The Benefits of Obtaining a Judgment: Post Judgment Collection
Often times, when we as attorneys send suit requirements, clients are conflicted as to whether they should file suit. With the downturn of our economy, it is often stressful to think of spending upwards of $300.00 on suit costs; some clients have compared this to “throwing good money after bad.” While spending the extra costs on suit may not seem worthwhile, obtaining a judgment against a Debtor can certainly provide the client with leverage, ultimately resulting in collection.
Anytime a new claim comes into our office, we make at least three phone calls, typically once a week, before suggesting suit. If we know that a business is no longer operating and there is not a personal guarantor, we do not suggest suit, as a judgment will not likely lead to collection. If we are able to confirm that we have a viable address for the Debtor and that the business continues to operate, suit is most likely the best option for the client.
Once a complaint is filed, a Debtor cannot ignore our demands without the risk of default judgment. After service of a Complaint by the Sheriff or otherwise, depending upon the applicable Rules of Civil Procedure, a Defendant has thirty (30) days to respond to the Complaint, typically by filing an Answer or in certain instances, Preliminary Objections. After twenty (20) days, we provide the Defendant with a Ten Day Notice. Once thirty days pass with no response, we are free to enter a Default Judgment.
Often times, we hear that it is the client’s goal to place a lien on the Defendant’s property. What clients sometimes don’t realize is that a judgment automatically places a lien on all property owned by the Defendant in the county in which the judgment is filed. There are of course some exceptions, for example, if the property is owned jointly between a husband and a wife and the judgment is entered against only one spouse, no lien rights are created.
Aside from automatically serving as a lien on residential property in the county where judgment was filed, there are several other advantages to obtaining a judgment against a Debtor. Demands coming from an attorney are far more forceful at this stage of the game. There is only minimal cost associated with sending demand letters to the Defendant. This is a useful tool regardless of whether the client chooses to pursue any of the additional remedies listed below. At this stage of the process, making demands is different than it was before suit was filed, as there is now a judgment in place. The leverage in forcing the Defendant to pay is the judgment, which has now affected the Defendant’s credit and real property in the county where the judgment was filed.
Our most popular method of demanding on a judgment is garnishing the Defendant’s bank account. This option is only available if the client has banking information on hand. The costs associated with garnishment are typically $150.00 and include filing fees and Sheriff’s service upon the Bank. After service, the Bank has thirty (30) days to respond to our interrogatories. If no response after thirty (30) days following service, we are free to move for a judgment against the garnishee. As soon as the Bank is served with our interrogatories, the Defendant’s bank account is “frozen.” Often, this will result in us being contacted by the Defendant. Regardless of whether contact is made, when we are in receipt of answers to our interrogatories, we are free to enter a judgment against the Bank for the amount the Bank admits to owing our Defendant in the answers. Note that individuals are entitled to a $300.00 exemption, which is ordinarily automatically deducted from the Garnishee’s answers.
Another method of execution available to the client after filing judgment is a writ of execution directed towards the Defendant’s personal property. The cost of filing and serving a writ of execution is approximately $350.00. Because of the cost associated with an execution, executions should be used only when there is money or property owned by the Defendant (individually, not as a tenant by the entirety) that can be seized to satisfy a judgment. Typically, there is a period of five years after judgment is entered to issue an execution. After the writ is filed, the Sheriff has ninety (90) days to service and levy upon the writ.
There are two types of executions, real estate and personal property levies. Personal property is considered non-real estate property such as automobiles or household furnishings. In the case of a business, non-real property may include office furniture, computers or even stock. When an execution is issued to the sheriff for personal property, there need not be a description of the specific property to be seized. Personal property is tagged for purposes of identification when an execution on personal property is issued. The sheriff must post and publish a Notice of Sale advertising when the property will be sold. This must be done for six (6) days and must be posted in three specific places: (i) the sheriff’s office; (ii) the place of sale; and (iii) the place of levy if different from the place of sale. Typically, personal property is sold at the place of the levy. A representative from the Plaintiff must be present at the sale and the Plaintiff is responsible for anything remaining following the sale.
Most personal property has exemptions. If a property claim is filed, the sale will not proceed before a determination is made on the claims. However, in most instances, the client isn’t scheduling the sale to obtain the goods, rather the client is hopeful that the sale will lead to payment of the Judgment. Property claims do not solely apply to individuals. Even in this instance of a sale of business property, a secured creditor, such as a bank or other lending institution, might have a security interest in the assets of the business, which may take precedent over an execution. Therefore, it is important that a UCC filing check be made on any business before executing on any of their assets to determine if there is a security interest in the name of a secured creditor.
Although suit can be a little costly, depending on the amount of a client’s claim, suit is usually worthwhile, as the benefits normally outweigh the risks. Obtaining a judgment provides us with leverage that is far more likely to result in collection. Patience, along with a little time and money can go a long way in the collection world.
For additional information on perfection of security interests and the usage of other credit enhancements, please see the other articles in this Publications section.
