After a Judgment: Collecting Money

Winning a civil case in court is not the end of the process. If you are lucky enough to win a money judgment, it may only be the beginning. If the losing party cannot pay the judgment or refuses to follow the court order, you are responsible for collecting your award.

The court does not collect a civil judgment for the plaintiff. Once you have your judgment, you are the "judgment creditor." You can use the court to enforce your judgment against the defendant, now the "judgment debtor."

There are a number of methods you can use to collect your judgment. The only real limit is how much time and effort you want to spend collecting your award. Some of these methods may require help from an attorney or a collection agency. Get legal advice before proceeding with any of these options.

Payment Plan

Small claims cases can be the easiest to collect. Financially stable defendants will pay their judgments to avoid further costs. You may get your money judgment in a lump sum at the courthouse or shortly thereafter.

Consider a payment plan if the debtor cannot afford the entire judgment, which may be why you took them to court. Small claims courts may arrange payment in installments if both parties are willing. The judgment form can include payment amounts and dates, with a default clause that makes the entire sum due if the judgment debtor misses a payment.

Real Estate and Other Liens

If you're not in a hurry to collect, you can file a real estate lien on the debtor's property. Judgment liens resemble contractor's liens, except you need a court judgment to file them. There are pros and cons to real estate liens.

On the plus side, a real estate lien is easy to obtain. Once you receive the judgment, you go to the recorder's office and complete the forms necessary to record a lien. Once you record the lien (known as "perfecting the lien"), all you need to do is wait until the owner sells the property. Depending on state laws, you must renew your lien in 10 years.

Downsides to real estate liens include:

• You won't get paid until the owner sells or refinances the property. If the owner transfers the property by gift or quitclaim, the lien follows the deed, but you won't see any money.
• Liens are paid in order of filing. During a foreclosure, the mortgage is paid first, followed by any existing liens. If no money is left when the trustee reaches your lien, you get nothing.
• Bankruptcy, homestead exemptions, and other personal property exemptions may prevent liens from payment. State laws vary about what the debtor may keep in a bankruptcy or foreclosure.

If you decide to file a lien, check the public records to see how many liens (if any) are ahead of yours. If there are few or none, filing a lien and waiting for your money may be worthwhile.

Garnishment

Theoretically, private individuals can garnish wages from other private individuals. In reality, it can be difficult to make wage garnishment happen. Laws differ from state to state, and some counties and municipalities have their own rules as well.

In general, states limit wage garnishment to 25% of a debtor's wages. In some cases, it may be 25% of their discretionary income, meaning after paying for rent, utilities, and other necessities. You cannot garnish wages if:

• The debtor's income is not wages, for instance, Social Security, disability, or child support
• The debtor's wages are below the poverty level
• The debtor is not subject to another garnishment order unless that order takes less than the 25% maximum

If your state allows wage garnishment for child support, the family courts may have a procedure for collecting support payments already in place. You should speak with your attorney about this process. In some states, the process may be automatic.

It is possible to garnish or "levy" the debtor's bank account. To levy a bank account, you need a writ of execution from the court. Since not all branches can accept a writ, you must find which bank branch handles levies. Once you have that information, you must instruct the sheriff to execute the writ against the debtor's account.

As with wages, some money in the account may be exempt from garnishment. The debtor must object to the garnishment and prove which funds are exempt. This adds additional time to your payment.

Property Seizure and Sale

Seizing the debtor's assets, such as business equipment, motor vehicles, or machinery, is possible if the debtor is a company. Taking a debtor's personal property if the debtor is an individual is more difficult. The exemption laws that protect wages and bank accounts also safeguard property. Unless you know your debtor has valuable artwork or jewelry, property seizure is not an ideal way to recover your judgment.

If you choose this route, do not take self-help measures to acquire the property. Only the sheriff's office may execute a writ of seizure, and in some states, the sheriff must auction the property seized. Never take it upon yourself to collect the debtor's property.

Bankruptcy

If the judgment debtor files for bankruptcy, it may extinguish your ability to collect your judgment. Real property liens are dischargeable in bankruptcy if they impinge on the homestead deduction. Bankruptcy does not remove a child support judgment but may result in a support modification.

Bankruptcies do not eliminate wage garnishments. If the debtor quits, or if the debtor's employer refuses to honor the order, you must also get an order against the employer.

After Your Judgment

You must enforce your money judgments within a specific time period. Depending on your state, these can range from five to 20 years. Ten is the average. If you have not collected the amount within that time, you must file a renewal of judgment. Usually, you can only renew once. Renewing the judgment also renews your liens on the debtor's property.

If you successfully collect your judgment or come to some other resolution with your debtor, you must file a "satisfaction of judgment" with the court. This closes the case in the court records.

You may need an attorney's assistance for your collection efforts. Some attorneys specialize in debt collection. These lawyers may work on a contingency basis. You should look for an attorney in your area who knows your state laws on collecting judgments and garnishing wages.