Laurie Hager, The Daily Record Newswire
One of the most common reasons for a business (or person) to file a lawsuit is because it believes it is owed money. The debt claimed may be the result of a breach of contract, a personal injury, or an injury to property.
No matter how the debt arose, a successful claimant will receive the same piece of paper at the end of the case: a judgment from the court requiring the defendant (now the judgment debtor) to pay the business or person claimant (now the judgment creditor) a certain sum of money.
These judgments are wonderful pieces of paper. However, claimants cannot take a judgment to the bank and exchange it for cash. So, how do claimants get what they really wanted in the first place — money from judgment debtors?
There are a number of options, and the best one will depend on the circumstances of each case (or on the particular judgment debtor). For example, a judgment creditor can garnish a judgment debtor’s bank accounts or employer to obtain money. A judgment creditor also can garnish a person or business to intercept money that would otherwise be paid to the judgment debtor. A judgment creditor also can have the sheriff sell the judgment debtor’s real estate or personal property. Other collection options exist as well.
Before choosing among the many collection options, consider the following tips.
1. A claimant may already know where the judgment debtor banks, or be able to make a very educated guess. If a claimant has received a check from the judgment debtor in the past, chances are the judgment debtor still uses the same bank. If the judgment debtor filled out a credit application, bank account information may exist there.
Also, people or businesses typically bank at a convenient location and use the same bank for multiple purposes. Thus, if a claimant knows where the judgment debtor obtained a loan, which bank has a mortgage against the judgment debtor’s real estate, or of a bank with a branch near the judgment debtor’s work or home, an educated guess may be possible concerning where the judgment debtor holds money that may be garnished.
2. Remember that depending on the state, a judgment can be good for a number of years, and can be extended. In many instances, a judgment creditor will be unable to collect a large judgment against a person or a distressed company all at once.
Even if a judgment is not fully collectible right away, don’t give up. Continue to periodically monitor the judgment debtor’s website, Facebook page or other information sources to spot signs of prosperity. Another tip is to time collection efforts with certain times of the year or month to target certain expected funds, such as tax refunds, year-end bonuses or invoice receivables.
3. Determine whether a judgment debtor has equity in real estate or personal property. A judgment debtor’s asset, no matter what the value, is worth nothing to a judgment creditor if it is underwater (that is, if the liens against the property exceed the value).
Before deciding whether it is worthwhile to attempt to execute on a judgment debtor’s real estate or personal property assets, it is important to research the value of the property and the judgment debtor’s equity in the property. That also requires analysis of other creditors’ potential prior liens on the property.
Website tools may give a preliminary indication of value. But information from the Internet should be followed up by research by professionals.
Claimants can draw inspiration from these tips and perhaps take another look at their judgments. Consider revamping efforts to collect.
—————
Laurie Hager is a commercial litigator for Sussman Shank LLP. She specializes in multiple issues, including those affecting debtors and creditors. Contact her at 503-227-1111 or laurie@sussmanshank.com.
