CAUTION STATE LAW VARIANCES
Judgment enforcement law is notoriously non-uniform between the various states.
"While the relevance of some of the questions may seem remote, the purpose of a judgment debtor examination is to leave no stone unturned in the search for assets which might be used to satisfy the judgment."
~ Troy v. Superior Court, 186 Cal. App. 3d 1006, 1014 (1986).
A debtor's examination is the creditor's chance to ask the debtor questions about the debtor's assets, and receive live responses. A debtor's examination seems an awful lot like a deposition, i.e., there is usually a court reporter present, and the examination is conducted outside the courtroom. However, a debtor's examination is technically a "hearing", the proceedings can move back into the courtroom and be immediately heard by the judge if there is some issue, the debtor can be ordered right then and there to turn over assets to the levying officer (read: sheriff), and the debtor can be sent to the pokie to spend the night, or longer*, if the debtor refuses to answer questions.
*The record-holder for the longest U.S. contempt incarceration is believed to belong to H. Beatty Chadwick, ironically an attorney, who refused to repatriate $2.5 million from overseas to satisfy a divorce judgment in favor of his ex-wife, and sat in jail from 1995 to 2009 -- nearly 14 years!
The Debtor Examination Process
While the debtor examination process various from state-to-state by, well, about as much as any legal procedure that exists in U.S. law, generally the process begins with the creditor applying for an Order of Examination ("OEX") from the court that sets a date and time certain for the examination, along with an Order to Appear ("ORAP") that the creditor then has served on the judgment debtor. It is common that the ORAP be served along with a (long) list of documents that the debtor is required to bring to the examination, such as bank statements, deeds, titles to cars, trust documents, corporate shares, partnership agreements, and you-name-it.
The debtor then shows up at the specified courtroom as required, and is sworn in as a witness. The debtor, debtor's attorney, creditor's attorney, and court reporter (if the creditor's attorney brought one), then go out into whatever place is available in the courthouse (frequently, just a bench in the hall outside the courtroom, an unused jury room, or about as often the courthouse cafeteria) and the examination commences. In heavily populated counties, debtor's examinations are assigned to a specific judge who holds all debtor examinations one day a week -- I've been to these rodeos when there were as many as eighty (80) debtor examinations going on at the same time.
The creditor's attorney asks questions; the debtor responds. While the debtor's attorney can make objections, in post-judgment proceedings there are frankly not many types of objections that are available. If there is a dispute, and the debtor refuses to answer the question, then the parties march back into the courtroom and the judge sorts it all out. If the judge determines that the debtor should answer the question, and the debtor continues to refuse, then the court's deputy will take the debtor into custody and hold the debtor in jail until the debtor either (1) decides to answer, or (2) is successful with an emergency appeal.
In Kyne v. Eustace, a 1963 California case, a creditor who was owed $353.50 demanded from a music teacher the list of her students, on the grounds that they might owe her money. The teacher refused to turn over the list, fearing that the creditor would call the students' parents and embarrass her. The Court held the teacher in contempt, confined her to jail, and after four hours she thought better of the situation and turned over the list. The teacher then sued the creditor for abuse of process; but the case was dismissed, because the creditor had both the right to obtain the list and to call the students' parents.
The Turnover Order
Another very significant thing distinguishes a debtor examination from a deposition: At the end of the debtor's examination, the creditor can ask the court to order the debtor to turnover any assets identified during the examination to the levying officer, which means either the courtroom deputy (if the debtor has possession of the asset), or require the asset to be turned over within X days to the levying officer.
For instance, in the O.J. Simpson civil case, the judge ordered Simpson in the courtroom to turn over his expensive-looking Rolex submariner, which the creditor did believing that it was worth at least $12,000. Simpson did so with a smile on his face; it later turned out to be a $125 fake.
The Turnover Order can be used for any asset that the debtor has in its possession or control, even if the debtor doesn't have the asset immediately handy. For instance, it is common for the court to order debtors to turn over their cars, keys, title and registration to the levying officer within five days. Company share certificates, deeds to real estate, and the money in bank accounts are all common subjects of turnover orders.
The Turnover Order can also reach property that is outside the state. Assume that a debtor has $10,000 in a bank in Switzerland; even though the Court doesn't have jurisdiction over that account, it does have jurisdiction over the debtor, and if the debtor refuses to bring the overseas money back and turn it over to the levying officer, the contempt order will likely follow (see the story of H. Beatty Chadwick, above).
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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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