What Is the Judgment Collection Process? Finding a Debtor’s Assets
A New Jersey commercial collection attorney may be able to help you locate and seize assets entitled to you after a court decision. Attempting to collect on a claims judgment is a relatively simple matter if the property is known and easy to locate. However, when hidden assets exist, the judgment collections process becomes more complicated.
Judgment Debtor’s Statement
Many states require the debtor to list all his or her assets on a document known as a Statement of Assets after losing a collections judgment. The purpose of this list is to make the judgment creditor’s attempt to collect due assets simpler. The state usually requires the debtor to send this list to the creditor within a certain amount of time of the judgment. This is unless the debtor pays his or her debt or begins the appeals process. It is not uncommon for a debtor to refuse to fill out the statement or to issue an incomplete statement. Such a lack of cooperation can result in the court holding the debtor in contempt or even arrest. A New Jersey commercial collection attorney may be able to assist in the process of asking the court to hold the debtor in contempt.
Judgment Debtor’s Examination
In cases where there is no Statement of Assets, whether because the court does not require one or because the debtor failed to do so, creditors may ask the court to require the debtor to appear in court for questioning. This process is sometimes known as a judgment debtor’s examination or an Order for Examination. This court order is mandatory, and the debtor is required to personally appear in court to provide the information under penalty of arrest.
Limitations to the Examination
An Order for Examination can be a useful tool when it comes to collecting the assets you are entitled to by court decision. However, there are limitations. You may not request that the debtor travels an excessive distance to perform the examination, for example. You must also request that the court clerk subpoenas all relevant documents, such as bank statements, property ownership documents, and vehicle records. Otherwise, it may be difficult to prove which assets are available for seizure. You may also require a court order for a turnover order, which allows the creditor to request information on any monetary assets within the debtor’s possession and to claim those assets.
Judgment Collection Process in Different States
In some cases, your judgment debtor may move prior to the collections process or have assets in another state that you wish to seize. A collections order is still enforceable across state lines under the Uniform Enforcement of Foreign Judgments Act. The act enforces standard procedures for collecting on assets across state lines. This includes filing in the new state in which the lender will collect the assets. In most cases, you only need to mail a certified copy of the original judgment to the new state as well as an affidavit with the debtor’s name and address. The affidavit typically renders your judgment valid with that state’s court, which makes it possible to serve notice to the debtor.
Court Appearances for Debtors
Creditors can force a debtor to appear before the court and provide them with a list of their assets. They can likewise require that the debtor bring financial documents related to their bank accounts and monthly income. If the debtor chooses not to show up for this hearing, they can be declared in contempt of court and a warrant can be issued for their arrest.
Assets Held in Trusts
In some cases, debtors will transfer assets into living trusts or LLCs in order to “protect” (avoid) the judgment collection process. While this tactic can be effective in some circumstances, it’s not as effective as most people believe.
Assets held in certain types of trusts (irrevocable) with off-shore trustees may be difficult to access. Since the money or property held in the trust is technically no longer considered a part of the debtor’s estate, a creditor may not be able to file a judgment against the trust.
On the other hand, a debt collection lawyer can sue the trust directly if it is managed by the trust-maker (a revocable trust). These trusts are still considered part of the debtor’s estate and because they maintain control over them, those assets can be vulnerable to creditors.
Liens on Real Property
In New Jersey, once a creditor has gained a judgment against a debtor, a judgment lien is automatically created on their present and future real property. This is an integral part of the judgment collection process. While real estate is the only type of property that can have a lien placed on it, most folks don’t want the title of their property clouded. This creates an immediate incentive to settle the debt to remove the lien.
Judgment liens are automatically created if the creditor brings the case before the New Jersey Law Division. Claims of less than $15,000 can be brought before New Jersey’s Special Civil Part. If you’ve filed your claim in this venue, you will need to docket the judgment in New Jersey’s Law Division. We can help you through this process.
Once you have the lien, the lien remains on the debtor’s property for the next 20 years. While creditors cannot force the sale of homestead property, the creditor would be entitled to any proceeds from the sale in the amount of the original judgment.
Additionally, the lien may not be discharged in a Chapter 7 bankruptcy. The debtor must take further action in order to remove the lien. Essentially, you’ve turned an unsecured debt into a secured debt. The bankruptcy only prevents the debtor from discharging the debt. It does not remove encumbrances to property that predated the bankruptcy.
Once you have received a court ordered judgment to collect monetary assets or other property, you may still run into difficulty gaining access to those assets. Many debtors refuse to provide the information the court orders them to. Moreover, some states do not require that they provide a clear Statement of Assets after the debtor’s judgment has been made. In other cases, the debtor may move across state lines. They may do this either to intentionally avoid paying on a judgment or for other reasons.
In either case, you can take steps to gain knowledge of the money and property you have a legal entitlement to collect from him or her. From filing an affidavit in a new state to requesting that the court summon the judgment debtor for an Order for Examination, you have the right to know what assets the debtor has, as well as the location of those assets. Contact a New Jersey commercial collection attorney at Snellings Law LLC. We can assist you when it comes to moving the judgment collection process forward. We can also help you in getting past the many roadblocks that can appear after a court-ordered judgment.