Collecting a Judgment on Your Own After Winning a Lawsuit
If you bring a lawsuit and win, you might think that the hard part is over. Unfortunately, this is not always true. Collecting a judgment can be just as challenging as winning the lawsuit in some cases. If the defendant has stable finances, they should pay the judgment uneventfully. If the defendant is going through financial difficulties, on the other hand, you may need to force them to pay you. Sometimes it makes sense to evaluate whether you can collect a judgment before you bring a lawsuit. If you have no way to collect if you win, you may end up incurring the costs of litigation for no tangible reward.
The clerk of the court will issue the judgment shortly after the case is decided, at which point you will become the judgment creditor, and the defendant will become the judgment debtor. Most often, the judgment debtor will need to pay the judgment as a lump sum, but sometimes a debtor will ask to pay it in installments. This request is usually granted, but you can go back to court to modify the award if the debtor fails to keep up with payments.
Locating Assets of Judgment Debtors
Once a judgment has been issued, the judgment debtor may need to fill out disclosures of their assets. They probably will comply with this process, since they can face significant sanctions otherwise. Assets that a judgment creditor will want to investigate include money, bank accounts, investments, inheritances, real estate, motor vehicles, artwork, jewelry, and business interests. If the judgment debtor transferred property just before the judgment for less than its fair market value, the judgment creditor might be able to get that transfer reversed as a fraudulent attempt to avoid collection. You can retain an expert to help you locate assets if you suspect that the judgment debtor is trying to hide them.
Assets Protected From Seizure
Not every asset of a judgment debtor is subject to collection efforts. States provide exemptions for some equity in key assets, such as homes and motor vehicles. (Equity is any difference between the amount owed on a mortgage or car loan and the current value of the asset.) If the debtor has equity in their home or car that goes beyond the exemption, you can collect from that unprotected equity. Since mortgages and car loans tend to be substantial, a debtor may have little or no unprotected equity in these assets. Exemptions for a debtor’s personal property may be more limited, and they may not be able to protect certain luxury items like jewelry and electronics. However, states sometimes cover a limited amount of equity in these items, and they tend to cover necessities like clothing and basic furniture.
If the debtor files for bankruptcy under Chapter 7, you probably will not be able to collect on the judgment, but there are some exceptions. Also, if the judgment results in a lien on the debtor’s property, you can at least take the property attached to the lien, even if the debtor will not need to pay the judgment. You should record the lien to prevent the debtor from challenging it.
Ways to Collect a Judgment
One of the main ways to collect from a debtor who does not pay a judgment is garnishing their income. You cannot take more than a certain percentage of the debtor’s income under federal and state laws, and you cannot collect from certain types of income, such as government benefits. Thus, collecting from the debtor’s income makes sense only if they earn a substantial amount of non-exempt income.
You also can consider collecting from bank accounts, investment accounts, or business assets. If the debtor owns a business, you can potentially collect by forcing them to sell equipment related to the business. If they have a professional license, you can motivate them to pay the judgment by filing it with the state licensing board for their profession. They could lose their license if they fail to pay the judgment, unless they file for bankruptcy.
