A classic problem for many creditors is collection of their judgment(s). Often obtaining a judgment is the easiest part of a collection lawsuit. During a collection lawsuit, many debtors will put up a weak defense, but just enough of a defense to slow up a creditors attempt to obtain judgment. Debtors often take this position since this allows them to not have to immediately pay and it provides them with an opportunity to either obtain funds or hide/transfer assets. The following is a brief outline of post-judgment collection techniques which will allow creditors the maximum number of options when pursuing debtors who will not pay or are attempting to hide/transfer assets.
A standard post-judgment collection technique is to pursue a debtor’s assets by attempting to force the debtor to tell you what assets he/she has and where the assets are located. This method is typically done through legal documents filed with the court called post-judgment interrogatories. Post-judgment interrogatories are most effective when a debtor has a number of assets. Post-judgment interrogatories are most effective when debtors have assets since they will not typically want to disclose their location. Thus, the debtor feels pressure to pay or at least settle the matter prior to answering the post-judgment interrogatories. If a debtor truly has no assets, post-judgment interrogatories will have little impact on the debtor since he/she has nothing to hide.
If a debtor fails to respond to post-judgment interrogatories, there are a number of actions, including good faith letters, a motion to compel and a motion for sanctions, which although not timely, can result in the debtor being incarcerated for up to twenty days. The threat of incarceration can be effective in resolving collection cases.
A second post-judgment collection technique is a levy. A levy can involve a variety of options, but is basically the seizure of real or personal property. A typical levy takes place when the sheriff in the county where the debtor resides appears at the debtors home and seizes all personal property belonging to the debtor. While this technique can be an effective collection tool, it can also be costly. In a typical levy the creditor must pay for a moving service to appear and remove the seized property. The seized property must then be stored at creditor’s expense until such time as there has been a sheriff’s auction. At the sheriff’s auction, the seized property is auctioned to the highest bidder. After the auction, the expenses for the mover, the storage fee and auctioneer fee are deducted off the top of any money obtained in the auction with the balance paid to the creditor.
While levies can be a source of immense satisfaction in that the personal assets of a debtor are taken, if the debtor does not possess valuable assets, it is possible that the levy can result in little or no recovery and could, in fact, cost the creditor to conduct. Thus, prior to the execution of a levy, one should verify a debtor has significant assets and that these assets are not encumbered by liens or UCC filings.
Another standard post-judgment collection technique is a garnishment. Georgia, unlike many states, allows for two types of garnishments: (1) continuing and (2) regular. A continuing garnishment is the garnishment of a debtor’s wages. A continuing garnishment is filed against the employer of the debtor and typically lasts for seven payment periods. A regular garnishment is typically a garnishment of a debtor’s bank account. A regular garnishment basically seizes all funds up to the judgment amount which are in the possession of the garnishee (bank). Both of these methods can be highly effective if the creditor has information regarding the debtor’s employment and/or current bank account information.
It is not uncommon for a debtor who has a continuing garnishment filed against him or her to immediately attempt to settle the case. This typically happens because the debtor wants his/her full check, not a reduced percentage, and because some employers have been known to fire employees who have garnishments filed against them.
A regular garnishment, when successful, is a highly effective way to recover outstanding debts. A regular garnishment is served upon a bank possessing debtor’s funds and the funds are then frozen. Within forty-five days of the service of the garnishment the garnishee (bank) must pay the seized funds into the court or become liable for the outstanding balance. Each court has their own release procedures for seized funds, but usually funds may be obtained from the court within fifteen days of the court receipt.
For garnishments to be effective, the creditor must have current employment and banking information. This information can often be kept current by investigative reports (CBI) and by keeping a copy of all checks made payable from debtor to creditor.
A final inexpensive post-judgment collection technique is to record the creditor’s judgment in all the counties in which the debtor is believed to possess real property. When the judgment is recorded in a county, it attaches to any real property located in that county which is in the debtors name. In order for the debtor to sell the real property the creditor must be paid at the closing of the real property. While this can be a very slow method of collection, it can be highly effective if the debtor owns real property with any equity. It is important to remember that post-judgment interest runs on most judgments and this can also be collected at the time the real property is sold.
For a creditor, the most important aspect of collection is information. Generally speaking, any information regarding any type of assets can lead to some form of recovery.
The second most important factor is to aggressively pursue collection matters in a timely fashion. By knowing your debtor and aggressively and timely pursuing a debtor, a creditor significantly enhances his or her possibilities of ultimately recovering the outstanding balance.
Mr. Busch is an attorney specializing in commercial and construction litigation for Busch, Reed, Jones & Leeper, P.C. in Marietta, Georgia