Collecting Judgments – The Basic Tools
By Randy Ortlieb
When you obtain a judgment to pay money, you are a creditor with the “ultimate IOU.” If the debtor doesn’t pay (which they should because judgments earn interest at 10% per annum) then you have the full backing of the enforcement of judgment law to locate income and assets in order to obtain payment.
Contact the experienced Escondido Business Law Attorneys at Palomar Law Group for skilled legal assistance in collecting on a debt owed to your business. Call (760) 747-2202 to arrange for a complimentary consultation.
Enforcing a Judgment
Here are some of the basic tools a creditor has to enforce a judgment:
- Abstract of Judgment. This is a two-page notice of the judgment amount with names of the debtors and identifying information including driver’s license number and last four digits of the Social Security Number. When recorded, the abstract creates a lien on the debtor’s real property in the county where recorded. Then, if the property is ever sold or refinanced, the opportunity to obtain payment may well arise depending on the equity in the property.
- Judgment Lien on Personal Property. This is a form similar to the abstract of judgment which is recorded with the Secretary of State. It creates a lien on personal property in the state and creates an opportunity to obtain payment if valuable personal property such as financed business equipment is even transferred or refinanced.
- Debtor Exam. This is a court-ordered oral examination supervised by a judge. At this exam, the debtor is required to disclose sources of income, expenses, and assets. When coupled with a subpoena to produce financial records, the debtor exam is an effective way to ascertain the ability of debtors to pay the judgment.
- Levying. If the debtor has a source of income, it is a potential source of payment through garnishment (or levy). A creditor can also foreclose against some kinds of real property. If the debtor has a business, accounts receivable can be levied and the business can even be turned over to a keeper to receive payments from customers.
- Renewal of Judgment. A judgment is automatically effective for 10 years. After 5 years, a creditor is entitled to renew the judgment for an additional 10 years, and to add the accrued interest to the judgment. So, a judgment for $20,000 renewed in 5 years would increase in value to $30,000, and the same judgment could be renewed again and increased in value to $45,000 at the 10 year mark.
Solving the collection riddle isn’t simple. Creditors usually use all the collection tools available in order to increase their chances of payment. If you want answers to questions about collecting a debt, contact the Palomar Law Group and ask to speak to Randy Ortlieb. As an experienced business attorney, Mr. Ortlieb finds solutions for clients in a wide range of business law matters.