Creditors often assume that their judgments are not worth pursuing, either because they believe that the debt is too small, the debtor is insolvent, the debtor’s assets are geographically removed, or that the debtor is otherwise safe from collection efforts. Often it pays to make every effort to enforce your judgment even if it seems as though you may be unlikely to collect the money owed to you.
Interest Increases the Value of Your Judgment
Debtors often fail to respond promptly to a lawsuit, resulting in a default judgment, or they disregard a judgment once it is entered by the court, which only causes the amount owed to increase in size due to the continual accrual of interest. In New York State, judgments accrue interest at a rate of 9% per year, meaning that a judgment for $50,000 grows by $4,500 each year. Just because a debtor does not pay right away, that does not mean they will get off scot-free, and may actually owe much more later.
If Debtors are Geographically Removed
When considering whether to seek enforcement of a judgment, creditors often worry that the debtor’s assets are too far away to reach through traditional collection efforts.
Even when a debtor has located some distance from the creditor, that does not mean we cannot reach them or their assets. Companies located out of state, and even out of the country, may still conduct business or maintain assets in New York, which can provide avenues to collect the judgment through their New York contacts.
For example, if a debtor does business with a company in New York, and the company owes the debtor money, the creditor may have rights to seek payment directly from the customer.
Regardless of Debtor Finances
While a creditor may be under the impression that the debtor is insolvent, there may still be avenues to satisfy the judgment. A company may seem as though it is not doing well financially because it is waiting for payment on a large invoice, or because its expenses are too high. However, if the company is continuing to operate, it’s likely that revenue is still coming in the door, which would allow the creditor to collect on the judgment directly from the revenue sources.
Even when it appears that a judgment will be difficult to collect because the debtor is struggling financially or is located outside of New York, it is worth speaking to an attorney to discuss your options and whether or not it makes sense to try and enforce the judgment.
Kenneth J. Katz