You are a small business owner getting ready for your very first civil case. You have been compelled to go to small claims court by a customer who has refused to pay an outstanding debt. You will be happy with a win, but what happens after the gavel falls?
What concerns you are statistics demonstrating that the vast majority of judgments entered in U.S. courts are never fully paid. You worry about going through the court process, spending the necessary time and money, and still coming out the other end not receiving the money you are due.
Unfortunately, there are never any guarantees in civil court. Winning a case only establishes the legal existence of a debt. It does not guarantee your company will ever see a penny of what is owed.
Disclosure of Assets
In most states, debtors are expected to meet with their creditors at some point after a case has been decided for the purposes of disclosing assets. It is through asset disclosure that a creditor and its attorney can determine the best way to proceed.
A perfect world scenario would have a debtor making use of their available assets to immediately pay what they owe. But this is not a perfect world; rarely do civil judgments end in this manner.
Oftentimes, creditors turn to wage garnishment in order to extract whatever amount they can from the debtor. Most states allow garnishment of a certain percentage of a debtor’s disposable income.
Bank account garnishment might be another option to look at. It is similar to wage garnishment except that, instead of serving the debtor’s employer, the debtor’s bank or credit union is served. That financial institution is compelled to seize a certain amount from the debtor’s account and forward it to the creditor.
Asset Seizure and Property Liens
Wage and bank account garnishment are practical tools when the amount owed is relatively small. But for larger amounts, garnishment could take years to square a debt. In such cases, creditors can look at asset seizure or placing liens on debtor property.
This approach tends to be more effective at getting a debtor’s attention. The challenge is locating appropriate assets. State laws do not allow every asset a debtor owns to be seized and sold. For example, creditors often cannot touch a debtor’s primary residence unless the judgment in question is related to a mortgage.
Putting It All Together
According to Utah-based Judgment Collectors, the challenge for many creditors is putting it all together after the gavel drops. There is so much to consider that doing things in-house can be impractical.
Companies often turn to firms like Judgment Collectors, firms that specialize exclusively in this form of debt collection. Another option is to turn collection over to the company attorney. Either way, both collection agencies and attorneys know how to uncover information that creditors will never find. They know how to employ skip tracing; they know where to look in terms of public records; they know how to use social media as an investigative tool.
Getting It Done in a Timely Manner
One final thing to know about what happens after the gavel falls on civil litigation is the reality of statutes of limitation. Most states limit enforcement of a judgment to a period of between seven and ten years. If a creditor has not collected by then, the judgment must be renewed or abandoned.
Obtaining a civil judgment against a debtor doesn’t guarantee payment. It is what happens after the gavel falls that counts the most. Perhaps that’s why companies like Judgment Collectors exist.