"I have a judgment, so they have to pay me, right?" That was the question posed to me this week from a long-time client of the firm. It was both a statement of expectation and a question, though mostly a rhetorical one. He had a judgment against a produce dealer that failed to pay his invoices and fully expected the Judgment to result in payment. What was my answer to the question? Yes, they have to pay you - but that doesn't mean they will. So, it's a solid "maybe."
Of course, the true answer is more complex. In some cases, we obtain judgments against debtors who either fail to mount a defense, in which case a Default Judgment is entered, or who simply do not have the resources to pay the entire claim amounts. In these situations, the judgments serve as orders validating the claim amounts against the debtors, who then become "Judgment Debtors." A Judgment Debtor is a person against whom a money judgment has been entered but not satisfied.
Judgments provide a sufficient basis to enforce and collect upon outstanding debts. Immediately after we obtain a judgment on a client's behalf, we record it in the county or counties where the Judgment Debtor owns real property. We also record the judgment with the Secretary of State in the Judgment Debtor's state of residence. These recordings effectuate liens upon any real or personal property owned by the Judgment Debtor in the county or state. If either the real or personal property is sold after the judgment is recorded, the lien must be satisfied in order for clear title to pass to the buyer.
Although it is relatively easy to locate and identify real property owned by a Judgment Debtor, some assets are a bit more difficult to find, particularly if the Judgment Debtor is actively trying to hide them. In situations where we believe such assets may exist, we request our client's authority to hire a private investigator to perform a detailed asset search. The information provided by the investigator enables us to evaluate whether to proceed with a Writ of Execution on the property or a Writ of Garnishment.
A Writ of Execution is a court order permitting the sheriff to initiate a sale of the Judgment Debtor's real or personal property. The success of this option depends largely upon the mortgages and liens the Judgment Debtor has on its property, if any. If the balance of the mortgage or the amount of the liens exceeds the property's value, no equity will be available to pay our client's judgment amount.
If the investigation reveals significant funds in a bank account held by the Judgment Debtor, we have the option of asking the court to issue a Writ of Garnishment. The Writ of Garnishment can be served on the bank in an attempt to recover the funds without notice to the Judgment Debtor. A Writ of Garnishment can also be served on the Judgment Debtor's current employer. If the Judgment Debtor is employed, the Writ of Garnishment directs the employer to withhold a portion of his or her wages to pay the judgment amount.
Although state laws provide the various options discussed above, they also supply certain protections to the Judgment Debtor. These protections include homestead exemptions and wages for heads of households. Additionally, judgments are not perpetual. Therefore, judgment creditors must renew a judgment if full payment has not been received by the judgment's date of expiration, or the state will consider the judgment satisfied.
Utilizing these collection "tools" may not result in immediate payment. The Judgment Debtor may be unemployed and have no real or personal property to attach by lien. However, they do provide a judgment creditor with an opportunity to recover the indebtedness long after the judgment was obtained. In that sense, the judgment is much like an investment; it may or may not bear fruit, but you have to plant a seed for the tree to grow.
Should you have any questions regarding this or any other topic, please feel free to contact our office.