Getting Past Judgment: FAQs About Collecting Your Money – April 2015

Terry Jessop & Bitner Newsletter

Issue 20, April 2015

We help a lot of businesses and individuals collect money that is owed to them. Here are some common questions about the debt collection process.

Do I have to go through the courts?

Unless the debtor voluntarily pays, yes. The only way to forcibly take money is to file a lawsuit, win the lawsuit, get a judgment, and enforce the judgment. A judgment is an order from the court stating that the debtor owes the creditor money. In Utah, a judgment is enforceable for eight years. It can be renewed for additional eight-year periods.

Can I collect a debt without an attorney?

Trying to collect by yourself is like doing your own appendectomy. It is less painful and your chances of success go up significantly if you trust the work to a trained professional. Hiring a collections attorney is the most efficient option and it can be surprisingly economical with fixed fee and contingent fee arrangements. There are a lot of rules that govern the collection process. The higher the amount of debt owed to you, the more you should seriously consider hiring an attorney. If you would like help collecting a debt, give us a call.

Can I take money out of the debtor’s bank account?

Yes, if you know where the debtor banks. You do not need to know the account number. You obtain and serve a writ of garnishment on the bank which is then obligated to pay the judgment creditor any money of the debtor which the bank is holding.

If I garnish a bank account, do I get all the money in it?

Yes, but there are exceptions. For example, if the debtor can prove the money in the account consists of disability, unemployment, medical care, social security, child support, life insurance, or other similar benefits, the money cannot be garnished. Also, a creditor can garnish only 25% of wages.

How long does a writ of garnishment to a bank last?

A writ is only effective upon service on the bank. Within 7 days after receiving a writ, a bank must notify the creditor how much of the debtor’s money it is holding. For 21 days after that, the bank has to hold the debtor’s money to give the debtor a chance to request a hearing with the court. The bank is not allowed to give the money to the debtor during this time. If no hearing is requested, the money is yours. The rules do not obligate the bank to do anything beyond this point. A writ of garnishment on a bank account should be treated as a single-hit tool. If a creditor believes more money is deposited into the account at a later date, she should apply for a second writ of garnishment.

Can I force the sale of the debtor’s house?

Yes, but you must “perfect” the judgment lien against the home first. Recording the judgment in the county where the property is located creates a lien on all real property owned by the debtor in that county. By foreclosing the judgment lien you can compel the sale of the home, but if there is not enough equity in the home to cover the judgment and any prior mortgages, it is usually not worth doing. Meanwhile, the lien prevents the debtor from selling or mortgaging the property until the judgment is paid or expires.

Because judgment liens make life difficult for debtors, creditors often see significant recoveries two or three years later, even if the creditor stops actively pursuing collection.

Can I take a debtor’s paycheck?

Yes, 25% of each paycheck, if you know where he works. To do this, you need to apply for and serve on the debtor’s employer a writ of continuing garnishment. The first one lasts for one year. All subsequent writs of continuing garnishment last for 120 days. If the debtor is self employed, you won’t be able to garnish a paycheck, but you may be able to intercept money that is owed to the debtor by a third party, e.g. a company that hired the debtor to do some work.

Can I take a debtor’s tax return?

For Utah State tax returns, yes. For federal tax returns, no. Federal law allows only governmental entities to intercept a federal tax return. You can, however, garnish a bank account after a tax return has been deposited into it.

If a debtor files bankruptcy, how do I get my money?

Usually you don’t. Bankruptcy discharges debts, meaning they go away, and the debtor does not have to pay them. There are a few exceptions. For example, if the debt was incurred by way of fraud, you can object to the discharge of the debt. Keep in mind that once a debtor files bankruptcy, creditors are not allowed to make any attempts to collect the debt. This is prohibited by what is called the automatic stay.

What if I do not know what assets the debtor has?

If you want to find out where the debtor works, where he banks, or what assets he has, you can apply for a supplemental order from the court. This is an order that obligates the debtor to come to court and answer in person your questions about his or her assets. If the debtor fails to appear at the hearing, and if the order scheduling the hearing was served on the debtor personally, the creditor can ask the court to issue a bench warrant. You can also hire an asset location company. If you have questions about collection, give us a call.

© Terry Jessop & Bitner April 2015