Obtaining a judgment is the first step in recovering money owed to you. However, a judgment will not be entered by the court until you file a lawsuit against the debtor and the debtor either fails to respond or you win the lawsuit. In some debt collection cases, the defendant does not dispute the amount owed or does not want to fight the case. If so, obtaining a judgment against the debtor may be relatively straightforward.
Writ of Attachment
A writ of attachment is a remedy which can be used before you obtain judgment. The purpose of this remedy is to prevent a debtor from transferring or concealing assets available to satisfy the judgment. This remedy allows the sheriff to seize the debtor’s property pending the outcome of the underlying claim, and may require the creditor to post a bond of $10,000 or more before the writ can be issued. Pre-judgment attachment is available in California on most commercial claims once the ‘probable validity’ of an obligation is established. Emergency (ex parte) writs of attachment can be obtained upon a proper showing of need, but they are the exception rather than the rule.
Temporary Protective Order
Temporary protective orders are another method of preventing the debtor from transferring or concealing assets available to satisfy the judgment. Upon a showing of necessity, such an order can be issued pending a hearing on whether a writ of attachment should be issued. This is a preliminary step to protect your rights to the assets while the court decides whether or not to grant a writ of attachment.
Claim and Delivery
This provisional remedy can be granted to a creditor in an action for recovery of specific, tangible personal property in the defendant’s possession, and requires a showing that the creditor has a superior right to possession of the personal property. If granted, this remedy allows for the seizure and storage of the claimed property pending completion of the lawsuit. In some cases, filing an action for recovery of possession of the property may get the debtor’s attention and result in a settlement. However, if the creditor does not win the lawsuit, there can be liability for wrongfully seizing the property.
Appointment of a receiver is a remedy in which a court appoints a representative to take possession or manage property to preserve and protect it pending an outcome of the lawsuit. Receiverships are often expensive and not favored by the courts. They are sometimes impractical because of the cost of administration.
What does a judgment do?
Once you obtain a judgment against the debtor, your judgment bears interest at the legal rate (10% per annum) and is renewable every 10 years provided that the renewal occurs before the ten year period expires. You may also be able to collect pre-judgment interest from the date your debt became certain.
If you would like us to assist you with collection of your business debt, we have the ability and experience to locate debtors and their assets. We will collect your judgment using remedies such as debtor’s asset examinations, bank levies, wage garnishment, seizure and sale of assets, writs of attachment and possession, temporary protective orders, receiverships, and judgment liens.
What else should be considered?
There are a number of factors to keep in mind in deciding whether or not you want to file a debt collection lawsuit against your debtor. One of the most important issues is the cost of filing the lawsuit. In some cases, the attorneys’ fees and costs of the lawsuit are recoverable either by statute or if there is a written agreement between the parties. In other cases, Kingston, Martinez & Hogan, may take your case on a contingency basis, costing you nothing in attorney fees until the judgment is enforced and the debt is recovered.
Another consideration in filing a collection lawsuit is whether the debtor is going to contest the lawsuit. If the lawsuit is disputed, we are experienced debt collection attorneys and have the ability and experience to navigate the procedures and requirements necessary to fight for you and your rights.
You should also consider whether your debtor has assets or whether he or she may be insolvent and judgment proof. Is your debtor going to file bankruptcy or is your debtor only threatening bankruptcy as a negotiating tactic? Kingston, Martinez & Hogan can help you determine whether a debt collection lawsuit is practical for you.
If you need an experienced commercial debt collection attorney to guide you through this process, please contact us, and we will be happy to assist you.
After you win your lawsuit and obtain judgment, the next step in your collection process is to enforce the judgment. The best method of enforcing and collecting your judgment will vary depending on the facts of your particular case. Some commonly used methods of enforcing your money judgment are discussed below.
Debtor’s Asset Examination
A debtor’s property can sometimes be located by examining the debtor in court, under oath, about his assets and liabilities. A judgment debtor may be required to come to court and answer questions about his financial condition every 120 days.
Writ of Execution
Another common means of enforcing money judgments is through a writ of execution. A writ of execution is a court ordered process in which the sheriff enforces the money judgment by levying on property and taking possession of the property.
Levy with a writ of execution has several advantages: 1) non-exempt property of the debtor is subject to execution, 2) execution by a levying officer creates a lien, which may be an important advantage if the debtor files bankruptcy, 3) after levy, the property can be sold and the proceeds used to satisfy the judgment, and 4) the execution levy often causes the debtor to resolve the debt in order to avoid the consequences of the levy.
Unlike recording a judgment lien, however, the creditor must identify the assets the debtor owns, including the location and description of the property. The debtor may be entitled to claim that certain personal assets are exempt from execution.
Seizure and Sale of Assets (including Bank Levies)
A writ of execution allows the creditor to request a sheriff take possession of certain property, levy upon it, and sell the assets at a public sale to satisfy the judgment. In addition, the sheriff may seize funds from the debtor’s bank account and safety deposit boxes. This is a powerful remedy to collect your judgment.
After you have won your lawsuit, you can require the debtor’s employer to withhold up to 25% of the debtor’s net disposable earnings to satisfy your judgment. This method of debt collection is relatively inexpensive and easy to implement. In addition, it may be the only means available to enforce a judgment when other property is exempt. There are protections for the debtor, however, that limit the amount of wage earnings that you can withhold based upon the debtor’s financial condition.
A judgment lien on real property can be obtained by recording an abstract of judgment in any county in which the debtor owns real estate. This procedure is relatively fast and inexpensive. A judgment lien on personal property can be obtained by filing a personal property lien with the Secretary of State. These liens, if properly perfected, may provide a creditor important rights in the event the debtor files bankruptcy.
Until 2021, the homestead exemption in California was $100,000 for the head of a household. That amount can increase to as much as $175,000 when the debtor is elderly or disabled and is available to debtors whether or not they record a declaration of homestead. In 2021, the homestead exemption amount increased to as much as $600,000 with annual cost of living adjustments. It is important to note, however, that the amount of the exemption is determined as of the date the judgment lien is created on real property.
Domestication of Sister-State and Foreign Money Judgments
Judgments arising in other jurisdictions can often be registered in California and enforced with California process. The debtor is served with a notice of entry of the judgment and has 30 days in which to contest the judgment on limited grounds. After the 30-day period has expired, the creditor can enforce the judgment like any other California judgment.