Options for Judgment Holders

This article is written for informational purposes only and is not legal advice; any legal questions must be addressed to the qualified attorney of your choosing.

There is a misconception that once someone obtains a judgment, they will be able to easily collect whatever amount of money that the Court determines the final judgment shall be. In fact, collecting a judgment can be exceptionally difficult, and often yields little (if any) recovery.  However, it is still important to explore the various avenues for collecting on a judgment, even though it may take years to recover any actual money.

What is a judgment?

A final judgment is the term that applies to the outcome of a lawsuit that has been detailed into a written format and signed by a Judge.  At some point after the conclusion of a trial (sometimes hours, sometimes weeks) the Judge will enter a final judgment – a judgment is a court order stating that someone owes someone else money because of a lawsuit, or may say no one owes anything.

A judgment will typically first recite how the judgment came about (e.g., a trial before the Judge, a jury, or a default judgment – meaning a party did not show up to defend themself). Following this brief recitation, the judgment will identify what relief is provided by the final judgment. For example, it may say the Plaintiff shall recover $50,000.00, plus attorneys’ fees of $20,000.00 plus post-judgment interest of 8.25% per annum and court costs. Court costs refer to the various filing fees and other expenses that are incurred in trying a lawsuit (outside of attorneys’ fees for their time spent on the case). Interest can be particularly important as it will cause the judgment to grow over time.

The final judgment will bear the signature of the presiding Judge, and a statement that it is a final judgment, rendering the case over. There are options to appeal, but that is not the subject of this article.

In Texas, judgments are valid for 10 years from the date they are initially signed by the Court; they can be extended for 10-year periods until satisfied if certain steps are taken to “renew” the judgment, such as keeping up with collection efforts and ordering new documents from the Court after a period of time. I strongly urge you to speak to a judgment collection attorney about renewing a judgment to ensure it is done properly in your particular case.

I have the judgment – now what?

In the best of circumstances, a Defendant from which you obtain a judgment will either have insurance to satisfy a judgment, or at least sufficient assets to pay the judgment in cash. However, many cases are against smaller businesses and individuals that have no insurance let alone cash that is easily obtainable.

There are options, although none of them will guarantee recovery:

• Abstract of Judgment – An abstract of a judgment is a document created by the clerk of the Court where the judgment is entered, and filed in the real property records of any county where a Defendant may have property. Thus, if the Defendant (now a debtor) has real estate in that county, the abstract essentially puts a lien on the property (excluding homesteads).  Therefore, if the debtor sells the property, you can seek collection of the judgment through the sale (typically via the title company that will find the abstract when it does its title search).  Abstracts can require a lot of patience however, as property may sit unsold for years, and property can still be transferred “under the table” if you are not keeping an eye out.

• Writ of Execution – A writ of execution is another document obtained from the clerk of the Court, but in this situation, the writ directs the local sheriff or constable to seize and sell the debtor’s property. In practice, our local officers are very busy and collecting property is not likely to be at the top of their list of priorities. It helps if you can obtain information about assets that the debtor may have (i.e., a boat, vacant land, etc.) and provide that information to the officer to assist in finding available property more quickly. If you simply order a writ and provide it to an officer, it will be difficult for the officer to do much other than a cursory inspection of the debtor’s homestead (which is exempt from collection).

• Writ of Garnishment – Debtors may have bank accounts that you can seize; the process can be costly so it’s important to do what you can to determine what banks have money for the debtor and how much money is in each of these accounts. This may require an investigator or the use of “post judgment discovery”, a way to acquire documents like bank statements, tax returns, etc., after a judgment is entered in a case. Banks charge fees for having to respond to these actions, and the creditor is on the hook often if the debtor does not have sufficient assets in the account. Thus, be cautious with this approach and only use it when a reasonable level of certainty exists that there is money available.

• Turnover Orders – If there are assets that are hard to collect, but you know they exist, you can seek a Court to grant a turnover order. As the name suggests, it orders a debtor to turn over an asset to satisfy a judgment. This is often used when a debtor owns stocks, royalties from some investment, property outside of the state, etc. Turnover orders are highly effective if you can get the order before the debtor transfers the property to someone else, thus evading the order, and again requires you to have some knowledge of the assets of the debtor.

• Receivers – The use of receivers has become very popular in trying to collect on judgments. Essentially, a receiver is a debt collector granted their authority by the Court, and therefore tend to have a lot more power and authority to collect a judgment, investigate and have greater powers (such as taking the deposition of the debtor). The problem with receivers, however, is they usually collect a percentage of what they recover and therefore may be more apt to go after only quite lucrative cases where there are higher chances of easier recoveries. The receivers often will only work for those who have judgments that are worthwhile, which for some may be a minimum of a judgment in the amount of $100,000.00.

Conclusion

It is usually only practical to sue someone for compensation if they have the ability to pay. Before initiating a lawsuit, some consideration should be given to the ability to collect money should you be successful in the litigation process. If collection is unlikely based on lack of insurance (or other reasons), you need to consider whether the time and money involved in trying to collect on a judgment is worth the effort. However, a lot of times it is difficult to know whether collection will be possible, and you may end up at the end of the case with a piece of paper signed by the judge saying that someone owes you money. There are steps to take, and sometimes patience can pay off. A client of mine recently was paid on a judgment obtained several years ago thanks to the sale of a piece of property by the debtor.

Lastly, keep in mind that there are specialized debt collection law firms and companies that work on a contingency fee (they collect a percentage of what they recover rather than charging you by the hour) that may be the most efficient way to collect on a judgment. Enlisting one of these professionals will help take the burden off you, but continue to keep the heat on the debtor.