Clients are entitled to know as much of the plan to enforce a judgment as they would like. Some clients really want to get into the weeds on details, while others feel otherwise and tell us to go do what you have to do. Most clients lean toward the latter. They know their business, and they don’t really want to become a lawyer, so they trust us to do what we have to do to collect.
For those who do want to know more about the process, an effective plan to collect on a money judgment should facilitate quick satisfaction of the judgment by enabling the attorney to:
- Locate available assets;
- Impose judicial liens on such assets at the earliest possible time;
- Obtain possession of specific property prior to judgment; and
- Select the proper enforcement method to reach other assets.
Do Judgment Liens on Property Apply in Commercial Cases?
If a creditor client has a judgment, we usually record a notice of judgment lien with the Secretary of State so that if the business pursues a secured loan or files bankruptcy, our lien should appear and make other potential creditors or the bankruptcy court aware of our lien’s existence. Now, our lien may not be in first position, for the cost of filing a judgment lien ($5 to $10), it really is a no-brainer.
Is There a Way to Improve a Lien’s Priority?
With a few exceptions, liens are given priority according to the date they were filed or recorded. As is often said, “first in time, first in right.”
Enforcement of Judgment by Writ of Execution
Once we have a judgment, one of the first things we do is request that the clerk of the court where the judgment was entered issue a “writ of execution.” Issuance of a writ of execution is a prerequisite to essentially all levies (e.g., bank, accounts receivable, wage garnishment, real property, etc.). The writ of execution provides the levying officer (usually the County Sheriff) with authority to levy on that property which the judgment creditor wants to seize.
In the case of a bank levy, we will generally send the Writ (along with written instructions we’ve prepared) to the levying officer in the County where the bank or bank branch to be levied upon is located, or, in certain circumstances, to a registered process server.
The levying officer/registered process server then visit the bank and serve a “Notice of Levy.” Once served, the Notice requires the bank to freeze any and all accounts they have in the name of the judgment debtor as of that day, up to the amount of the judgment. The bank is then required within ten days to pay over to the levying officer any amounts withheld along with a written report detailing how much, if anything, was in the account.
Once in receipt of the funds, the levying officer generally takes can take 30 days or more to remit the funds to the creditor. The bank account may not have enough to pay the whole judgment, so when there is not enough, we can do multiple bank levies. However, sometimes the debtor has closed their account or there are no funds available in which case the bank is required to note this in its report to the levying officer.
That is an example of one type of levy. Other types of levies that arise often in the commercial context are accounts receivable and keeper levies and real property wage garnishments.
How Might a Writ of Execution Be Used to Levy on Tangible Property?
When it comes to a business, we can levy on almost anything of value that is physical in nature (e.g., a boat or a car) under a writ of execution.
When a creditor levies on tangible property that can be moved, such as a vehicle, it is seized by the levying officer, then sold at a public auction with the net proceeds after payment of any liens against the vehicle and fees, turned over to the creditor.
The process with respect to levies on real property, such as a debtor’s residence or investment property, is similar, however, since the asset cannot be moved, it is liened and then sold by the levying officer at a public auction with the net proceeds (those amounts remaining after payment of all mortgages and senior liens). A levy on real property can be complicated and difficult to complete especially in the case of a debtor’s residence where significant procedural hurdles and exemptions can come into play.
The good news is that in many cases, even a threat to sell a debtor’s real property often forces the debtor to settle rather than risk losing the property.
What Are Special Enforcement Procedures?
Special enforcement procedures are different tools used to enforce a judgment. They are not necessarily under a writ of execution, so they are not technically considered a form of garnishment.
One special enforcement procedure is an examination of the debtor and third parties, which is similar to a post-judgment deposition. If properly served, the debtor is required to come to court to answer questions about their assets, if and where they are employed, where they bank, whether they own any real property, etc. .
We can also subpoena the debtor to bring financial records about the business or in the case of an individual debtor, about them and their spouse (we can also garnish a spouse’s wages or levy on many joint assets. California is a community property state, so one spouse is liable for the debts of the other incurred during the marriage. This examination is primarily an information-gathering tool. We may not necessarily be seizing assets that day; however, we are usually gaining information that will help us collect in the future.
If the debtor does not appear for this examination, the court can issue a contempt order, meaning a warrant is issued for their arrest. The warrant is generally held to see if the debtor appears at the continued examination, which is usually in about one month’s time. Debtors that fail to appear for the exam the first time and are sent notice that a warrant has been issued often show up the second time to avoid being arrested.
Another special enforcement procedure is the use of post-judgment interrogatories and/or a demand for production of documents that are served on the debtor. In my opinion, these are not very effective. In fact, it is rare when a debtor actually responds. Most debtors ignore them because the only remedy for a non or defective response is for the creditor to file a motion to compel and obtain monetary sanctions that are added to the judgment. Frankly, a determined debtor that does not want to pay will not be concerned if a few dollars are added to the judgment amount for non-compliance.
A third special enforcement tool is an assignment order, which applies to future payments. “If a judgment debtor has a right to a future payment, a court may order an assignment of all or part of such right to a judgment creditor.” This tool can be very effective and is discussed further below.
Can You Add Someone Who’s Not Originally on the Judgment?
We can sometimes amend a judgment to add a non-party alter ego. Let’s say we have a judgment against a company and subpoena the company’s financial records. If we discover that a principal of the company was, for example, commingling company funds with their own or using the company to pay a significant portion of their personal expenses, we can ask the court to find that the principal is the “alter ego” of the debtor. If the court agrees, they can be added to the judgment and their personal assets will be held equally responsible for payment of the judgment. her to the judgment, as well.
We have found that even the threat of such a motion can force a settlement.
How Does Enforcement of Foreign Judgments Work?
Subject to taking proper steps first, judgments in any of the fifty states are enforceable in any of the other states. For example, if a creditor has a judgment issued by a Wyoming Court and the debtor lives in California or has assets in California, we can “domesticate” the Wyoming judgment in a California court so that it is fully enforceable here. Alternatively, if we have a California judgment but the debtor has moved to or has assets in another state, we can work with an attorney in that state to domesticate the California judgment in the courts of that other state.
The bottom line is that whether we are domesticating an out-of-state judgment in California or a California judgment in another state, we have to go through the proper steps before enforcement proceedings can begin.
With respect to civil judgments issued by U.S. Federal Courts, the same domestication rules don’t apply since Federal Courts (although located in all 50 states) are essentially a single United States court for judgment enforcement purposes. Therefore, federal court judgments need only be “registered” in a federal court located in the state where the debtor has moved or has assets. Registering a federal court judgment is generally a faster and somewhat less involved process than domesticating an out-of- state judgment.
What Is a Turnover Order?
To illustrate, let’s say a creditor has a judgment and you bring the debtor in for a judgment debtor examination, which is essentially a post-judgment deposition that takes place in court, during which the creditor is permitted to ask the debtor about their assets and where are they located. If the debtor shows up to court wearing a Rolex watch, I can ask the judge to order the debtor to turn over the watch to me. This obviously doesn’t happen very often, but the same would apply if they showed up with $2,000 in cash in their pocket or a fancy ring on their finger (though wedding rings would be exempt). When I am representing a judgment debtor, I tell them to appear for the examination wearing simple clothes with no cash, watches or jewelry on their person. Turnover orders can be obtained in other contexts as well and are generally used to obtain possession of smaller items of value.
What is a Seizure Order?
Seizure orders, while permitted under California law, are fairly infrequent occurrences. These orders allow a creditor to seize certain personal property owned by a judgment debtor. However, seizure orders are infrequently acted upon due to the expense of doing so and the additional fact that levying officers will, understandably, not put their lives or those of third parties at risk to enforce a money judgment. They are generally used to obtain possession of larger items such as cars, RV’s, boats, etc.) What is an Assignment Order?
An “assignment order” requires the debtor to assign ongoing payments to you. This is often used for continuing royalty payments, sales commissions, or rent.
What is a Till Tap or Keeper Levy?
If the judgment debtor is a business that generates significant amounts of cash, we can levy on those cash proceeds in a couple of different ways.
A “till tap” is when the levying officer goes to the business and collects all cash on the premises at that point in time, up to the amount of the judgment. We would try and have the Sheriff visit the business at the time of day when it is likely to have the most cash.
A “keeper” is when we send the levying officer to a business for hours or even days and collect all cash and checks that arrive at the business during that period. Given the lengthy nature of this procedure, the levying officer will generally charge a much higher fee than for a till tap. If the business is a type that brings in a lot of cash, a keeper can help you collect some or all of your judgment. I have found that, even in cases where the keeper does not collect the entire judgment amount, this procedure often causes the debtor to call us looking to settle given that it is likely bad for business to have a representative from the Sheriff’s department at the business for extended periods of time.
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