Don't Sue Unless You Can Collect the Judgment

October 12, 2017

Winning a small claims court case is exhilarating, but it's only half of the battle. You've got to be able to collect on the judgment. Before filing your lawsuit, you'll want to know whether the defendant—the person or business you're suing—has assets you can seize with a money judgment. Learn more about when you should sue.

For instance, the most accessible assets are employment income and bank account funds. Real estate with significant equity is another possibility, but it takes longer and costs more to liquidate real property. Find out more about collecting your small claims judgment.

Ways to Collect

If you win your small claims court case, you'll receive a money judgment for the amount you're owed. If the defendant refuses to pay voluntarily, the money judgment will allow you to use collection techniques like wage garnishments, property liens, and bank account levies to access the following types of property:

• Personal income. An easy way to recover is to take a portion of the defendant's wages each month. Most states allow a wage garnishment of up to 25%; however, the wages of very low-income workers are exempt from garnishment, and you can't garnish welfare, Social Security, unemployment, a pension, or a disability check.
• Personal assets. You can withdraw funds from a bank account or levy on property, such as real estate, cars, and stocks and bonds. If you don't mind waiting, recording your judgment with the recorder's office will put a property lien on the defendant's real estate, and you'll be paid once the property gets sold. You can't attach everything a defendant owns, however. Defendants can protect some things they need to work and live (more below).
• Future income or assets. Someone who is judgment proof now might not own anything you can attach with a money judgment now, but could very likely be solvent in the future. College students are good examples of people whose judgment-proof status might change—especially since judgments are collectible for many years, almost indefinitely if you do the paperwork to keep renewing them (more below). They also accrue interest as long as they remain unpaid.
• Professional licenses. If your lawsuit is against a building or remodeling contractor who has a current license, some states, including California, allow you to file the judgment with the state licensing board. If the contractor doesn't pay it off, post a bond, or file for bankruptcy, the contractor could lose the license.
• Business income. A business bank account and a cash register are two good sources of business income. If a company takes in money daily, the chances are excellent that the sheriff or marshal will take the cash right out of the debtor's bank account or register (called a till tap).
• Business assets. A valuable piece of equipment or machinery can be sold to pay your judgment, especially if the business owner signed a contract giving you a lien in the business property.

Collecting isn't always easy, however. If you're dealing with a fly-by-night business with no identifiable office or headquarters, or, if a company or individual has already filed for bankruptcy, you might be out of luck.

However, suing an individual who received a bankruptcy discharge recently can be a good thing. A debtor must wait several years before filing for bankruptcy a second time, so you'll have plenty of time to collect on new debt.

See Tips for Collecting Your Judgment for more information.

Property You Can't Collect

Debtor protection laws keep you from seizing and selling many types of property, including the food from the debtor's table, the clothing from the closet, and the TV from the living room. It will also be difficult to seize and sell the debtor's car because most states protect a debtor's motor vehicle from creditors up to a certain amount of equity.

If the debtor uses the car for business purposes, the protected equity amount will increase. You'll find that these values are the same in bankruptcy and that the protected property lists are in the state bankruptcy exemption laws.

Suspending Driving Privileges

In some states, a judgment debtor's driver's license can be suspended by the Department of Motor Vehicles if the debtor doesn't pay a judgment stemming from an auto accident. However, to get rid of the debt and therefore avoid the suspension, the debtor might decide to declare bankruptcy. Before that happens, you might want to try negotiating with the debtor. If you work out a payment plan, you get your money, and the debtor doesn't have to declare bankruptcy. Everybody wins.

Renew the Judgment

Judgments eventually expire—usually after five to 20 years, depending on the state. As long as you renew before the judgment's expiration date, you'll be able to extend the time to collect. Keep in mind that you'll need to record the renewed judgment to ensure you retain certain lien rights.

To find out your state's rule, see the chart below. Also, be aware that the expiration periods might differ if you're collecting on a judgment initially entered in another state. Also, laws change, so you'll want to verify this information with the court clerk.

State	Small Claims Collection and Renewal Period
Alabama	20
Alaska	10
Arizona	5
Arkansas	10; 5 in Justice of Peace Courts
California	10
Colorado	20; 6 in county courts
Connecticut	10
Delaware	10
District of Columbia	12
Florida	20
Georgia	7
Hawaii	10
Idaho	11
Illinois	7
Indiana	10
Iowa	20
Kansas	5
Kentucky	15
Louisiana	10
Maine	20
Maryland	12
Massachusetts	20
Michigan	10
Minnesota	10
Mississippi	7
Missouri	10
Montana	10
Nebraska	5
Nebraska	5
Nevada	6
New Hampshire	20
New Jersey	20
New Mexico	14
New York	20
North Carolina	10
North Dakota	10
Ohio	5
Oklahoma	5
Oregon	10
Pennsylvania	4
Rhode Island	20
South Carolina	10
South Dakota	20
Tennessee	10
Texas	10
Utah	8
Vermont	8
Virginia	20
Washington	10
West Virginia	10
Wisconsin	20

For information about renewing judgments, contact your small claims court clerk's office or visit the court's website. You'll find more information about collecting a judgment in Representing Yourself in Court. For a detailed guide to suing someone successfully, get Everybody's Guide to Small Claims Court, by Ralph Warner (Nolo).