Winning a commercial lawsuit and obtaining a money judgment is an important victory. However, it does not mean automatic payment in California. The courts will not collect the debt for you, and many debtors may refuse to pay voluntarily without pressure.
Your objective after getting a judgement is turning your status from judgment creditor into paid in full, which can require a deliberate enforcement plan to collect payment. The strategies below outline some of the available tools you have to help you convert a paper judgment into real recovery.
Discovery: Locating hidden money
In California, a judge can order the debtor to appear in court to testify under oath about their assets, including bank accounts and accounts receivable. To ensure the accuracy of this testimony, a Subpoena Duces Tecum can also accompany the order.
This legally compels the debtor to bring relevant financial documents directly to the examination so creditors have verified financial information they need to collect on their judgment. If the debtor does not comply, the court may hold them in civil contempt, impose fines or issue a bench warrant for their arrest.
Post-judgement mechanisms
To secure a judgment in California, a creditor can place legal claims or liens on a debtor’s property. These liens can prevent them from selling or refinancing their assets without paying what they owe. There are two different ways to go about this, depending on the type of property.
One option is filing an Abstract of Judgment or Form EJ-001 with the county recorder to place a lien on any real estate the debtor owns in that specific county. Alternatively, filing a Notice of Judgment Lien or Form JL-1 with the California Secretary of State can target business assets. This puts a claim against the debtor’s personal business property, like machinery and equipment, product inventory and unpaid customer invoices.
Direct collection of assets
After identifying a debtor’s assets, the next step in the California collection process is to actively levy on or garnish the funds. You can use several court-ordered enforcement methods executed by the local Sheriff’s department, including:
- Bank levies: The Sheriff freezes the debtor’s bank account(s) which are then turned over to pay your judgment.
- Wage garnishment: The court requires the debtor’s employer to automatically withhold a portion of their paycheck and route it to the Sheriff on your behalf.
- Till taps: A deputy enters the debtor’s business and takes all cash and checks currently in the register.
- Keepers: A deputy stationed at the business for eight hours to several days to collect incoming customer payments.
These tools allow you to bypass the debtor’s resistance and often pressure them into a quick settlement to avoid major disruptions to their daily operations.
The benefits of patience
If immediate recovery is not possible, time can work in your favor. In California, judgments accrue a high interest rate of 10% per annum.
They also have a validity of 10 years before you can renew them. These ensure the arrears follow the debtor until they can pay you again.
Protecting your right to collect
Enforcing a commercial judgment in California often demands persistence and strategy. Fortunately, you have robust mechanisms to help in your collection efforts to prevent debtors from moving or hiding assets successfully. An experienced commercial collections attorney can guide you through the process to help maximize your recovery.