When you win a judgment in small claims court, the “judgment debtor,” the person or business that owes you money, is supposed to make good on the obligation. But it doesn’t always happen. If the judgment debtor doesn’t pay, you can take steps to force the debtor to pay the amount owed.
The Small Claims Judgment Process
After hearing a small claim action, the judge will award the winning side a “money judgment,” and many will pay it off promptly. If the judgment debtor fails to pay as required, you’ll want to take steps to protect your judgment and determine whether you can force the judgment debtor to pay.
Protecting Your Small Claims Money Judgment
Many creditors immediately file the judgment (or an abstract) with the recorder’s office. Why? Because if the debtor sells a house, vacation home, or another type of real estate, you might receive a check, even if the judgment debtor files for bankruptcy.
Timing Money Judgment Collections
Before taking other collection actions, it’s a good idea to wait until after the appeal period passes (a judgment debtor can contest the small claims award). That way, you won’t collect money you might have to return later.
Developing a Small Claims Judgment Collection Strategy
Having a judgment in hand doesn’t guarantee you’ll be able to collect. You’ll want to consider the likelihood of recovering money before incurring collection costs. You’ll accomplish this by determining whether the judgment debtor has assets you can seize to pay the money judgment.
Finding Assets at a Debtor’s Examination
If you’re not sure whether the judgment debtor has assets, you can ask the debtor directly. In some courts, the judgment debtor must complete a form listing all assets. In others, you’ll file paperwork asking the court to order the judgment debtor back to court.
The questioning process usually takes place in the hallway outside the courtroom. If the debtor refuses to respond, you’ll let the judge know. The judge will decide whether the debtor must answer.
Both approaches force the judgment debtor to answer financial questions under oath, such as:
- Where do you work?
- How much do you make?
- Where is your property located?
- How much is your property worth?
- Do you own a business?
- What is the value of the company?
You can also require the debtor to produce financial documents like bank and investment statements, paycheck stubs, and profit and loss information.
Assessing the Judgment Debtor’s Finances
If the judgment debtor doesn’t have anything you can recover, proceeding with collections won’t make fiscal sense. Here are two concerns to consider:
- Is the debtor judgment proof? Hopefully, your judgment debtor will have assets you can use to pay off the debt. However, someone without a job and little property might be protected from collection or “judgment proof.”
- Can the debtor protect all assets? A debtor can keep or “exempt” property needed to work and live. Debt collectors can’t reach exempt property. For instance, most states allow residents to keep household furnishings, clothing, and a modest car. Debtors can protect a certain amount of wages, as well. If the judgment debtor is low-income, nothing might remain for you.
Creating Your Collection Plan
If the debtor has collectible assets, you’re in luck. Here are the primary tools that you can use to go after the judgment debtor’s nonexempt assets.
Recording the Judgment
As discussed above, many creditors immediately file the judgment (or an abstract) with the recorder’s office. Why? Once recorded, the filing creates a lien on the property that secures the payment, and the judgment will get paid out of any real estate sales proceeds. You'll receive a check if the debtor sells a house, vacation home or other real property.
Not only does recording the judgment increase the likelihood of being paid in the future, but the paperwork is also relatively inexpensive to file. Most recorder’s offices post instructions and costs on their websites. Recording the judgment everywhere the debtor might own real estate is important.
What Are the Costs for Recording the Judgment?
It’s fairly minimal. You’ll likely pay $25 to $30 per page, but it could be $0 or substantially higher. To find out, try searching for your county and state and “judgment recording fee schedule.” For instance, “Multnomah County Oregon judgment recording fee schedule.”
Recovering Money
Most judgment creditors look for a readily available source of cash to pay off the judgment. Here are two techniques that are economical and yield results quickly.
- Wage garnishment. You’ll request the garnishment by delivering paperwork to the sheriff or responsible agency. An officer will forward it to the employer. The employer notifies the employee and deducts funds after the waiting period required by your state elapses. After receiving the funds, the enforcement agency delivers them to the judgment creditor.
- Bank account levy. After you provide the necessary documents to the proper agency (including branch location information because you must explain where to find the funds), an officer will give the paperwork to the bank. If money in the account is subject to levy, you’ll be forwarded the funds.
Example. At the debtor’s examination, the judgment creditor learns that the judgment debtor works as a social media expert for a local entertainment venue and banks around the corner from the courthouse. The creditor levies the bank account but receives only $350, a fraction of the judgment amount. The creditor garnishes the judgment debtor’s wages and recovers the balance over time.
What Is the Process for Requesting a Bank Account Levy?
You’ll complete the paperwork described below in “The Judgment Collection Process: Getting Started.” Once complete, you’ll deliver the paperwork or have it served on the judgment debtor’s bank and receive the funds after the objection period expires.
The specific procedures vary by state. Check your state statutes, your small claims court’s self-help department, or the serving officer’s website for more information on your state’s process. If you need additional help, contact a local lawyer.
Auctioning Property
You can ask the sheriff to recover property and sell it at auction. This approach works well with high-value items with substantial equity or when the judgment debtor owns the property free of loans or liens.
If the judgment debtor owes money on the property or a lien encumbers it, you must pay the creditor in full after the sale. You’ll want to consider loans, liens, and sales costs when determining whether the property’s equity is sufficient for recovery to be worthwhile.
- Real estate. You can instruct an officer to take and sell real estate at auction. The procedure is often costly because you must deposit a hefty fee in advance. Also, the process can take time.
- Personal property. Property other than real estate, called “personal property,” is also subject to seizure and auction. Many individuals don’t own property valuable enough to warrant using this technique. However, if the judgment debtor is a struggling business, you might be able to seize valuable equipment, products, or supplies.
Example. A judgment creditor has a money judgment for $250,000 against the sole proprietor of a Napa vineyard. The judgment debtor owns equipment worth $50,000, $100,000 in home equity, and $300,000 of highly-rated wine. In California, the judgment creditor can protect more than $100,000 in home equity with a homestead exemption, leaving the equipment and wine available for seizure.
Recovering Business Assets
If the judgment is in the name of a company or if the judgment debtor owns a business as a sole proprietor, you’ll have additional collection opportunities.
- Till tap. An officer will visit the establishment and take the cash register funds for the benefit of the judgment creditor.
- Keeper. An officer remains in the business for an extended period, takes all the money customers pay, and forwards it to the judgment creditor.
Example. The judgment creditor obtained a money judgment against The Whole Snack for an unpaid quinoa invoice and opted to collect using a till tap. The officer approached the food truck on a busy Saturday and seized $20 from the till. The Whole Snack had switched to Venmo and CashApp exclusively shortly after the small claims action.
The Judgment Collection Process: Getting Started
Your court judgment won’t be enough to initiate the collection process. You must fill out further paperwork. For instance, you might need:
- an abstract of judgment (a shortened version of the judgment)
- a writ of execution (for garnishment or levy)
- a writ of possession (to obtain property), or
- similar forms specific to your state.
The paperwork lists the amount of the judgment, fees, and accumulated interest so that you can collect what’s owed. Each will likely have a court seal affixed to prove its authenticity.
The paperwork isn’t complicated to complete, so don’t be intimidated by the odd names. You’ll likely find detailed instructions on the websites of both the court and the sheriff. For more on this subject, see Small Claims Court: Paying a Judgment.
What If the Debtor Files for Bankruptcy?
The quickest way for a judgment debtor to thwart your collection attempts is to file for bankruptcy. Once filed, the court issues an “automatic stay” order prohibiting debt collection activities.
Instead, you’ll have to get in line at the bankruptcy court along with other creditors. In many cases, little, if any, money will be available to divide between the creditors who file a bankruptcy claim for payment.
Learn more about bankruptcy ramifications in Personal Bankruptcy and Court Judgments.