When you win a judgment, the court may award you money damages, but obtaining the judgment is often less than half the battle. If the party against whom the judgment is entered (sometimes called the “judgment debtor” or just “debtor”) either refuses to comply with the court order or simply cannot afford to pay the judgment, winning the judgment may only be a hollow victory. To avoid having judgments function only as paper tigers, creditors may need to take additional steps (and incur further expenses) to actually collect on their judgment. Below are a few suggestions when collecting money after a judgment.
1. Don’t jump too quickly to ask for your money. Courts often give the losing party the right to appeal. You may want to wait until the deadline for filing an appeal has passed. If you start collection efforts too early, you may unintentionally prompt the debtor to file an appeal. Typically, the losing party does not have to pay a judgment while their appeal is pending.
2. Don’t harass the debtor. Although you are entitled to go after money, you should not harass or threaten the debtor and inadvertently invoke the protections of the Fair Debt Collection Practices Act (the “FDCPA”). Under the FDCPA, prohibited activities would include contacting the debtor early in the morning or late at night or repeatedly visiting the debtor at work. Humiliating or intimidating debtors can be counterproductive and could even get you sued. While the FDCPA generally applies to consumer debts, its coverage is broader than most people realize.
3. Once the appeals period has expired, don’t allow too much time to pass and remain vigilant. In many circumstances, time is of the essence. If the debtor suspects that you plan to go after the money in his account, he may close the account and move the funds. Keep tabs on the debtor until you have collected your judgment, such as paying attention to whether the debtor has gotten a new job, purchased new assets, or changed residences.
4. Start with readily available assets – go after the low hanging fruit first. When you hold a judgment against an individual, you can garnish the debtor’s wages to collect your judgment. Similarly, you may also garnish the bank accounts of a debtor. You can conduct post-judgment discovery, such as interrogatories and request for production of documents, to uncover a debtor’s source of income and assets. If the debtor is a company or other organization, it may also have personal property that is available to seize and sell, but you will need to first confirm that the personal property being sold (i) does not belong to someone other than the debtor and (ii) is not subject to the rights of a superior lienholder.
5. Be firm and persistent. A well-worded, professional request may be all that it takes. Don’t tell the debtor exactly how you plan to collect the judgment, because this may encourage the debtor to hide assets. Debtors that are financially stable usually pay judgments that are entered against them, because they want to avoid unpleasant collection activities and further costs.
6. Consider settling for less. You have the legal right to collect the full judgment, but that doesn’t mean you will necessarily be able to do so. The process of collecting on a judgment may be very protracted, and you may have to dedicate significant resources to tracking down the debtor’s assets, seizing them, and converting them to cash. In many cases, it may make more sense to settle for a bit less than the full claim, in exchange for cutting your losses and putting the whole matter to rest.
Although you may be entitled to recover the cost of collecting the judgment, that won’t do you much good if you can’t collect the original judgment itself. If a debtor refuses to pay the judgment or is insolvent, you may find it quite difficult to collect the judgment. Unscrupulous and savvy debtors often realize that the amount of litigation and court costs can quickly surpass the amount of the judgment, causing creditors to abandon the effort. Before you initiate your collection effort, be sure to consult with an attorney who can best advise you as to how to maximize your rights and remedies as a creditor.