Judgments in California accrue interest of ten percent per year, so they grow pretty rapidly. I’ve seen $25,000 judgments become $50,000 ten years out ($2,500 in interest a year times ten years equals $25,000), so it doubles.

This interest rate is another nice tool for us in that we can use it for settlement leverage. A client might say, “Okay, I lost $25,000 that I didn’t get paid back. The judgment’s now $40,000, but do I need the entire $40,000? My cost of funds was probably less than ten percent a year, so I’ll take $30,000 or $35,000.” The client is still making more than what they lent or what they were owed. The fact that interest accrues so quickly scares debtors, which gives us more leverage over them.

What Does It Mean For A Judgment To Be Partially Satisfied?

Let’s say the person owes $25,000. They pay $10,000, so they owe $15,000 (the amount left) plus interest accrued, which in this case would be $5,000. Their total amount owed is now $30,000. When they paid the $10,000, their judgment was partially satisfied.

The Cost Of The Suit

Under California law, you can recover your cost of suit, which includes your filing fees and service of process fees if you have to physically serve documents on your debtor. Those can generally be included in the judgment. Whether you get attorney’s fees or not as an item of cost in business cases depends on whether there’s a contract that provides for the recovery of attorney’s fees. You would be surprised how many of our clients have contracts that don’t have attorney’s fee clauses in there. That’s why if they sue for $20,000, it’s going to cost them $15,000 to collect $20,000, and if they can’t recover the attorney’s fees, it doesn’t make a lot of economic sense to sue.

When we start with clients, we’re their collections lawyer, but we oftentimes have to also become their business lawyer to alert them to things that should be in their contracts. Maybe their business lawyer forgot to put it in, or maybe they didn’t have a business lawyer—or whatever the situation may be. The good news is that regular costs, like out-of-pocket costs, can be recoverable. Whether you get attorney’s fees or not depends on what your contract says.

For How Long Is The Judgment Enforceable After It’s Put In Place By The Court?

Judgments don’t last forever, unless you take action to make sure they get renewed. In California, a judgment’s initially good for ten years and can be renewed for successive ten-year periods, but you can’t let it expire. If you wait ten years and one day before you go to the court and ask for the judgment to be renewed, it’s too late. Additionally, any liens you have recorded would expire, as well.

We hope not to have too many judgments that are ten years old and still haven’t been collected, but it happens here and there. We advise our clients to renew the judgment well before the ten years are up, let’s say in year eight or nine, rather than filing your application with weeks or days to spare. Then, you can keep renewing the judgment for ten-year periods, as long as you don’t let the time period lapse first. We will file that application for you, but we appreciate when you don’t wait nine years, eleven months, and 20 days to send me the judgment, especially if we’re dealing with LA County, which is very slow. We may not be able to get the clerk to renew the judgment in time. Take action at least six months before the judgment’s set to expire.

What Property Is Subject To Enforcement Procedures?

When it comes to a business, pretty much any property they have is subject to an enforcement procedure, unless there’s already a prior lien on it. If they have gotten a loan from a bank and the bank has a lien against all of their assets, we may not be able to seize their inventory. Generally, though, we can seize whatever moneys are in their bank account, even if they have pledged their assets, which can be a limiting factor in a business situation (but one that doesn’t often come into play). We can run a UCC1 search before we sue them and see what kind of liens exist against the business. If we learn that there’s a lien on all the assets and they don’t have any money in their bank account, that might be one of the things we consider in determining whether we even sue them in the first place.

As far as businesses go, the general rule is that there are no exempt assets, only limitations from prior liens. If you’re suing an individual, however, there are numerous exemptions that are largely outside the scope of this book. In California, individuals can exempt up to $500,000 of equity in their home and $2,000 or $3,000 from their bank account. If we’re trying to garnish their wages, we can only garnish 25 percent of their net pay. There’s a pretty long list of exemptions that a consumer or individual judgment debtor can use to make it more difficult—though not impossible—to collect.

For more information on Pre-Lawsuit Considerations if Prior Collection Efforts Are Unsuccessful, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (714) 594-6322 today.

Art Matthews

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