How To Collect Your Judgments
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This page discusses specifically judgments won in Small Claims Court. Note that we have a page in the members-only Manage Web that discusses Small Claims Courts in general, as well as other pages that discuss various Court-related subjects
Introduction
So, you won a Court case against an ex-tenant or a maintenance vendor and they owe you money. And, you now know that the person who lost the court case is called the debtor and that you, the winner, are called the creditor. Now what?
Winning your case in Small Claims Court is usually just the beginning and sometimes the easy part. Now comes the hard part - collecting your money. Generally, Small Claims Courts won't help you collect your judgment. Often, they won't even give you much information about how to do it. One of the reasons is that most courts already have enough to do with there own work.
The following discussions will provide the information needed to
- Locate the debtor
- Locate assets
- Lien and seize those assets
Although we have some related forms on our "Members Only" Forms Web, we do not provide the actual Court forms. Most forms should be obtained from the specific Court of jurisdiction because Court forms are not only different from state to state, but often also from county to county. To avoid problems with clerks and judges, you should use the forms that are provided for that Court. This will result in less hassle and potentially more help from the clerks. And, most importantly, you won't have made the judge mad at you from the beginning.
If it has been quite some time since you were awarded the judgment, it might be difficult to locate the debtors and their assets. Often it is difficult even when you just got the judgment. However, with adequate knowledge it can be done. Sometimes it is helpful or even necessary to have professional assistance in doing so and we will provide links to some of these services.
There are only three parts of the process that you would want to hire out.
- Locating your debtor
- Doing an asset search
- Having a debtors exam
Actually, there are really only two parts since the asset search and debtors exam would reveal the same information providing the debtors tell the truth at the exam where they will be under oath. For a really difficult case, the costs of utilizing professional help for these tasks are usually relatively inexpensive compared to the time that will be saved. Using only these specialized services when necessary is always much less costly than using a judgment collector or collection attorney.
If you hire a service to locate your debtor, or for other matters, try to get one that charges only a small fee. You should expect to pay something, since the service will spend time looking even if not successful and they do have overhead, including the special database services that they use.
RHOL may be able to locate a debtor's new address for our members. We can also set a WATCH for up to ten changes in your debtor's credit file, including a new address or employer. The cost may be as low as $6.00. Click Here!
The proof of a judgment that you got gives you many legal rights and numerous ways by which to collect your money. You have more rights and more ways than does a collection agency. You can file liens, seize bank accounts, force the sale of property, garnish wages, and more. Collection agencies can only send out letters and make phone calls. If you run into any roadblocks from Courts or companies when you are trying to acquire information be sure to tell them that you are a judgment creditor. In fact, it is usually best to tell them right up front. Provide them with a copy of the document if requested, or, in some cases, even before they ask. Always be polite and businesslike with these people. Remember that you usually catch more flies with honey than with vinegar. In view of the subject matter, they may be suspicious of you until they know what you're up to. Once they understand, they may even become very helpful.
The information we provide applies to most jurisdictions of the United States. There are some differences from state to state, but most follow the Federal Fair Debt Collection Act, so the tools available to you are basically the same. The main variations are in the terminology used by the Courts and in the differences in their forms.
The following section will provide you with the knowledge needed to let the court clerks know what you are trying to do and enable them to give you the proper specific forms and tell you how to proceed. Even if busy, they will usually help if you know something about what you want to do. They will be much more helpful if you already have a good basic understanding of the process than if they have to educate you from scratch.
You will likely incur various expenses as you proceed, but, as we'll discuss elsewhere, these costs can be added to the original judgment amount. Thus, you will get your expenses back so long as you eventually collect. Keeping this in mind, you may want to contract out certain things. For example, you may need to have a company pull a credit report for you. A credit report will often provide you with a substantial quantity of information about your debtors and their assets, with some of it being very relevant, for only few dollars. Credit reports are available ranging from about $9 to about $20, depending upon the source.
You may consider having an attorney represent you in a debtors examination to find out what assets they have and about their income, place of employment, bank account information, and more.
A word of caution however. Keep the amount of your judgment in mind. Although the maximum amount of Small Claims Court suits varies among states from $1,000 to $15,000, the maximum in most states is $5,000 or less, so the amount that might be reasonably invested in collecting a judgment is relatively low. Also, even though you should get your expenses reimbursed if you collect, remember that the word is "if." Accordingly, you will usually want to minimize your expenditures. Of the three items that we recommended for possible outside help, the most expensive by far will almost certainly be the use of an attorney for the debtor exam.
However, unless you really know the law and how to handle uncooperative or belligerent debtors, it might be worth the cost. Also, it removes you from the most obvious and potentially confrontational part of the whole process. Finally, if the debtors are uncooperative, the attorney's report of this to the Court will be much more productive than the report of a layman. You should definitely shop around for the best deal, keeping in mind that you want an attorney who is considerably experienced in this specific job. Try to find one who will do it for a flat fee rather than by the hour, but will put extra time at a reasonable per-hour charge in if the debtor turns out to be difficult to deal with.
Doing the rest of collection yourself is certainly better than paying a judgment collector one-half of your judgment to attempt to collect it for you.
Some may be concerned about the danger of retribution by the debtor. As with any matter that is confrontational by its nature, there is some risk of a debtor retaliating against anyone who is trying to collect the debt. However, you can operate so that you have little or no direct contact with the person and, you have the law on your side. Most importantly, for the most part, collection is handled through the Court and most direct contact will be by personnel of the Court or of the sheriff's office.
In most states, judgments are good for 10 years and are then renewable for another 10 years. If the debtors can't be found now or if you locate them and they have no job or assets, all is not lost. You can keep checking back periodically to determine if the situation has changed. You must remember that interest is accruing on that debt at a rate of from 7 to 12 percent, depending on which state your in. The rate of return is often more than you could earn on the debt amount invested elsewhere. You may, however, have to consider your judgment to be a long-term investment. Sometimes, by the time a debt is collected, the interest is more than the judgment. This should provide you with incentive to keep up your collection efforts.
Again, be sure to keep track of all expenses, as you will get them back when you do finally collect.
Locating Debtors & Their Assets
This is sometimes the most difficult part and often requires considerable time if you do it yourself, particularly if you are completely inexperienced.
Because there is a lot to say on this subject, we have a separate page called Locating Debtors & Their Assets where you will find a lot of ideas about tracking down those who owe you money and finding what they own and where it is located.
State Laws
It is always recommended and sometimes necessary to read the actual state law regarding specific issues, particular those that are not common to most states. In the "old days" (more than 5 years ago) this meant traveling to the nearest university with a law school, a trip to the Courthouse, or a visit to the office of an attorney friend. Now we have the Internet and laws at every level of government are easily accessible from your easy chair at home. To make it even easier, we provide you with links to sites where you can find the laws of your state.
First, the links below are useful for looking up codes for the Small Claims Court systems of the 50 states, the District of Columbia, and the U.S. territories. These links get you to each state's official Web site, from where you can track down the code pertaining to the Small Claims Court. Since you aren't likely to be familiar with the exact numbers of the state code pertaining to your particular question use the search feature.
For some states, you may have to drill down in order to get to the information, but just remember to keep looking for the "state code." Use the site's search box for a short description of the topic - for example "execution of liens." Usually all the other state codes for the Small Claims Court system of that state begin with those first numbers. You can then go to where it starts and read all codes pertaining to that states Small Claims Courts codes.
These links are also useful for finding state regulatory agencies or other information for a particular state.
Second, a more direct path to information regarding the Constitutions, Statutes, and Legislative information by State is found on the Cornell Law School site from the following links.
One of the best Web sites for general legal self-help is that of Nolo Press.
Online Dictionaries & Encyclopedias
Some other sources of legal information are
Debtor Exam
More correctly called Order of Examination or Interrogatories, this is a way to find out about your debtors employment, bank account, real properties, stocks, bonds, investments, rental income, and lots more information. You fill out a form for this at your local courthouse. Depending on the state, it is called "an order for examination" or "order for interrogatories" or a "discovery."
An order to appear is served on them and they have to appear or a warrant will be issued for their arrest. The debtor has to answer these questions under oath. You may also instruct the debtor to turn over any money that they have on them at that time. Have your writ of execution and letter of instruction ready so you can levy on assets at that time before they have time to move them! This is very important.
If your debtor has moved out of state
All is not lost even if your debtor has moved to another state. You still locate them and their assets in the same way. But you may have to apply for what's referred to as a foreign judgment or a sister state judgment. Some states require you to open a new case. Other states will issue a judgment based on your current judgment. Some states do no allow the debtor to debate the validity of the judgment, only as to whether the other state had jurisdiction over the matter in the first place.
If you find that your debtor has a job and/or assets, you have a good chance of getting your money, just as if you found them in your local area. To save money and trouble, you should consider hiring a paralegal in the state that your debtors and their assets are located. They'll be familiar with the codes in their area and their fees are much lower than those of an attorney. Again, you can recover the cost of the help if you can collect.
Keep in mind that you might have to or want to deal with assets in other states even though the debtors reside in your local area. For examples, their main asset might be a vacation condo in another state or their funds might be in a bank in another state or they may own a business in another state.
Forming your strategy
After you have located the debtor and have the necessary information about your debtors and their assets, its time to decide which is the best, cheapest, fastest, easiest way to recover your money from them. Use your own judgment here (pun intended).
Usually, wage garnishment, liens against house and cars, and a bank account levy does the trick, but you probably know more about your debtors than anyone else, particularly now that you have all that information.
However, although you now have a lot of power, you must take into consideration that if you make life to tough on the debtors they may file for bankruptcy. That would not usually be in your best interest so you have to use some care in deciding how to proceed. The risk of a debtor filing bankruptcy usually decreases as the value of their assets increases. And, under current law, an individual cannot file another bankruptcy for 7 years after filing one. Finally, the good news for landlords is that the new bankruptcy law effective in 2001 makes it more difficult to discharge debts. For information about bankruptcy law visit the legal sites listed above or visit the site of the American Bankruptcy Institute.
Some judgment collectors report that more than half of their debtors respond to a letter inquiring if they would like to work something out, especially if it's been a while since the judgment was obtained. Making a small compromise might encourage them to pay up. For example, you might offer to waive the interest if they pay all at once. Or you might set up an acceptable payment plan, with the original interest continuing of course. Doing this can provide extra income each month.
If you decide to offer a plan of any kind, don't give them more than 10 to 15 days to make up their mind. Make the letter business-like and to the point. Do not make threats. You especially don't want to disclose any of your plans regarding available recovery tools. Just offer them a chance to settle the matter and get it behind them. It should be clear to them that you are not going to just forget this matter and give up.
To Seize or Not To Seize, that is the question
Actually forcing the sale of a home, car, boat, etc. is usually a lot more trouble than its worth. It can end up costing a lot of money and possibly even result in legal problems. Placing a lien against the property, whether it be a house or vehicle, is usually effective enough. The debtors can't sell the property or borrow money against it without paying the debt.
When it comes to seizures, there is exempt and non-exempt property. A list of non-exempt property for a typical state follows. Check the laws of the specific state of interest.
- Rental Properties of all types
- Business Income Vehicles (including RV'S and boats)
- Bank Accounts (25% or more)
- Wages (25%)
- Personal Property Business Property
- Security Deposits Third Party Property
- Judgments That Are Owed To Your Debtor (you may find some)
- Anything else of value that is not specifically exempt.
Exempt property for a typical state might include the following. Again, check the laws of the specific state.
- Life insurance policies and disability insurance income
- Social Security, veterans', welfare, unemployment and workers' compensation benefits.
- Some household property
- Child support
- In most states, some or all of public and private retirement benefits, including 401k, IRA, and Keogh plans
Your debtors have only 15 days to file an exemption claim after the sheriff serves the notice of levy. They may not even know that they can file an exemption or, even if they do, they may not be able to prove the specific sources of the funds seized.
Seize!
In some case it will be necessary and advisable to seize property, so we'll now discuss how to go about doing it. The first consideration is that it is very important to fill out the Court forms properly with accurate information. Make sure that the debtors' names are spelled correctly and that all the other information is correct, including spelling. Technical errors in the forms can allow the debtors to have the judgment vacated or even require you to return money that you've already collected.
Traffic Accident - May Be Special Case
When a judgment is the result of a traffic accident some states allow you to enter an abstract of judgment which suspends the person's driver's license until the judgment is paid. Check your state code to see if this is allowed. The court will have the necessary forms.
Writ of Execution
This writ is the primary order or form you will be using. It is used to garnish wages, seize property, and do a third party levy. Check your state code regarding how to file or call your Court and ask. Each state is a little different, but as usual, you can get the forms at your courthouse. You must put in the full amount of the judgment. If your judgment includes court costs, be sure to include them. Do not include the costs of locating your debtors or their assets. As explained later, that will be done at a later time using a different form. Don't forget about interest. Find out, by calling the court, what interest rate is for your state.
Figuring the daily interest is quite simple. For example, using an interest rate of 10% and a judgment amount of $2,000, the calculation is
$2,000 x 0.10 = $200.00 per year interest
Next, divide $200.00 by 365 = $0.55 per day interest
The completed writ of execution must be recorded by the court clerk. When the clerk has recorded the writ you will be ready to take it to the levying officer in the county where the debtors or the assets to be seized are located, along with a letter of instruction.
Levying officer
This will be the person who will be seizing the property for you. Depending on the jurisdiction, it will be the sheriff, constable, or marshal of where your debtors assets are located. You will be giving them a "letter of instruction." This letter will instruct the levying officer on what you want them to do. Some areas of the country provide a form for this. If not, here is a sample letter of instructions based on a bank levy (red items need replacement with specifics for your case).
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To the constable of CountyName County, State of StateName, USA:
Please serve this writ of execution and levy against any and all deposit accounts in the names of DebtorNames, Social Security Nos. 000-00-0000 & 000-00-0000, respectively, at the BankName, BankAddress,City,State, USA. Account Nos. 0000000, 0000000, and 0000000. Then after the legal waiting period please mail the funds to me/us, CreditorNames, the assignee of record, at CreditAddress,City,State, USA.
A check for your fee of $20.00 is enclosed.
Thank you,
Creditor Signatures |
Bank levy
A bank account is one of the easier assets to seize. You can sometimes get a sizeable piece of your money all at once. For these reasons, it pays to start here if possible. Furthermore, if you have either received a check from the debtor or have written them one at some time in your relationship with them, you should already have their bank name and account number. Note that if you know where their account is and have their social security numbers you can still levy without knowing the account numbers.
From the credit report you should have the debtors' social security numbers and places of employment. Just follow them from work to the bank on payday to find out which bank their account is at. This will also give you a time to put on your instructions to the levying officer to best seize the account when its at its largest.
If there is a way for you or a friend to write the debtors a check you would be able to find out for sure where they currently bank because when you get it back it will have the account information on it. Or if your debtor owns a business go in, or have a friend go in, and pay for something by check.
You use a writ of execution for a bank levy. After the writ of execution is recorded in the court you take your letter of instructions for the bank levy to the levying officer. One special issue regarding a bank levy. The constable may be willing to serve the writ at a certain time on a certain day at the bank.
Doing the levy at a special time on a specific date can be very important. For example, if you have found out through your investigations that the debtors make their big deposit at 3 p.m. on Fridays, ask in the instructions that the writ be served at say 3:45 p.m. on Friday. Or ask the constable personally if he can do this for you when you bring him the instructions. Usually they will do this if you give them enough advance notice.
Following the service, the bank will place a hold on the debtors' funds for 10 to 15 days, the exact period depending on the jurisdiction. This is the legal time period that the debtors have to file for an exemption. If a particular account is a joint account and only one of the parties is your debtor, then you can only levy on one-half the funds in that account.
You can see how tactics like this will get your debtors attention and make them want to get this out of their life. But this is just the beginning and life can become even more difficult for them.
Wage garnishment
Wage garnishment is not quite as good as a bank levy only because the money trickles in a little at a time and you may have do repeated garnishments in order to get all of your money. However, it is highly effective and can be a good monthly income source. A few states are non-garnishment states. For example, Texas is a non-garnishment state. Don't worry though, if you live in a non-garnishment state you get them with other tactics.
You can't garnish a federal employee or someone who is on disability. If any employer fails to comply with the garnish order they can be held liable for the full amount of the judgment themselves. Sometimes an employer will try to protect the debtor for various reasons, such as they a friend or relative. Usually, a letter drawing the employer's attention to his potential liability is enough to get them to cooperate.
You can't garnish the wages of someone who already has another garnishment in place. Also, tax and child support garnishments always take priority. You can check with the Court or with same people who serve your writs (constable, sheriff, etc.) to see if there are already garnishments in place. If so, find out the expiration dates. Garnishments are usually only good for 90 days (most states), after which there is a short window of time (usually a week or two) before another garnishment order can be placed against the debtors. Accordingly, when the current garnish order from the other party expires you might be able to slide yours in soon after. If you don't get all your money from the first garnishment, you can simply get another "application for earnings withholding order." A writ of execution is valid for six months in most states, so, you won't necessarily need to get a new one every time.
For additional information regarding garnishments, visit our special Garnishment page.
Seizing From a Business
Businesses are usually very easy to collect from because seizures are highly visible to their customers. A business will usually borrow the money to pay you in order to avoid the various possible scenarios and the the bad affect that they might have on their business and reputation.
The first method is called a "till tap." With this method the levying officer goes to the business and collects all the money that is in the cash register. You have to pay a fee for this, but if the levying officer can't collect any money or the cash register is empty you usually get about one-half of your fee back. You can, of course, add this amount to what the debtors owe you.
The next method is called an "8 Hour Keeper." With this method the levying officer stays in the business for 8 hours and collects all cash and check receipts, including any that come in the mail. An hourly rate is charged in advance which can be added to the amount of your judgment.
There are also 12 Hour, 24 Hour, and 48 Hour keepers - obviously named for whatever time it takes to collect all of your money. You just need to fill out and record the writ of execution discussed earlier. Remember that writs of execution are the main tool that seizures are carried out with. Just take the original and a letter of instruction to the sheriff in the county where the business is located. In the letter just give the instructions where you want them to go, how long you want them to stay, and what you want them to do. Call the sheriff before to find out the fee and include it in the letter of instruction.
Credit card purchases are not collectable, but the receipts from all other purchases are. Debtors can avoid a keeper if they close their business for the day. However, you just do it again. A business can't keep closing forever if their business is profitable. Furthermore, repeated closing will be bad for customers relations.
Property of the business
The debtor can close his business to avoid a keeper. However, such is not the case with a with a levy on business property itself. If the the debtors try to avoid a seizure of business property they can be jailed. They have ten days to file an exemption after the property is seized for sale. Then they are notified ten days in advance of an "execution sale." The debtor then has ten days to satisfy the judgment or the sale will take place as scheduled. The debtor will usually come up with the money before the sale.
If the business is open to the public you can instruct the levying officer to seize all of the business property unless they have a partner, in which case you can only get half of it.
Collecting From a Third Party
This is a good way to collect on a debtor who doesn't have wages to be garnished. If there is a third person holding wages, property, escrow funds, or deposits (legally a deposit of any kind is property of the debtor) you can levy on that third person. This procedure is common for collecting money from independent contractors and other self-employed persons or unemployed persons.
Fill out and record a writ of execution and take it along with a letter of instruction and a memorandum to the sheriff where the third party is located. The sheriff will send a copy to the debtors and also serve it on the third party. The third party usually has ten days to fill out the form and respond.
If the third party doesn't turn the money over to you they could be held responsible for the whole amount of the judgment and other penalties.
Placing liens on property
As mentioned earlier, it is usually not a good idea to force the sale of property. It can be expensive and can have legal ramifications against you later if not done exactly right. Even if done right it can often turn out bad. Placing liens on property though is very effective even though collection is not usually immediate. Remember though that interest is adding up each day and that someday day the debtors may want to sell their home, car, boat, RV, or other property against which you placed liens and they can't sell them or borrow money against them as long as the liens are in place.
To put a lien on something use an "abstract of judgment." After recording it in the court where your judgment was awarded take it or mail it to the recorders office in any of the counties where the debtors property is located. You have to adjust the abstract of judgment to show any payments the debtor makes to you over time and show the accrued interest.
You also have to remember to release the liens when your judgment is paid off. If the property is sold, any liens filed before yours will be satisfied first. If anything is left, it will go towards satisfying your judgment.
Other Methods of Collecting Your Money
If you chose to contact your debtor or they contact you, you can suggest some ways to pay the money like borrowing it or getting a cash advance on a credit card. Be creative. For example, if they own a store or service business you might be able to barter with them for goods or services.
Recovering Your Costs
In most states you have a certain amount of time in which you can recover expenses after they are incurred. This period is usually two years. You must file a memorandum of costs. This is also done to collect your interest also. Filing periodically, say once every six months, is the best way to handle it. That way stay current in coverage.
Use a "memorandum of costs" order to ask for the amount of the judgment to be raised for expenses and interest and to record any money the debtor has paid you. Don't forget to figure in the additional accrued interest to date. Keep all bills and receipts in case the debtor contests the charges. This includes attorney fees, process server fees, filing fees, etc. Just about every cost related to your judgment should be documented and can be recovered.
If you file a "memorandum of costs" you must serve the debtors with a copy personally or by mail. They usually have ten days to contest it with appropriate forms, but they usually don't. Even if they do contest the costs, the court will usually give you what you asked, assuming that the expenses are reasonable.
Its a good idea to file a "memorandum of costs" when you file your "writs of execution" since you will already be at the courthouse. Make sure that you recover your costs before the judgment is satisfied or you can't recover them.
Now You Have The Necessary Knowledge
You now are armed with more information about how to recover your judgment than most attorneys know. If you read something on this page and an attorney or court clerk tells you that you can't do that, research the state code yourself rather than take their word for it. They are often wrong. This is not meant to demean attorneys or clerks. It's just that they can't know every code on the books. So, check out the law for yourself.
Review
- Locate your debtors, using credit reports and other tools to find them
- Uncover their assets, again using the credit report and other tools. Also you may want to have a professional do an asset search or do a debtors exam.
- Plan your strategy
- Go after them and their asset
Obey The Law
Be sure that you obey federal and state laws regarding debt collection.
Abusive debt collection practices sometimes contribute to personal bankruptcies, marital instability, the loss of jobs, and invasions of individual privacy. The Fair Debt Collection Practices Act (FDCPA) was enacted in 1996 to protect individuals from all debt collectors.
For additional information about the Act, visit our FDCPA page.
When It's Over
After you've collect all your money, don't forget to file a "satisfaction of judgment" with the court and have the debtor served with one to, usually by mail. Make sure that you release all liens and garnishments or property that belongs to the debtors.
Conclusion
You are now well informed as to how to collect your money from a Small Claims Court judgment. Remember though when to call it quits, at least temporarily. There is no use spending time and money or becoming stressed if the debtors have nothing to seize or garnish at the present. Just keep checking back every six months to a year to see if their financial situation has improved. Good luck!
Be sure to check out our Collecting Judgments eCourse.
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