It is often said that winning a money judgment in civil court is only half the battle. The other half is collecting what you are owed. Whether it’s a debt collection case or a personal injury lawsuit, collection is often the most difficult part of the whole process. Judgment creditors really only have two avenues for collecting: debtor income and assets.
Granted, there are numerous ways to go after income and assets. There are also different rules within the states for doing so. But when you boil judgment collection down to its most basic principles, you are left with either being paid out of the debtor’s income or going after his assets. A creditor might tap into both.
Leveraging Debtor Income
Income is the place to start, according to Salt Lake City-based Judgment Collectors. Perhaps the debtor has sufficient income to make a lump sum payment for less than what he owes. He offers to make that payment in exchange for a satisfaction of judgment.
A second option is to work out a monthly payment plan. Creditors endeavor to work together to determine a certain amount per month in the number of months it will be paid. The judgment is satisfied when all installments have been paid.
In the absence of either of these two options, the only other possibility is garnishment. Most states allow garnishment of:
- Wages – A creditor is allowed to garnish a certain percentage of the debtor’s disposable income via his or her paycheck. Under a garnishment order, the debtor’s employer is required to withhold a certain amount of money and forward it to the creditor.
- Bank Accounts – A bank account can be garnished as well. Under such an order, the debtor’s bank would be compelled to seize all or a portion of the account balance for payment of the judgment.
Some states allow garnishing a debtor’s state income tax return. If a tax return were garnished, any money not seized by the state to pay outstanding fines, child support, etc. would be sent directly to the creditor.
Leveraging Debtor Assets
Relying exclusively on debtor income to pay an outstanding judgment can mean waiting a long time for the debt to be paid. But if a debtor has significant assets, there may be other avenues for satisfaction. Note that the states draw a distinction between exempt and nonexempt assets.
In most states, a person’s primary residence is exempt from judgment collection. A vehicle that the debtor needs to get to and from work might also be exempt. Examples of nonexempt assets include investment property, stocks and bonds, collectibles, and jewelry.
Leveraging a debtor’s assets is managed in one of two ways:
- Property Liens – A property lien in a judgment case (also known as a judgment lien) works just like any other kind of lien. A lien represents the creditor’s financial interest in the attached property. That property cannot be sold or otherwise disposed of without satisfying the debt.
- Writs of Execution – A writ of execution is a court order that allows a creditor to seize and sell nonexempt property. Writs of execution are enforced by the local sheriff or constable. They can be very effective at persuading debtors to find other ways to pay.
It should be clear that there are numerous ways to collect an outstanding judgment. But not every method is equally effective. It pays to thoroughly understand a debtor’s financial position and how each option applies before determining how to proceed with collection. And now you know why collection is often the hardest part of winning a civil lawsuit.
