Don't Sue Unless You Can Collect the Judgment

Before you sue, ask yourself whether you can collect. If you can't, think twice before filing a lawsuit.

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 you file your lawsuit, it’s important to know whether the person (or business) you’re suing has assets you can seize with a money judgment, such as income, money in the bank, or real estate.

Ways to Collect

If you win your small 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 a welfare, Social Security, unemployment, pension, or disability check.
  • Personal assets. You can also withdraw funds from a bank account or levy on property, such as real estate, cars, and stocks and bonds. Or, record your judgment with the recorder’s office. Doing so will put a property lien on the defendant’s real estate, and you’ll be paid once the property gets sold. Be aware that you won’t get everything a defendant owns. Defendants can protect some things they need to work and live (more below).
  • Future income or assets. Someone broke now could very likely be solvent in the future (as might be the case with a student). Judgments are collectible for many years, almost indefinitely if you do the paperwork to keep renewing them (more below), and they 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. Then if the contractor doesn't pay it off, post a bond, or file for bankruptcy, the contractor could lose the license.
  • Business income. A couple of sources of business income include a bank account and a cash register. If a company takes in money on a daily basis, 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.

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 a number of years before filing for bankruptcy a second time, so you’ll have plenty of time to collect on a 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.

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.

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).

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