In many cases, obtaining a judgment in a lawsuit is the easiest part of the debt collection process. Once a judgment is granted, it is left in the creditor’s hands to take the appropriate steps to enforce it and collect the amount due; and many creditors are unaware of how to go about collecting unpaid debts or face difficulty in doing so.
The following article provides a brief overview of some of the post-judgment collection options that are available to creditors in pursuit of debtors, who have not voluntarily paid the amount owed or who attempt to avoid debt collection.
If a debtor fails to pay a monetary judgment or is unwilling to make payment arrangements, the creditor may employ one or more standard post-judgment collection techniques to collect the balance due, including, but not limited to, debtors’ interrogatories, garnishments, levies, and liens.
Locating The Debtor’s Assets
The first, and often most difficult, stage in post-judgment collections is identifying assets owned by the debtor that may be attached or levied to satisfy the judgment. Depending upon the creditor’s line of business, this may be as simple as reviewing the debtor’s file for information relating to his/her assets, including cancelled checks, employment records, tenant information, and vehicle registration information.
Many creditors find judgment enforcement to be frustrating, because they simply do not know what, if any, assets the debtor has or where those assets are located. In the event that a creditor does not maintain asset information, all it not lost. The creditor may search for assets and employment information by performing an internet search, pulling the debtor’s credit report, engaging a private investigator to perform a “skip trace” or requesting a summons for debtor’s interrogatories.
Once the debtor’s assets have been identified, the creditor may pursue a garnishment or levy to attempt to satisfy the judgment.
A useful tool employed before pursuing a garnishment or other post-judgment collection option is what’s known as debtor’s interrogatories. Debtor’s interrogatories may be used to summons the judgment debtor to appear in court for purposes of answering questions under oath about his/her finances, employment and property. The answers provided by the debtor may assist a creditor in determining whether he/she has assets that may be attached or garnished to satisfy an unpaid judgment.
If the judgment debtor is property served with a Summons to Answer Debtor’s Interrogatories and fails to appear in court on the specified date, the court may issue a Rule to Show Cause as to why he/she should not be held in contempt of court. If the judgment debtor ignores the Rule to Show Cause, the court may issue a capias directing the Sheriff’s office to take the debtor into custody and bring him/her before the court to explain the failure to appear. The judgment debtor may also be required to post a bond prior to his/her release.
Garnishments are a commonly used to collect unpaid judgments (including court costs and judgment interest). A garnishment is a post-judgment collection technique against a judgment debtor, whereby the court orders a third party (knows as a “garnishee”) to withhold funds, which are otherwise owed to the judgment debtor, and pay them into the court or directly to the judgment creditor. If the garnishee fails to answer the garnishment, a creditor may request that the court enter a judgment against the garnishee for the full amount of the judgment.
There are generally two types of garnishments, one being a “regular” (or one-time) garnishment, and the second being a “continuing” garnishment.
Regular garnishments are typically filed against the debtor’s bank (bank garnishment), and obligate the garnishee bank to freeze any activity on the debtor’s bank accounts and to withhold the funds held in the accounts (up to the judgment amount), until the Court has ordered the funds to be paid over to the creditor or to be otherwise disposed. The debtor is notified of the bank garnishment only after his/her bank has been served with the garnishment, to prevent the debtor from withdrawing his/her funds to avoid the garnishment.
Continuing garnishments, on the other hand, are typically filed against the debtor’s employer (wage garnishment) or tenant (rent garnishment), and can last for a period of up to 180 days in the Commonwealth of Virginia. When a garnishee is served with a continuing garnishment the garnishee is required to required to withhold a percentage of the debtor’s disposable income (for wage garnishments) or rent payments due to the debtor (for tenant garnishments) through the date on which the matter returns to court.
Although uncommon, a creditor may choose to pursue what is known as a levy. A levy is the process in which the local Sheriff seizes the judgment debtor’s personal property (including jewelry, cars, electronic equipment, furniture, etc.) for the purpose of satisfying a money judgment. This is done by advertising and selling the debtor’s property at public auction. Following the auction, the Sheriff must pay any costs incurred in conducting the auction (e.g. moving, storage, auctioneer fees, etc.), and remaining any proceeds from the sale of the debtor’s property are then paid over to the judgment creditors in order of lien priority.
Finally, judgment creditors have the option of recording an unpaid judgment among the land records of any county or city in which the debtor owns property. Recording a judgment lien is a passive debt collection technique. When a judgment lien is recorded, it attaches to any real property (real estate) located within the county that is in the debtor’s name, and will prevent a debtor from selling his/her property, without first satisfying the unpaid judgment (including all attorneys’ fees, interest and court costs).
Because people keep their homes for several years before selling them, judgment liens can take some time before a judgment is recovered. Under Virginia law, once recorded a General District Court judgment is enforceable for ten (10) years and may be renewed for an additional ten (10) years. Circuit Court judgments, however, are enforceable for twenty (20) years and may be renewed for an additional twenty (20) years.
Although a judgment lien make take longer to recover, court awarded interest continues to accrue during the time frame that the lien is in effect, and may be collected at the time that the property is sold.
The key to effective post-judgment debt collection for any creditor is information. Knowing what, if any, assets a debtor has and where they are located are critical to ensuring the possibility of collecting an outstanding debt. Once armed with the appropriate information, a creditor may timely and aggressively pursue collection of any debt.