Securing Your Dues: Steps to Take After Winning a Lawsuit
Winning a lawsuit can be a significant relief, but the victory is only half the battle. Once the court rules in your favor, you are awarded a judgment. Collecting that judgment can be a different challenge altogether. Here’s a step-by-step guide to help you understand how to collect what you’re owed:
1. Understanding Your Judgment
The judgment is the official court decision that states the defendant owes you money. This document contains the specifics, like the amount of money owed, any interest to be paid, and the time frame for payment.
2. Communicate with the Debtor
Once you receive a judgment, it’s a good idea to contact the debtor. They may be willing to pay the judgment amount immediately or set up a payment plan. Clear communication can often avoid the need for more aggressive collection methods.
3. Judgment Lien
If the debtor refuses to pay, you can place a lien against their property. A judgment lien means that if the debtor sells or refinances the property, the owed money will be taken from the proceeds of the sale to pay off the debt.
4. Wage Garnishment
Another way to collect is through wage garnishment. Here, a portion of the debtor’s wages is taken out directly by their employer and paid to you until the debt is paid off. Remember, wage garnishment laws vary by state, so it’s important to familiarize yourself with your local regulations.
5. Bank Levies
If you know where the debtor banks, you can ask the court for a bank levy. The bank will freeze the debtor’s account, and funds will be taken out to pay the judgment. It’s crucial to be aware that this is a one-time event; if the funds aren’t sufficient to cover the judgment, you might need to levy the account again in the future.
6. Property Seizure
This is a more aggressive approach. With a writ of execution, local law enforcement can seize the debtor’s personal property, which can then be sold at auction. The proceeds from the sale will go toward the judgment.
7. Judgment Debtor Examinations
If you’re unsure of the debtor’s assets, you can request a judgment debtor examination. This forces the debtor to come to court and answer questions about their finances under oath. If they fail to appear, the court may issue a warrant for their arrest.
8. Renew Your Judgment
Judgments don’t last forever. If you haven’t collected by the time the judgment expires (the duration varies by state), you might need to renew the judgment. Be aware of the time frame in your jurisdiction.
9. Consider Selling the Judgment
If you believe it’s unlikely to collect or you don’t want to invest more time and effort, there are companies that buy uncollected judgments. You won’t receive the full amount, but you’ll get a portion without the hassle of chasing the debt.
10. Consult with an Attorney
Collecting a judgment can be complex and may require navigating legal loopholes and state-specific regulations. Consulting with an attorney who specializes in collections can streamline the process and increase your chances of recovering your money.
Conclusion
Winning a lawsuit can feel like a triumph, but collecting on the judgment can be an entirely new challenge. Being proactive, understanding your rights and options, and staying persistent can make the difference in ensuring you receive what’s owed to you.
Video Transcript
How to Collect Once You Win a Lawsuit?
So a lawsuit can give you two things. It can give you an injunction, which is where the court orders a person to start doing something or stop doing something. But the court can also order the payment of money. And so, let’s say, for example, you win a judgment against another party for a million dollars. Just hypothetically, I am picking a number that is large enough that it is worth going after. You know, if it is $5,000, you don’t want to spend $15,000 in legal fees going after it, but if it is a million dollars, you will spend some money and put some attention into collecting.
And let’s say, hypothetically, you get a judgment against a business and two of its owners. And let’s say those owners have some fancy vehicles or some expensive vehicles or some real estate, maybe some other businesses. How do you collect the million dollars that you are owed from the business and the two owners?
Working with a Collections Attorney
Well, first off, once you get that judgment from the court, and let’s assume it is docketed, which means it is filed, and typically, there is an appeal period that needs to run. So maybe 60 days for appeal. What you will typically do is sit down with a creditor’s attorney. This is an attorney who helps creditors who are owed money and helps you collect. And those attorneys are going to work with you either on an hourly basis or a contingency basis. Contingency means the attorney doesn’t get paid unless they collect money for you. But they are going to get a percentage of whatever they collect.
Contingency Agreements and Decision Making
And let me tell you something about attorneys who do collection work on a contingency basis. They don’t take work unless they are pretty confident they are going to get paid, and they want to make good money, not just a little bit of money. So if they think it is going to take a lot of effort to get paid, or you are unlikely to get paid, or you are going to get paid a small amount, collection attorneys won’t take the case on contingency.
But, let’s say for example, the attorney figures, you know what? You are likely to get paid here, and you are likely to get a million dollars. The attorney might say, “Hey, I will work on a 40% contingency.” That means if the attorney collects a million, the attorney gets $400,000, and the attorney might think to himself or herself, “I am going to put $50,000 worth of work into this, but I am likely to get $400,000 in contingency fees; that is a good deal.”
So that is the analysis that collection attorneys go through when determining whether they will offer to work on a contingency basis or not. So likewise, you should be thinking about, “Do I want to give up a contingency percentage, or do I want to pay by the hour?” I have a great article on contingency attorneys and this whole analysis. We will add a link to that later so that you can be thinking about whether a contingency attorney is best for your circumstances. There is sometimes called a no-win, no-fee attorney.
Steps After Hiring an Attorney
All right, so you have decided to hire a collections attorney though. You figured out some way to pay them. What is the next step? Typically, a collections attorney is going to run a report that is either provided by a private investigation firm or a private public database that identifies all the public records related to the ownership of the defendants. And in this scenario, we are talking about a company and two individuals. So it might say, “Hey, this individual owns this vehicle, this vehicle, this vehicle, this home, this real estate, this real estate, this business, this business, this motorcycle,” whatever it might be. And then the collections attorney may do—you start immediately going after those assets by either garnish; by the way, you often find out about bank accounts as well, garnish the bank account, levy the bank account.
Garnishment and Levy Explained
What is the difference, by the way? Garnishment is when you freeze assets. Levy is when you take them. So you have to freeze the assets before you can take them. So typically, a collections attorney will garnish an asset so it can’t leave and then take it.
Using Legal Procedures to Collect
So we are talking about bank accounts here, where a bank account has funds in control of the bank. The bank will garnish those funds, which means freeze them so the owner cannot withdraw them. And then, once the statutory process is complete, the bank will release those funds to the creditor who owed the money, and that is called a levy (or the bank will levy them and take them and then release them). But all right, so long story short: there are statutes in every state that provide how a creditor can start with a judgment can start taking the assets of somebody else, whether it is through a sheriff sale, garnishment, or levy. These laws vary by state.
And so if you need to collect on a large judgment, you will need to work with an attorney experienced in collections for creditors. If you go to an attorney with a million-dollar debt, but you haven’t yet obtained a judgment, the attorney will usually tell you they need a higher percentage, or it is going to cost more because they have to go out and sue the case out to get that judgment first. If you have already gotten the judgment, it will obviously be less work for the attorney, so the attorney’s average rate will be substantially less.
Conclusion
So, to conclude, if you have a judgment against somebody because you have won against them in court, can you go after a bunch of the stuff they own? Their cars, their properties, etc.? Yes, you absolutely can. You can start taking all of those assets, and often they will offer you money in exchange for keeping those assets if they really want to keep them. There are certain states or certain assets that you cannot take. Every state has what is called an exemption statute. For example, it typically says a personal residence has a certain amount of exempt equity. So you can’t take a person’s home unless it is an expensive home that is worth more than the exempt portion.
Minnesota’s exemption statute has a number of other unique things: you can’t take their family Bible, you can’t take an instrument, you can’t take a family heirloom up to a certain value. There are certain things of kind of sentimental value that you can’t take. So you will want to look at your state’s exemption statute to see which assets are exempt from creditors.
Alright, if you would like to get notified about the next live session, you are welcome to subscribe to the Aaron Hall attorney YouTube channel. You are welcome to subscribe to our little reminder email system at aaronhall.com/free. You can also sign up and follow us on other social media sites. I am Aaron Hall, an attorney for business owners and entrepreneurial companies. It was a pleasure talking with you today and answering your questions from an educational perspective.
As I always say, before you rely on any of this, consult with an attorney. It is my hope that you use these questions to identify topics and questions to bring up with your attorney. Until the next live session, I hope you are doing well. Take care.
