When a party is successful in a civil lawsuit, the court may award that party a judgment which states that the losing side owes the successful party a sum of money. Judgment enforcement is the legal process under which the winning party attempts to satisfy the judgment by collecting the debt owed under the judgment by the unsuccessful individual or business. For individual debtors, a common way to enforce a judgment is through an income execution, whereby a portion of the debtor’s wages are garnished and paid to the judgment creditor.
However, the process can be much more complex when the debtor is a business. The judgment may include a court order to seize property or other assets to satisfy the debt, or the creditor may request those orders after the judgment has been entered. Creditors seeking to collect on a judgment are advised to contact an attorney experienced in pursuing these judgments in New York.
How are outstanding debts collected?
Lawyers with knowledge of judgment enforcement and commercial collections understand the lengths to which some debtors will go to avoid complying with a court order or judgment. Creditors who try to enforce these orders themselves are often frustrated, wasting time and money in the process. Experienced attorneys bring results by:
- Locating the debtor’s assets
- Seizing assets and levying debtor income
- Uncovering and pursuing fraudulent monetary transfers
- Enforcing judgments against successor companies and owners
- Holding owners personally responsible for outstanding company debts
Pursuing judgments in two common scenarios
Getting a favorable court judgment to collect an outstanding debt is only half the battle. The real fight can be getting the debtor to comply. These situations can raise certain challenges:
- The debtor files for bankruptcy: When a debtor files for bankruptcy protection, all collection efforts against that debtor must cease. However, bankruptcy does not necessarily mean that all debts are forgiven, and repayment is possible depending on the debtor’s assets, the type of bankruptcy filed, and the amount and type of other creditors who also have claims against the debtor.
- The debtor dissolves or closes the business: Companies that go out of business but do not want to file bankruptcy can also do an ‘assignment for the benefit of creditors’ to pay off outstanding debt. This is accomplished much like bankruptcy, where a trustee or attorney pays creditors, who each must submit a claim. Often the payments are not at full value of the claim since the company may not have sufficient assets to pay all of its debts. However, many smaller businesses simply go out of business without compensating their creditors or start a new business to avoid paying debts. This raises issues that could allow creditors to seek to hold the owners or the new business liable for the debt of the old company. In either scenario, it is worth hiring experienced counsel to evaluate any potential claims a creditor may have against third parties to maximize the creditor’s potential recovery.
Avoid the credit collection company myth
Too many people believe the best way to recover anything in these circumstances is by turning the debt over to a collection agency. However, most bill collectors never take legal action and only write letters or make phone calls. In many cases, all they do is alert a debtor that someone is trying to collect.
Experienced attorneys understand how debtors avoid complying with judgments and the strategies they employ to stave off or delay collections. Your lawyer will pursue all available avenues to enforce a collection order, holding companies and their owners accountable.