A money judgment is a court ruling that a defendant owes a sum to a plaintiff. Rarely does the court provide collection assistance for the hapless judgment creditor. Experience has it that most judgments expire uncollected and worthless. A pity but it doesn’t have to be that way...
Collection requires the pro-active intervention of asset researchers, collection agencies, attorneys and sheriffs. Often judgment creditors do not have the time or resources to avail themselves of collection services. That is unfortunate because judgments on average have a life of 20 years. What’s more, judgments accrue annual interest at rates of 9 per cent (in the case of New York) or more. Ultimately, a judgment can be as worth as much as two and one half times its face value. Therefore it pays to attempt to collect in most, though perhaps not all, cases.
What can be done to improve the judgment collection rate?
A plaintiff can take steps both prior to commencing a lawsuit and after judgment has been awarded that will greatly increase the odds of recovery.
Pre Judgment Measures
When considering bringing an action against an individual, a business or both, one potential to collect is relative to whether assets are titled to the named defendants. A sheriff must ultimately see that bank accounts, payroll checks, real property or business inventory receipts match the name (and in some cases the tax id or social security number) of the potential judgment debtors.
It does little good to sue John Doe if he is ‘judgment proof’, in other words, has no assets in his name. Of course, you might sue in the hope that John Doe will one day open a bank account or buy a house. However, the existence of a judgment against an entity makes it all the more unlikely that that entity will register future assets in his/her name. Paradoxically, in some cases, it makes sense to wait until the defendant acquires assets, keeping in mind the statute of limitations that your state sets for bringing a lawsuit (in most cases six years).
For individual defendants, we suggest a Nationwide Real Property search (choice K1 on the Windsearch price list) prior to commencing litigation. Even if the defendant currently has no liquid assets, a judgment in most states acts as a lien against the defendant’s real property (many states require filing the judgment in the county where the property is located). This will often result in a future telephone call from the debtor’s attorney or a title company when the debtor seeks to sell the property. The title company will usually require that all judgments be satisfied and will seek to have you paid from the proceeds of the closing.
Businesses (with the exception of large corporations) are less likely to own real property. A bank search should be undertaken to see that the bank account title matches the name of the business. Every state permits businesses to operate using ‘dba’s’ - doing business as - or ‘fictitious’ names. A common business practice is to maintain direct deposit accounts in a ‘dba’ for the very purpose of avoiding post judgment executions. Don't be surprised if a court prohibits execution of a bank account in the title ‘Jimmy Mack’s Contracting’ if your judgment reads against ‘James Mack Home Improvements’.
‘But Sheriff, that is the bank account they use!’ will not help even if it is the one and only account that business uses. Knowing the actual account title prior, you would have sued ‘Jimmy Mack’s Contracting d/b/a James Mack Home Improvements’. This seemingly slight difference can result in the defendant calling to settle as opposed to ignoring your suit — that is if the defendant knows that you know how the defendant is concealing funds.
Another tactic that often yields results is bringing a lawsuit against multiple defendants. You might decide to sue Jimmy Mack’s Contracting d/b/a James Mack Home Improvements and James P. Mack, the owner of the business. While it questionable to name a party with whom you did not have direct transactional contact to the suit, you might reasonably assume that a proprietor or company president is responsible for the actions of his business. If you are suing an individual and are aware that he is shielding his assets behind a business, name that business. Defenses raised by any one defendant regarding being erroneously named will be addressed on the merits (that is, if the defendant bothers to answer at all). In the meantime you have gotten the attention of the defendant and will most likely have precluded a default judgment.
‘To answer or not to answer, that is the question’...
You might think that winning a default judgment (a judgment granted by the court at inquest because of defendant’s failure to appear) is the most favorable outcome for a plaintiff. Not at all. Generally, you want to do everything in your power to get the defendant to file an answer and appear. This is because you can receive the royal run-around trying to collect a default judgment.
Once you attempt to levy assets based on a default judgment, the judgment debtor can usually stop you in your tracks by requesting another court appearance date. The defendant can simultaneously motion to vacate the judgment and for the release of any restrained assets (usually granted pro-forma). Be aware too that despite this, the defendant might have no intention of appearing at the newly scheduled hearing. In fact, the defendant may be inclined to repeat this tactic several times using every excuse from inclement weather to infirmity to death in the family until the court grants a ‘final’ date.
In the meantime, assets are being depleted or transferred as you, the hapless judgment creditor, are being worn down spending time and money in your quest. This can become a war of attrition and the best remedy may be to impress upon the defendant that you know everything about them by suing every name they might be inclined to hide behind. Their inclination to settle or answer will be directly proportional to their inability to deceive.
If you locate assets in a state other than where your judgment was granted, that state will treat your judgment as a ‘foreign’ judgment. If your judgment happens to also be a default judgment, most states will not recognize it at all. You will have to sue the defendant again in the state where the assets are located. (Federal judgments don't apply; lawsuits over $100,000 are often brought in Federal court for this reason). Is this grossly unfair? Perhaps not as we will explain, though it does seem that in this age of greater mobility, many deadbeats abuse creditors by skipping out at a moment’s notice. The federal Uniform Enforcement of Foreign Judgments Act governs the procedures whereby judgments are honored across state lines. If judgment was granted after an answer was submitted or after trial, docketing that judgment in a different state usually involves no more than providing an exemplified copy of the judgment and submitting it with an affidavit to the court or the county clerk. However, if the judgment was granted by default, no state wants to go on record as accepting that 'justice' was done. There is always a possibility that the defendant was never served properly or had missed a court date for a valid reason. While it may seem that too much consideration is granted to defendants, it is obvious the law is designed to protect everyone from having assets taken away too easily. Of course this makes the task of collecting judgments that much more difficult
The key to collecting a judgment is to locate assets that are in the judgment debtors’ names or assets that can be shown to have been fraudulently conveyed by the judgment debtor. Windsearch provides various searches that can help to identify assets. Many of our searches are performed on a ‘no locate no charge’ basis, obviating the need to spend ‘good money after bad’.
Windsearch is the exclusive US distributor of an award winning New York bank locating software, BankFinder® and Collector Pro+® collection software. If you are inclined to collect yourself, call the Windsearch information services division at 888-WINDSEARCH (946-3732). We'll be pleased to help.
©2016 Windsearch, Inc. 1285 52nd St., Suite 2A, Brooklyn NY 11219
888-WINDSEARCH (888-946-3732) FAX: 718-871-6558 email@example.com