Collecting From a Judgment Debtor: Wage Garnishment, Property Liens, and Bank Account Levys
Learn about the different collection methods for getting money from a judgment debtor
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You have won your case and the other party (the judgment debtor) owes you money. The case may be over but your work may not be done. Now you need to collect what you are owed from the judgment debtor. Too often, this is not easily done.
Finding the Debtor's Assets
In many states the loser in a case must fill out a form listing his or her assets. Typically, the judgment debtor must send a completed copy of this form to the person who won the case (the judgment creditor) within a certain number of days after the judgment is mailed out by the clerk–unless the judgment debtor pays off the judgment, appeals, or asks the judge to reverse a default judgment. If the judgment debtor fails to complete the statement (which, unfortunately, is all too common), the judgment creditor may be able to ask the court to hold the debtor in contempt of court, and even issue a bench warrant for his or her arrest.
If the judgment debtor doesn't fill out the Statement of Assets form, in most states the judgment creditor can ask the court clerk to issue an order requiring the judgment debtor to appear in court in person to be questioned. In some states, this is called an order for examination or judgment debtor's examination. This order, which must be properly served on the judgment debtor, requires the debtor to show up in court and provide the information personally. Typically, if the debtor fails to show up, the judge can issue a bench warrant for the person's arrest.
If you know where the judgment debtor works, you are in good shape. In most states, you are generally entitled to get approximately 25% of a person's net wages to satisfy a debt. (But if a person has a very low income, the amount you may recover can be considerably less than 25% and possibly nothing at all.) Wage garnishments are not allowed in some states. The sheriff's or marshal's office in your area can supply you with the rules in your state, or you can check online.
Levying a Bank Account
If you know where a judgment debtor banks, you can order a sheriff, marshal, or constable to levy on a bank account and get whatever it contains at the time of the levy, subject to several exceptions. Of course, a bank account levy will only work once at a given bank, because the debtor is pretty sure to move the account when he or she realizes that you are emptying it.
Real Property Liens
Another way to collect money from a person or business against whom you have a small claims judgment is by putting a lien on real estate owned by the debtor. In some states, the entry of a court judgment automatically creates a lien on any real property the debtor owns in the county where the judgment was obtained. In the rest of the states, you must record the judgment with the county to create a lien on the debtor's real property.
Once you have a lien on the judgment debtor's property, especially real property, there is a good chance you'll eventually be paid. It usually works like this: When the judgment debtor wishes to sell the real estate, the title will be clouded by your lien and the debtor will probably pay you off to be able to transfer clear title to a third party. Likewise, if the debtor wishes to refinance, it almost certainly will be contingent on all liens being paid off. Thus, sooner or later, you should get your money. Remember, however, that a portion of the debtor's equity in a home is exempt from collection.
Before you record your lien, make sure you wait until the time to appeal has passed. In many states, here's how to record a property lien against all the debtor's real estate that you know about:
- 1. Get an Abstract of Judgment form from the small claims clerk's office at the court where your case was heard (a small fee is required).
- 2. Take or mail the Abstract of Judgment form to the County Recorder's office in each county where property is located or you think the debtor might buy property, and pay the required fee. The recorder's office will record your lien and notify the judgment debtor.
Taking Other Property
Other types of property are normally much more difficult to grab because all states have debtor's exemption laws that prohibit creditors from taking certain types of property to satisfy a debt. Items protected typically include a portion of or all equity in a family house, furniture, clothes, and much more. (Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Robin Leonard and Margaret Reiter (Nolo), includes a list of the exempt property laws of all 50 states.) Practically speaking, the only types of personal property (as opposed to real estate) other than wages and bank accounts that are normally worth going after are business receipts and property, and motor vehicles in which the judgment debtor has equity that's greater than your state's exemption amount. Theoretically, there are many other assets that you could reach–boats and planes, for example–but in most cases they are not worth the time and expense involved, considering that your judgment is for a modest amount.
Writ of Execution
Before you can levy on a person's wages or other property, you must get court permission, usually in the form of a writ of execution, writ of garnishment, writ of attachment, or similarly titled document. Some courts also require that you complete a short application for the writ. If you have a small claims judgment, you are entitled to a writ. In most states, you get your writ from the small claims court clerk, who will often help you fill in part of the information. There is often a small fee, which is a recoverable cost.
Once the court issues your writ, take or send it to the sheriff, marshal, or constable in the county where the assets are located. Give the officer:
- The original writ and one to three or more copies, depending on the requirements of the sheriff, marshal, or constable. Keep a copy of the writ for your files.
- The required fees for collecting, which will vary as to the type of asset. Call ahead to inquire or check the county's website–many post information on collection procedures and fees.
- Instructions on what type of asset to collect and where it is located. The sheriff, marshal, constable, or small claims clerk may have a form to use when providing these instructions. Normally, however, they will accept a letter if it contains all the necessary information.
Don't delay in serving a writ of execution. A writ of execution expires if it is not served on the debtor by the sheriff, marshal, or constable within a certain number of days of the date it was issued by the court. If this time runs out, you will have to go back to the small claims clerk and get another writ of execution issued. So don't get a writ of execution until you have identified the property you want to take.
To seize a person's wages, you will probably have to provide an official copy of the writ of execution form to the sheriff, marshal, or constable in the county where the assets are located, and a letter of instruction. The sheriff or marshal will serve a wage withholding order on the debtor's employer, and you should get some money soon. Typically, an earnings withholding order lasts for a set period of time, such as 90 days, or until the judgment is satisfied or expires.
To levy on a bank account, first contact the sheriff, marshal, or constable's office to be sure they handle this work (if not, contact a process server). You'll need the original and one or more copies of the writ, a letter of instruction, and the correct fee. If a bank account is in the name of the defendant and someone else, you may have to post a bond, depending on your state's laws.
Not all money in a debtor's bank account is up for grabs. Most states have laws that prohibit you from taking exempt funds, and if you do take exempt funds the judgment debtor can force you to return them. Typically, approximately 75% of wages placed in a bank account are exempt (100% if there has been a previous wage attachment involving the same money) for 30 days after payment. Generally, Social Security, certain retirement accounts, and financial aid for school are also exempt.
In many states, it is possible to have someone from the sheriff's, marshal's, or constable's office sent to the business of a person who owes you money to collect it from the cash on hand. It is done with a till tap or a keeper. You will want to ask your court clerk about your local rules.
A till tap consists of a one-time removal of all cash and checks from the business. The fees are reasonable. For a keeper, a deputy from the sheriff's, marshal's, or constable's office goes to the place of business, takes all the cash and checks in the cash register, and then stays there for a set period of time (an eight-hour keeper, a 24-hour keeper, or a 48‑hour keeper) to take more money as it comes in. Because you must pay the deputy to stay at the collection site, keepers' fees are relatively high. It is also possible for the business's property to be seized and sold. But the costs of doing so are usually prohibitive.
Talk to the sheriff, marshal, or constable in your area to get more details. This person will want an original and several copies of your writ, as well as instructions on where and when to go. You can get the judgment debtor to reimburse you for money you spend on collection processes, if enough money comes in to cover it.
Seizing a person's motor vehicle tends to be difficult for several reasons, including the following:
- A portion of the equity in a car is exempt from your levy in many, though not all, states. The exempt amount ranges widely, from $1,000 to $20,000.
- The car must be parked in an accessible place, such as a street or driveway, unless you obtain a court order allowing entry into a garage or other private place.
- You can't always be sure that the judgment debtor owns the car he drives. It may be in someone else's name, or he may be leasing it.
Finding out whether a judgment debtor owns the car he or she drives can be tricky. You might get this information from the judgment debtor's statement of assets or by conducting a debtor's examination. In addition, for a small fee, you may be able to find out from the Department of Motor Vehicles who owns the car, including whether or not a bank or finance company has an interest.
Once you have this information, you can determine whether the car is worth enough to levy against. If the car is sold, will the sale price be enough to pay off any car loan the debtor has, give the debtor his or her exemption, cover the costs of the sale, and leave enough to pay all, or at least a substantial part, of your judgment? If you are convinced that the vehicle is worth enough to cover these costs, as would be the case if it is relatively new and owned free and clear by the debtor, then have the sheriff pick up the car and sell it. But remember, the sheriff's fees to do this are relatively high and must be paid in advance. Also, the sale price at a public auction will fetch far less than at a private sale. If the car sells for enough, you can get back the money spent on sheriff's fees when the vehicle is sold.
Call the sheriff, marshal, or constable of the county in which the car is located to find out how much money is required as a deposit and how many copies of the writ you'll need.
Some states have no exemption for motor vehicles, and some exempt a higher amount of equity. Check your state's laws, call your local sheriff's or marshal's office, or consult Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Robin Leonard and Margaret Reiter (Nolo), which contains an up-to-date list of all states' exemptions.
Stocks, Bonds, Mutual Funds, and Other Securities
If the judgment debtor owns stock or other securities that are not exempt as part of a retirement plan, you may be able to force the debtor to sell these assets to pay your judgment. Your collection method will depend on whether the debtor personally holds the stock certificates or whether they're held by a stockbroker.
If the judgment debtor personally holds the certificates, you can levy against the certificates themselves as tangible personal property. However, you will first need to get a court order allowing you to reach property in a private home.
If, as is common, the certificates are held for the judgment debtor by a broker, generally you can initiate a third-party levy against the branch office of the stock brokerage firm. The sheriff, marshal, or constable will require a writ, written instructions, and fee to handle the levy.
Sometimes stock or mutual fund ownership is not manifested in certificates but is recorded in the computers of the company issuing the securities. In this case, it is usually possible to make a third-party levy at a company's in-state headquarters. If the company's headquarters are out of state, however, you will need to use different procedures, such as obtaining a court order assigning you the right to the securities. For assistance with this, ask the small claims clerk.
Individual Retirement Plans
In many states, you can get at money in the judgment debtor's individual (for example, IRA) or self-employment (for example, Keogh) retirement plans held in banks or savings institutions. You'll need to check your state laws to find out whether individual retirement accounts are fair game. If you're entitled to go after this money, you can do so just as you would with any other money kept in a bank. Of course, you need to know where the money is. Also, some states allow you to collect up to 25% of the periodic payment from an individual retirement or Keogh type retirement plan, just the way you would get a wage garnishment.
Private company retirement plans and state or local government retirement plans generally can't be touched. Federal government pension and retirement benefits may not generally be garnished to satisfy any debts for judgments you get in small claims court.
Collecting Judgments Across State Lines
If your judgment debtor moves to another state, or you discover that he or she owns property or assets elsewhere, collecting on the judgment becomes less convenient but is still possible. The majority of states have enacted what's called the Uniform Enforcement of Foreign Judgments Act, creating standard procedures for going after a debtor's assets or property across state lines. Here's how it ordinarily works: Say you file your small claims case in Illinois and get a judgment for $2,500. When you try to collect, you discover that the debtor has moved to Florida. In order to start your collection efforts, you will need to file your judgment in Florida, the new state. The procedure there, as in most states, is that you mail a certified copy of the original judgment to the Florida court clerk (usually in the area of the state where the judgment debtor lives), along with an affidavit showing your and the judgment debtor's names and addresses. (Some states vary this routine, so check with the court clerk first.) Once the court receives the certified copy and affidavit, your filing becomes a valid part of the court record. The court may notify the judgment debtor of your filing, or you may need to serve notice on the judgment debtor. When this is done, you can proceed with your collection efforts, following the collection laws of the new state.
Using a Collection Agency
If you don't want to bother pursuing the debtor, you can turn your debt over to a real collection agency. However, this probably doesn't make much sense, as the agency will often take up to 50% of what it can collect as its fee. And unless you are a regular customer, the agency probably won't treat your debt with much priority unless it believes your judgment will be easy to collect. Of course, if the debt is easy to collect, you should be able to do the job yourself and pocket the collection fee.
Recovering Your Collection Costs
You can be compensated for many–but not all–costs of collecting a judgment. Generally speaking, you can get your direct costs of collecting, which include costs like:
- sheriff, marshal, or constable fees
- costs to get copies of required court papers, like a writ of execution or abstract of judgment, and
- fees to file a lien against a debtor's real estate.
Generally you won't be able to get compensated for indirect costs such as:
- babysitting costs
- lost wages
- transportation costs, or
- postage or photocopying.
You are entitled to collect interest on your judgment according to your state's law. Interest begins to accrue on the date the judgment was entered. If the judge has entered a judgment to be paid in installments, you can charge interest only on installments that have become due, unless the judgment specifically says interest is to be earned earlier. Apply any payments you receive first toward interest and then to the unpaid balance of the judgment. You cannot claim interest on accrued unpaid interest.