There are several steps you may have to take to recoup what you are owed and one of those steps is filing a lien. But let's say you have filed the lien, the court accepts your filing, and yet - payment has still not been made. The debtor is demanded to pay the debt according to the law, but the courts have little authority to compel the payment. That's why knowing how to collect on a judgment is vital if your debtor fails to pay you. Here's how to do it.
What happens once a judgment is made?
- Change in Name: If you successfully have a judgment issued on your lien, you, as the case winner, become the judgment creditor, and the other party becomes the judgment debtor.
- Court Issues Notice: After the court has issued its judgment, the clerk will issue a written decision to all involved parties. This decision dictates how much the judgment debtor owes the judgment creditor. If you've sued more than one individual, the court's decision will list the total amount that all parties owe you. These parties must then divide the responsibility for payment among themselves.
- Chance for Appeal: The court notice of judgment is not always immediately issued by the court. That's because the judgment debtor often has time (approximately 30 days) to file an appeal. If the judgment debtor appeals, then their obligation to pay you is delayed until a new judgment is issued. But if the appeal is not filed, the judgment debtor has communicated that they agree with the obligation to pay.
- Financial Disclosure: After a judgment is issued, the debtor must file a financial disclosure statement. In this statement, the debtor lists all of their assets. If they fail to complete this step, a contempt court charge may be issued. Or, a judge can demand the debtor to appear in court for a debtor’s examination. Judgment creditors should attend this examination, and the debtor is asked to disclose all of their assets in each of the below categories:
- Checking and savings accounts
- Investment accounts
- Business ownership shares
- Trusts and inheritances
- Safes, vaults, and other secure storage spaces
- Real estate
- Personal property, including homes, vehicles, and jewelry
- Property transfers, as properties transferred for prices below their fair market value, may indicate fraud intended to circumvent debt
If a judgment debtor doesn't appear for an ordered examination, the judge can even issue an arrest warrant.
Ideally, the debtor would immediately repay their financial obligation to you in cash. However, some debtors may still resist payment. In this case, you may be able to seize certain assets. You can do so by:
- Garnishing the debtor's wages
- Taking cash or assets directly from businesses the debtor owns
- Seizing real estate or vehicles
How long does it take to enforce a judgment?
Judgments are valid for varying periods of time, depending on the state in which the lawsuit was filed. Pennsylvania has the shortest enforcement period at four years, and approximately a dozen states share the longest enforcement time of 20 years. Consult the applicable state court, or speak with a lawyer to determine how long you have to enforce the judgment.
However, as mentioned earlier, a judgment isn’t in and of itself enforceable. If the judgment debtor still refuses to pay, only certain authorities can move forward with enforcement.
How to collect on a judgment
To collect on a judgment, take the following steps.
1. Record with the County Recorder's Office - to collect on any kind of lien, you must record your judgment with the county recorder's office. With a lien in place, your debtor must fulfill the judgment before they can sell their building or property. Additionally, some liens remain valid if the debtor files for bankruptcy.
2. Communicate Directly - you may succeed in speaking with the debtor now that a judgment has been made and recorded with the county recorder's office. Remain firm that the debtor now legally owes you money and see if a mutually agreed upon payment plan can be implemented.
3. Seize Assets - If communication breaks down, wage garnishment or asset seizure are valid ways to collect the money your debtor owes you. However, consider the following as you do so:
- Wage garnishment is effective but time-consuming - It's straightforward to file and obtain a "writ of garnishment" requiring that part of your debtor's wages be given to you. However, garnishments are usually capped at 25% of the debtor's wages, making full repayment of your debt a slow process.
- Business asset seizure requires law enforcement - Only law enforcement authorities can seize cash, bank accounts, or other assets. They will likely charge a fee for their services. However, seizing these assets may be worthwhile if your debtor's assets are valuable enough to cover their debts. You can seek their help by taking your judgment from the court to their office.
- Personal asset seizure is complicated - If you're going after a debtor's personal property, they likely have equity, which is the difference between an item's current value and its loan value. Many states forbid judgment creditors from seizing a certain amount of equity from debtors. These rules mean that homes, vehicles, investment accounts, electronics, and jewelry can be tough to seize unless outright owned by the debtor.
- Lastly, you can file judgments with licensing boards. If the judgment debtor is a remodeling or building contractor, you may be able to file your judgment with the relevant state licensing board. In doing so, your debtor could lose their license if they do not comply with the judgment. However, this route is only viable in certain circumstances, and it may be against your best interests to take away their means of repayment.
Renew Your Judgment
It's important to remember that your judgment isn't permanent. However, it is renewable, a feature that can help with debts that take years to collect.
A renewed judgment is often valid for as long as the original judgment was good, starting from the renewal date. Each state's court system handles judgment renewals differently, so speak with your local county recorder's office about how to proceed.
File a Satisfaction of Judgment Notice
After the debts are paid, the judgment creditor submits a "satisfaction of judgment" notice to the court. This notice informs the court that it can close the case. Similarly, if you served a lien on the debtor, as described earlier, you would file paperwork with the recorder mentioned above’s office.
Length to Collect
The state with the shortest enforcement period is Pennslyvania at four years, and approximately a dozen states share the longest enforcement time of 20 years. Consult with your applicable state court, and speak with the clerk to determine how long you have to enforce the judgment. As stated earlier, a decision isn't in and of itself enforceable. There are official processes (wage garnishment) and authorities who can enforce the judgment.
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