January 1, 1900

by Dakar R. Ross

When a debtor owes money and will not pay, obtaining a judgment is just part of the collection process. Once a judgment is entered, the creditor needs to enforce the judgment and actually collect the moneys owed. Ideally, when the debtor receives a copy of the judgment, he or she will pay it. However, when a debtor continues to avoid payment, the creditor needs to take further steps. Judgment creditors frequently rely upon their attorneys to identify and locate personal assets or income which may be used to satisfy their judgments. In many cases, though, creditors can increase the probability of successful collection efforts, shorten the time necessary to collect payment, and reduce their expenses by undertaking certain proactive steps.

Background Information Useful

Under New Jersey law, each debtor is entitled to an exemption protecting $1,000 of personal property from collection to satisfy a judgment. In addition, welfare, social security and unemployment benefits are protected from judgment levy. Therefore, in attempting to collect money owed, the more assets and income which can be located, the more likely that collection efforts will be successful. On the other hand, if the debtor truly has insufficient property and therefore is "judgment proof," learning that fact early can avoid further wasteful expense.

Thus, information regarding the possible sources of the debtor's income is particularly important to determining what collection activities, if any, can and should be undertaken. In this regard, a judgment creditor can substantially save on investigative costs by organizing and forwarding to its attorney all personal and financial background information on the judgment debtor. The effort to procure this information often is minimal since debtors usually disclose such information in the various documents used by creditors in the ordinary course of their business.

Overseeing a Wage Execution

If the debtor works in New Jersey or his employer has an office in this state, the debtor's salary, wages or commissions can be subject to levy to satisfy a judgment, provided his earnings exceed a minimum established by law. Such a wage execution becomes a continuing lien which obligates the employer to deduct money from the debtor's income and pay it to the executing constable or sheriff for transfer to the creditor. Although only one wage execution can be implemented at a time, once instituted, the creditor's wage execution will remain in effect until either the judgment is satisfied, employment is terminated, the debtor has commenced a bankruptcy, or a superseding child support order is issued.

Where payments from a wage garnishment subsequently become erratic or completely cease, the creditor should contact the constable or the debtor's employer to determine the problem and attempt to rectify it. If the debtor has left that job, the former employer may know and disclose where the debtor is currently working, which will enable the creditor to apply for a new wage execution. Contact with other creditors, past and present, may also be helpful if they are willing to share vital information regarding the debtor's personal and financial status.

Creativity Improves Chance of Success

Creditors also can successfully use various techniques to ascertain the identity and/or location of their debtors' property when documented information is limited or unavailable. In cases where the debtor's bank and account numbers are unknown, the creditor should consider arranging for levies on those banks in close proximity to the debtor's residence or job given that most people are prone to use the most convenient banking location. For additional sources of liquid assets, creditors should consider whether the debtor may be receiving rental income, repayments of personal loans, litigation settlements, commissions and any other money that may due the debtor and which is subject to levy under a writ of execution. Once a possible asset has been identified, the creditor should then verify the debtor's ownership interest and the existence of any contracts of conditional sale, security interests or other liens of record that may create a priority over the creditor's claim.

To determine the extent of the debtor's ownership interest in personal goods (i.e., cars, furniture, appliances, jewelry, inventory, equipment, etc.), the creditor should search the records of the New Jersey Division of Motor Vehicles, the Secretary of State's office, county records, and New Jersey's court docket to ascertain the existence of any liens, Uniform Commercial Code security agreements, leasehold or other perfected security interests in the property. Such a search may not only disclose the existence of other available assets, but may also lead to third parties who may have pertinent financial information regarding the debtor.

Under certain limited circumstances, a debtor may be imprisoned, subject to posting bail, pursuant to a judicial process known as a writ of capias ad respondendum in order to assure that he responds to the complaint. A debtor who refuses to pay a judgment also may, under certain circumstances, be imprisoned until he posts bail or arranges for payment of the judgment, pursuant to a writ of capias ad satisfaciendum. Although an attorney's assistance usually is necessary to seek these extraordinary remedies, information about the debtor's conduct and ability to pay is required. Thus, prior investigation by the creditor can help the attorney to implement these actions.

Creditor's Efforts Make Attorney More Efficient

Creditors clearly should work in conjunction with their attorneys to effectuate collection of judgments. Consultation with legal counsel is necessary to assure compliance with applicable law, such as the Fair Debt Collection Practices Act, and with necessary court procedures. However, several of the foregoing measures can be undertaken directly by the creditor with a minimal investment of time and money and can help speed and economize collection efforts. When more extensive measures become necessary and the attorney becomes directly involved, preliminary efforts made by the creditor can improve the chances of collecting the moneys owed.

Dakar R. Ross is an associate of the firm where he is a member of the Litigation Division, School Law Practice Group and Municipal Law Practice Group.