If you've got a money judgment and want to collect, here's a few things you’ll want to know.
(Need to find assets? Learn the basics in Can You Collect Your Judgment?)
1. Plan your strategy.
Most states give a losing party the right to appeal, so your judgment won’t be official until the deadline for filing an appeal (usually 30 days or so, sometimes less) has passed. There’s no reason to bother the other party during this time because you might just nudge the judgment debtor (the person who lost the case) into filing an appeal. And generally, the other party doesn't have to pay a judgment while an appeal is pending.
2. Perfect your lien rights as soon as possible.
Your first concern should be that the judgment debtor will try to circumvent your ability to collect by transferring property or filing for bankruptcy. You can preserve your ability to satisfy the judgment by getting a lien right—a type of ownership interest—in the debtor’s property. In most states, you must “perfect” a real estate lien by recording the judgment with the recorder’s office or equivalent department in the county where the debtor’s real estate is located. Once filed, the debtor can’t transfer clear title as part of a real estate deal without first paying the lien. You’ll also retain more rights in bankruptcy because the lien will remain in place unless the debtor takes action to have it removed.
3. Ask for your money.
The debtor might pay the court judgment if you ask. A business-like request for payment might be all it takes, especially if you mention that an unpaid judgment will probably show up on the debtor's credit report. Don't tell the debtor exactly how you plan to collect if he or she doesn't pay up, however—again, any type of threat might encourage the debtor to start hiding assets (and you never want to appear to be harassing or intimidating the debtor.) Also, in many cases, it makes more sense to settle for a bit less than the full claim in exchange for having the whole thing over and done with.
4. Educate yourself.
The debtor might force you to resort to collection actions. If so, you’ll need to know what you’re doing. Learn about options like wage garnishments, property liens, and bank levies early on.
5. Find the debtor’s assets.
A debtor who won’t pay the judgment isn’t going to tell you where the money is—but you can take steps to find it. The court can order the debtor to answer questions under oath about the type, location, and value of assets that you can seize to satisfy the judgment. Lawyers call the process a debtor’s exam or an order of examination.
6. Start with easy-to-reach assets.
When you're planning a collection strategy, it makes sense to start by going after the low-hanging fruit. Wages, bank accounts, and money paid to a debtor's business are all relatively easy assets to get, and the procedures for doing so are simple and inexpensive. On the other hand, trying to force a sale of the debtor's vehicle, house, or personal property can be complicated, expensive, and time-consuming.
7. Consider hiring an expert, if necessary.
Plenty of collection professionals out there will try to collect your judgment in exchange for a percentage of whatever they get from the debtor. If you have had no success in collecting your judgment or you aren't willing to spend the time and effort necessary to get your money, hiring an expert might be a good idea. After all, it's better to get some of the money you're owed than none.
8. Renew your judgment.
Judgments don’t last forever. Instead, they usually have a shelf life of between 5 to 20 years depending on the state. Sometimes you need more time to collect, however. If you do, be sure to renew the judgment (and any recorded liens) before the judgment expires. In most states, failing to do so will result in a permanent loss of your collection rights. (Read Don’t Sue Unless You Can Collect the Judgment to learn more about renewing a judgment.)
9. Don’t give up.
Financial situations change. Even if you can’t collect now, the debtor might get a great job, build equity in a house, or receive an inheritance. And, the longer it takes to collect, the more your judgment will be worth because the accumulating interest adds up. So until you've collected your judgment, keep tabs on the debtor. It’s not unusual to end up with a big payout years down the road.
10. File the satisfaction of judgment once you’re paid.
After receiving your funds, you must file a satisfaction of judgment notice with the court (most courts have a form for this purpose). The notice lets the court know it can close the case. Also, if you perfected the lien, remember to file the appropriate satisfaction paperwork with the recorder’s office. Doing so releases the lien from the debtor’s property.
(To learn more about bringing a lawsuit, both in small claims court and regular state court, see Small Claims Court.)