tangible evidence in his or her possession. The notice to produce must be served at least 20 days before the examination date (or within any shorter time ordered by the court).
Examining a Third Party
If you believe a third person is in possession or control of property in which the judgment debtor has an interest or owes the judgment debtor more than $250, such third person may be ordered to appear for examination by requesting such an order from the court.
An examination order served on a third person creates a one-year lien on the debtor’s interest in property in the third person’s possession or control, provided the property is adequately described in the creditor’s application for the examination order. As stated above, having a lien on such property will allow the creditor to take possession or force a sale of the property to satisfy the judgment.
In addition, it appears that any person with knowledge leading to enforcement of the judgment (e.g., debtor’s bookkeeper, accountant or nondebtor spouse) can be required to testify before the court or a referee in an examination proceeding in the same manner as a trial witness.
Now You Know What The Judgment Debtor Has. How Do You Get It?
In order to reach real property (i.e. land and all things attached to it) to satisfy a judgment, you need to create a judgment lien on that property. A judgment lien on real property is created by recording an abstract of the judgment in the office of the county recorder of the county where the real property is located. An abstract of judgment is a written summary of a judgment that states how much money the losing party (the debtor) owes the person who won the lawsuit (the judgment creditor), the rate of interest to be paid on the judgment amount, any court costs and specific orders the judgment debtor must obey.
It is important to note that mere entry of the judgment does not create a real property lien in California.
If you believe the judgment debtor has real property in more than one county, an abstract of judgment has to be recorded in each of those counties.
Interest in Limited Liability Companies (LLCs) and Partnerships
In order to reach a debtor’s partnership or LLC interest, the judgment creditor must obtain a court order charging those interests with the amount of the judgment, known as a charging order. A motion for a charging order can be made in the court that entered the judgment or in any other court of competent jurisdiction. A lien on a judgment debtor’s interest is created by service of the notice of the motion for charging order. Such a lien will mean that the judgment creditor will receive any and all disbursements that would have been provided to the judgment debtor. This lien continues under the terms of the court’s charging order until the judgment is unenforceable or is extinguished if the court refuses to issue a charging order.
Interest in Corporations
In order to reach a judgment debtor’s interest in a corporation, you need to get a writ of execution then levy on that writ. A writ of execution is a court process directed to the levying officer (i.e., sheriff, marshal, or constable) of the county where the levy is to be made and to any registered process server. The writ requires the levying officer to enforce the money judgment in the manner prescribed by law. Note that a separate writ of execution must be issued for each county in which a levy is to be made.
After a writ of execution is issued, it must be delivered to the levying officer, either the marshal or sheriff, depending on the county, with instructions and the required fee. The levying officer then “levies” upon specified property of the judgment debtor by taking it into custody or otherwise subjecting it to a lien in favor of the judgment creditor. The property levied upon can then be collected or sold to satisfy the judgment. The levying officer has the authority to levy on the property for 180 days from receipt of the writ. Any number of levies can be made during that time period, but none following without a successive writ. It is good practice to direct the levying officer to hold the writ for further instructions. Unless you advise this, a levying officer may return the writ as soon as the instructed levy or sale is complete, thereby leaving the creditor without an effective writ.
This basic process is always the same, but differs depending on whether the securities are certificated or uncertificated and if it is held by the judgment debtor or by a broker or custodian.
The same process, writ of execution and levying on said writ, is used to reach a judgment debtor’s interest in bank accounts. At the time of levy or promptly thereafter, the levying officer must serve the judgment debtor with copies of (i) the writ, (ii) the notice of levy, (iii) if the debtor is a natural person, a list of exemptions and their dollar amounts and the forms the debtor may use to make a claim of exemption and provide a financial statement, and (iv) any affidavit of identity for the names of the debtor listed on the writ of execution.
Location of service of the writ of execution can be made at the office or branch that has actual possession of the property levied upon or at a designated centralized location for service of legal process. If no centralized location exists, a written request can be filed with the financial institution to identify a branch or office.
Importantly, no court order is required to levy on an account in the name of the judgment debtor, whether alone or with a third person, or an account in the name of judgment debtor’s spouse, whether alone or with third persons.
Although the last thing you want to have to do after securing a money judgment is to start a new battle to collect your money, understanding the methods by which you may collect on your judgment can make the entire process more easily accomplished. Nothing in this article is a substitute for legal advice and you should consult an attorney to assist you with your collection efforts.