Congrats, you won in court. So now you get your money, right? Well, sort of.
There are legal and practical difference between winning a money judgment and collecting on one. The court determines what money award, if any, is due to the winner. But court’s don’t enforce the judgment; they don’t physically collect and distribute payment.
It falls on you, the “winner” of the lawsuit, to get your money mostly on your own.
Pitfalls of collecting an award
Depending on the parties involved, collecting money damages may be a frustrating and drawn-out process. To begin, the “losing” party typically has 30 days to file an appeal of the final judgment. It’s likely that no money will exchange hands until the appeals process is complete, delaying payment for months, if not years.
If no appeal is filed and the debtor party has the ability to pay, then a written request may be enough to collect what is due. However, this is not a guarantee. You may have to ask for your money many times, and the response you get may not be what you hope for.
If the debtor party is insolvent or just flat out refuses to pay, collecting will be much more difficult. You will need to first uncover the location of assets, if any. This may require interviews under oath, hiring a private investigator, and researching bank accounts. Once you determine that assets exist, you will have a few means by which to collect.
Once you determine that assets exist, you will have a few means by which to collect.
You may be able to garnish wages, collect from bank accounts, stocks, or bonds, seize real estate or personal property, or even collect money directly from a cash register. Each means of collection has its own process and requires varying degrees of aid from the court and local administrators.
If you win a judgment, you can obtain a garnishment without the debtor’s knowledge and present it to a third party, like an employer or a bank, and request that any money that would normally flow to the debtor flows instead to you.
You can also request that the court issue a writ of execution, which will empower a local sheriff to seize property on your behalf. This can include real estate which is then sold at auction, or cash. You may not carry out this seizure yourself.
Alternatively, you can file a judgment lien on specific property, which will allow you to foreclose on the property, in much the same way a bank will on your house or car if your fail to pay back a loan.
At this point you may also be able to hire a debt collection agency to help you discover and recover your personal debts. However, depending on the agency, this option may be more expensive than you are willing to pay, especially since most debt collection agencies are used by big companies. If you are interested in going this route, you will want to make sure that the agency has the proper licensing and is equipped to deal with your specific situation.
Regardless of what method makes the most sense to collect on a debtor’s specific assets, the court will aid but never initiate the process. It is up to you to figure out the best means and then request the specific enforcement.
Protection of Assets and Discharge of Debts
There are a number of caveats to collecting a debtor’s assets. For example, most states provide protection for primary residences, vehicles used for business, or limit the percent of wages that can be garnished. Bankruptcy may also discharge any debt owed. You will want to determine what assets are protected before you start going through the process of filing liens and garnishments.
Full Faith and Credit
Once a judgment has been entered in your favor in one state, the full faith and credit clause of the Constitution dictates that it must be recognized by all other states. In other words, if your suit was decided in California and you want to take control of the debtor party’s assets in New York, you will need to first register your California decision with the New York court. In turn, New York courts must recognize and aid in enforcement of the judgment, just as if had been issued in-state.
Collecting on a judgment is not straightforward or automatic. Just because you “won” doesn’t mean you can expect a check in the mail any time soon. Be patient and may be know that there are processes to help enforce your winning judgment.