Congratulations! You have won your case and finally obtained a judgment against that owner or contractor who owes you money. Obtaining the judgment has not been easy. It has required hundreds of hours of time meeting with attorneys, collecting documents, printing e-mails, attending depositions and hearings, and perhaps even testifying at trial, not to mention the money spent on expert witnesses and attorneys. Given that justice has been served, has the time and expense of obtaining your judgment been worth it? Not necessarily. Most litigants feel that a judgment that cannot be turned into cash is worthless. The purpose of this article is to set out the some basic collections principles needed to turn a judgment into cash.

Front-End Planning

It is essential to plan ahead to help ensure that collection efforts will be fruitful. Careful planning by a supplier, contractor, or owner before providing materials or entering into a contract can help improve the success of a collections action. For example, suppliers and vendors can use credit applications to require their customers to provide the names of their banks, federal tax identification numbers, and even collateral securing large purchases. Having these key pieces of information gives a creditor some idea where to look to satisfy a judgment. General contractors and subcontractors can make copies of any checks they receive during the course of a project. Knowing where a potential debtor banks makes a garnishment action much easier. Also requiring corporate buyers to provide a personal guarantee for purchases over a certain dollar amount will provide the supplier with two potential sources from which to collect on a judgment. While a corporate debtor may turn out to be nothing more than a “shell” with no assets, the guarantor may have money or property that can be used to satisfy a judgment.

Owners and contractors can include provisions in their contracts requiring any legal fees spent on defending a lawsuit, including garnishments or other collection proceedings, to be deducted from any amounts owed under the contract. With such a provision, if the owner or contractor is served with a garnishment or has to engage in any post-judgment proceedings, the associated legal fees will be shifted to the party who caused the extra work and expense.

Record The Judgment

Most states have a process whereby a judgment can be recorded in the property records of a particular county or counties where the debtor owns real property. The purpose of recording a judgment is to put other creditors on notice of the judgment and to reserve the claimant’s place in line for the distribution of any assets which the debtor may have. For example, in Georgia, judgments are recorded with an instrument known as a Writ of Fi. Fa. (O.C.G.A. § 9-13-1) and Alabama uses a Certificate of Judgment (Alabama Rules of Civil Procedure Rule 58). A recorded judgment is also the authority a sheriff can use to seize property such as equipment, building materials, furniture, vehicles, and other assets of the debtor.

Once recorded, it is important to know the lifespan of a judgment and the renewal process. A judgment that has expired is of no use to a creditor who has invested considerable time and money pursuing a debt. In Georgia, judgments are good for 7 years (O.C.G.A. § 9-12-60); Mississippi 7 years (Miss. Code Ann. §§ 15-1-43 and 15-1-47); Tennessee 10 years (T.C.A. § 28-3-110); and Florida 20 years in some cases (F.S.A. § 55.081 and 95.11).

Domestication

After a judgment is obtained in one state, a debtor may relocate to another state to stymie collection efforts. In response to this practice, most states have adopted the Uniform Enforcement of Foreign Judgments Act which allows for judgments obtained in one state to be domesticated in another with the domesticating state giving the judgment full faith and credit as if rendered by the state’s own courts. This Act prevents a debtor from evading its obligations by simply relocating. Most states that have adopted the Act have done so by incorporating its provisions into their own statutes and by requiring that the debtor have some connection with the state where the domestication is sought, for example, the debtor resides or has assets in the state. The domestication process is an effective way to enforce and collect on judgments across state lines.

Garnishments

Once a judgment has been obtained and/or domesticated, one of the ways to collect on the judgment is through the process of garnishment. Garnishments can be served on banks, employers, businesses, some governmental entities, owners, contractors, subcontractors, and other garnishees to collect monies owed by judgment debtors. There are generally two types of garnishments, regular and continuing.

A regular garnishment is usually served on a bank and requires the garnishee to freeze any accounts belonging to the debtor in order to satisfy the judgment. A regular garnishment can also be served on owners, some governmental entities, and contractors that have contracted with the debtor to perform work. In such cases, any amounts due or which may become due, including retainage, for work performed for a construction project are subject to the garnishment. A continuing or wage garnishment is usually served upon the debtor’s employer or business and requires the employer to withhold a portion of the debtor’s weekly wage to be paid to the creditor.

With both regular and continuing garnishments, failure by the garnishee to file a timely response can result in the garnishee being liable to the creditor for the entire amount of the judgment entered against the debtor, even though the garnishee had nothing to do with the debt incurred. After a response is filed, the money owed the debtor must be deposited into the registry of the court. A creditor can then make application to the court to receive the garnished funds if the court does not automatically make disbursements pursuant to a standing order.

Garnishments are effective because they allow creditors to seize a debtor’s bank accounts, safety deposit boxes, or a portion of the debtor’s weekly wages. Note some states forbid or have limited wage garnishments. Some states even allow recovery of costs incurred by a creditor in filing and serving a garnishment in addition to the judgment amount.

Post-Judgment Discovery

Creditors can also take advantage of post-judgment discovery procedures such as serving post-judgment interrogatories and requests for the production of documents, and taking depositions to learn the amount and location of assets a debtor may have that can be used to satisfy a judgment. Creditors have many options to satisfy a judgment; all of which should be taken advantage of as part of the litigation process.