CREDITOR DEBTOR LAW
An Overview of Creditor-Debtor Law and
Judgment Enforcement Techniques
CAUTION STATE LAW VARIANCES
Judgment enforcement law is notoriously non-uniform between the various states.
Collecting Default Judgments
Default judgments are those taken where a defendant failed to timely respond to a Complaint or Petition, and so the Court then entered a judgment against the defendant anyway, often after a "Prove-Up Hearing" where the Plaintiff puts on evidence of damages.
Default judgments are worth no more than ordinary judgments, and often much less. The reason is that default judgments are notoriously easy for defendants to set aside, usually because the defendant will claim that he was never served with a copy of the Complaint in the first place. In the first year, many judges will set aside default judgments for just about any old reason, thinking that it is "no harm, no foul", and the case can proceed normally. After the first year, default judgments can be set aside for some period of years (three seems to be common) if the defendant can show that service was defective based upon the court records prior to the default being entered (a/k/a the "Judgment Roll").
This places the creditor in a quandry: Does the creditor wait a year until enforcing a default judgment, but risk the debtor dissipating assets? Or does the creditor begin collections, and risk that the defendant will get the default set aside?
The better practice for creditors is usually to begin collections and draw the debtor out early to either get the default set aside or not. But this depends on a lot of factors, such as the quality of the service of process, how close the case is to being one year from the judgment, and what the cost would be to litigate the case ab initio.
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MAJOR SECTIONS OF WEBSITE
ABOUT JUDGMENTS - Overview of judgments as they relate to judgment enforcement.
Collecting Default Judgments - Special considerations for default judgments.
Form of Judgment for Collection - Getting the form of judgment right can make collection easier, and getting it wrong more difficult.
Judgments On Appeal - Is a judgment enforceable when it is being appealed? Maybe. Appeal bonds a/k/a supercedeas bonds also discussed.
JUDGMENT ENFORCEMENT DISCOVERY - It's difficult to collect against the debtor's assets unless you find them, and it can be difficult to find them.
Private Investigation - Non-judicial methods of investigating the debtor's assets and affairs, including database searches and the use of private investigators.
Written Discovery - Some states allow for written discovery to be propounded to a debtor, which is a good way to start accumulating information from the debtor, or at least what the debtor claims is his assets.
Debtor Examinations - The traditional way of obtaining information from a debtor, which is to haul them into court, sit them down at a table, and ask questions point-blank about assets and income.
Third-Party Examinations - Means of obtaining discovery from third-parties about the debtor's assets and affairs.
JUDGMENT ENFORCEMENT REMEDIES - The primary methods for taking assets and income away from the debtor.
Judgment Liens and Abstracts of Judgment - Ways of freezing assets so that they cannot be easily transferred away pending execution.
Writ of Execution - This document authorizes the Sheriff to make collections on behalf of the debtor, and some other stuff.
Writ of Garnishment - Used to collect wages and against income streams in some states.
Federal Wage Garnishment Law (FWGL) - 15 U.S.C. sec. 1671 provides nationwide wage exemption.
Writ of Levy - The remedy that allows the Sheriff to grab the asset and auction it off on the courthouse steps.
Charging Orders - The "exclusive" remedy against a debtor/member's interest in a partnership, limited partnership, or limited liability company.
Assignment Orders - An order used to intercept income streams, such as advertising revenues, royalty payments, etc.
Creditor Suits - Actions taken against a third-party who has possession of an asset that is still titled in the name of a debtor, or who has violated some other enforcement process.
Receivers - Often the end-game strategy to take a difficult debtor down, by having the court appoint a neutral with all the powers of the debtor, such as to sell season football tickets, or dissolve corporations.
OTHER JUDGMENT ENFORCEMENT THEORIES - While technically not "remedies", these bodies of law are often used in judgment enforcement proceedings.
Alter Ego and Veil Piercing - Cutting through corporations, trusts, and LLCs which are simply the debtor himself in another form.
Voidable Transactions (was Fraudulent Transfer and Fraudulent Conveyances) - Used where title has been transferred to a third-party.
OPINIONS -- Interesting opinions in creditor-debtor law.
Kyne v. Eustice, 215 Cal.App.2d 627, 30 Cal.Rptr. 391 (1963).
In re Foster, 556 B.R. 233 (Bk.E.D.Va., 2016).
Church Joint Venture, L.P. v. Blasingame, 2020 WL 284527 (6th Cir., Jan. 21, 2020).
LAGNIAPPE - A potpourri of stuff.
OTHER INFORMATIONAL WEBSITES
BY JAY ADKISSON
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© 2020 by Jay D. Adkisson. All Rights Reserved. No claim to original government works. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction. This site https://creditordebtor.com Contact Jay Adkisson by phone to 702-953-9617, by fax to 877-698-0678, or by e-mail to jay [at] creditordebtor.com