Debt Collection and Judgment Enforcement
NOTE: The Following is not legal advice on a particular matter, but rather is provided for information purposes only. While Mr. Houts has a great deal of background in these areas, his practice is devoted to business law and lending matters now.
Remedies for Creditors with Judgments
Bank Account Levies
Once you have a judgment, if you know or can discover where the debtor banks, you can seize money from the debtor’s bank accounts using an account levy. We will have the court issue a Writ of Execution and send it to the sheriff with instructions. If the bank has more than 9 California branches, according to a new law effective January 1, 2013, the bank must designate a centralized facility to receive service of account levies. Banks with less branches may designate such a facility, but don’t have to.
If you are after a very small bank, we may have to serve the branch where the debtor’s account is maintained to have an effective garnishment, so it is always a good idea to get branch information and in some cases, it may be necessary. A complete or even partial Social Security number is also helpful, but not required.
Existing law can make it difficult to find banking information if you do not know it. If you have cancelled checks or other sources of banking information, that is a good starting point. We will do whatever the law permits to help you locate sources of such information.
Abstract of Judgment
If you have a judgment, Mr. Houts can record an Abstract in the real property records of every California county in which you think the debtor may own land or buildings. Recording an abstract creates a passive lien or charge against the property in the amount of the judgment. The lien is “passive” because, unlike a home loan deed of trust, there is no power to force sale of the property if the debtor does not pay you.
As the creditor, your lien remains in place until the property is sold or refinanced, at which time you will hear from the debtor. The debtor won’t be able to proceed to sell or refinance without first paying you. You will benefit from appreciation in the property since the recordation of your lien.
If your debtor files a bankruptcy after you place your lien, the debtor can sometimes avoid your lien in whole or in part. If that comes up, talk to us, but it can interfere with or eliminate your lien rights.
A judgment creditor may also seize part of (garnish) the wages of a debtor. In California, a creditor is typically entitled to take up to 25% of the debtor's net take home pay. You can be required to take less if the debtor can prove to the court, by a claim of exemption proceeding, that the debtor’s limited finances justify a lesser amount.
Debtors who are employees and receive periodic paychecks are the most obvious choice for this remedy, but by no means the only choice. Commissions and other types of income can also be seized by garnishment or other similar procedures described in this website. Self-employed individuals can be harder to collect from but it is not impossible. If you have a compensation type that you are curious about, just ask.
Judgment Debtor Examinations
If you are a creditor with a judgment, Mr. Houts can also schedule hearings where the debtor can be compelled to come to court and be questioned under oath about assets, liabilities, and sources of income. These hearings are called Judgment Debtor Examinations. Such an exam will sometimes identify something you can seize or levy on. We routinely do a Notice to Produce requiring the debtor to bring a range of documents to the hearing, which can be enlightening. Service of the exam order also creates a one year lien on many types of the debtor’s property. Importantly, the exam is an opportunity to speak to an evasive debtor and attempt a resolution of the debt or a payment plan.
Exams can identify specific money or property on the person or in the possession of the debtor, and turnover orders can sometimes be obtained and that property delivered to the creditor on the spot.
The key here is that the examination order must be personally served, so a good locate on your debtor is critical. If you do not know how to locate your debtor, we have contacts with investigators and services that can be of assistance.
If your debtor owns a cash business, like a restaurant, bar, fast-food outlet, jewelry store, retail store, or the like, a Keeper may be just the ticket to collect. This is a type of execution levy where the sheriff will put a representative, typically a retired deputy, in place in the store for a prescribed time and collect all receipts so they can be paid over to you. Credit transactions are typically tracked so payment can be arranged for later.
You have to target the right kind of business, but if you do, this type of levy will lead to immediate communications and possibly payment because the debtor will not want to be drained of receipts and endure the disruption that results from the sheriff’s presence.
Once you have a judgment, if you are aware of an asset the debtor has equity in or ownership of, you can consider having us obtain a Writ of Execution which we instruct the Sheriff to use to seize and sell it. There are certain items of property, usually limited in value, that are exempt, meaning you cannot seize and sell them or, if you do, you must pay part of the sales proceeds to the debtor.
This can be a complicated area and there is often no substitute for a specific discussion with Mr. Houts about it. Still, it can be an effective creditor’s tool. For example, many creditors do not realize that they can commence an execution sale of the debtor’s house. You would want to reserve this for appropriate judgments of a sufficient size where the home in question has some equity that is not protected by a homestead exemption because it is a costly procedure if taken to completion. Typically though, if there is some available value in the home, the debtor is encouraged move swiftly to work with you to avoid losing their home.
An interesting use of an execution levy is to seize the debtor’s stock in a corporation, particularly if it is a majority interest. Control of the corporation can be sometimes be wrested, perhaps with the use of a receiver, and used to encourage the debtor to pay or to divert payments to you. Liquidation of the shares/interest in the corporation can also be explored if there is some market for the shares.
What if your debtor’s only apparent asset is an interest in a legal entity like a corporation, LLC, partnership, or the like? Unless they are getting a paycheck, you cannot garnish. In some such cases, it is worth considering a Charging Order. This order, possibly in combination with the appointment of a receiver, permits a creditor to seize and realize upon the interest of an individual in such an entity.
Such a procedure can permit you to intercept distributions or income flowing to the debtor from the entity and, in an appropriate case, can be so unpalatable to the debtor, that they will want to work with you.
If your debtor is owed money from a third party (a business or an individual) you can identify and locate, you can file a post-judgment motion for an Assignment Order. The order is served on the third party that owes the money and directs them to pay it to you instead of your debtor.
This can be advantageous for certain workers and professionals who do not get regular paychecks and are not “employees” because the amount that can be forcibly “assigned” to the creditor is not subject to the 25% limitation of wage garnishment.
Judgment Liens on Personal Property used in Business ("JLPP")
Another remedy available to judgment creditors, the JLPP, is a filing with the Secretary of State’s office. It allows you to place a 5 year, extendable lien on accounts receivable, inventory, chattel , equipment, farm products, and negotiable documents of certain types. It will attach to after-acquired property as well, meaning property in the categories mentioned above that the debtor gets after you file your JLPP.
The property you want to lien must be business-related and must not be a vehicle. There are other restrictions, so you will want to discuss this with us in detail.
The lien is not self-executing, meaning that just filing and getting the lien does not liquidate the asset. You have to use other means, such as a Writ of Execution, to do that.
So-called exempt property refers to assets or income which the law says a debtor can retain and use, even if they owe money, have a judgment against them, or file a Bankruptcy. The property cannot be levied on by a creditor in most cases. You should always check with Mr. Houts to see if property is exempt before determining to rely on it for recovery. Particular caution is needed in the area of retirement income sources.
The California Judicial Council form EJ-155 contains a list of the exemptions, but to get the dollar amounts of the exemptions, note the following:
AMOUNT OF EXEMPTIONS: A list of the amounts of exemptions from a judgment under CCP § 703.150 starting
on April 1, 2004, is available from the clerk of the court and on the California Courts Web site at
www.courtinfo.ca.gov. Except as otherwise provided, the dollar amounts of the exemptions will be adjusted
thereafter at three-year intervals on April 1, and the adjusted amounts will become effective immediately on that
Dollar amounts of exemptions change from time to time, so it’s best to navigate to:
The form is called “Dollar Amounts of Exemptions from Enforcement of Judgments.”