How to Collect on a Judgment

What happens once a judgment is made?

Once a judgment is issued, the winner of the court case becomes the judgment creditor and the loser becomes the judgment debtor. After the court has issued its judgment, the court clerk sends a written decision to all involved parties. This decision specifies how much the judgment debtor owes the judgment creditor. If you’ve sued more than one individual, the court’s decision will list the total amount that all parties owe you. These parties must then divide the responsibility for payment among themselves.

A judgment is not always official immediately upon being issued by a court. That’s because the judgment debtor has 30 days (or less, in some states or municipalities) to file an appeal. If the judgment debtor appeals, their obligation to pay you is delayed until a new judgment is issued. [Read related article: How to Write a Debt Collection Letter]

If an appeal is not filed, the judgment debtors are legally obligated to pay you. However, the enforcement of this obligation is another matter.

How to collect on a judgment

To collect on a judgment, take the following steps:

1. Perfect a real estate lien.

Regardless of whether your judgment debtor files an appeal, you should prepare for the worst — namely, your debtor attempting to hide their assets and thus making collecting your judgment more difficult. You can plan for this possible outcome by perfecting a real estate lien.

To perfect a real estate lien, you must record your judgment with the county recorder’s office. With a lien in place, your debtor must fulfill the judgment before they can sell their building or property. Additionally, a real estate lien may remain valid if the debtor files for bankruptcy.

2. Reach out directly.

Sometimes, you won’t need to seize property. You might find that reaching out to the debtor to request payment after a court judgment is enough to compel the payment you’ve long sought. Don’t threaten the debtor or detail how you plan to collect the judgment if you don’t receive it in a timely fashion, but remain firm that the debtor now legally owes you money.

3. Choose the right assets to seize.

Wage garnishment, business cash or asset seizure are all valid ways to collect the money your debtor owes you. However, consider the following points as you do so:

• Wage garnishment is easy but slow. It’s often straightforward to obtain a writ of garnishment requiring that part of your debtor’s wages be garnished and given to you. However, garnishments are usually capped at 25 percent of the debtor’s wages, making full repayment of your debt a slow process. Additionally, some low-income debtors may be exempt from garnishment, and government benefits payments cannot be garnished.
• Business asset seizure requires enforcement. Only law enforcement authorities can seize cash, money stored in business bank accounts or other assets. Additionally, they may charge a fee for their services. However, if your debtor’s assets are valuable enough to cover their debts, seizing these assets may be worthwhile.
• Personal asset seizure is even more complicated. If you’re going after a debtor’s personal property, they likely have equity, which is the difference between an item’s current value and its loan value. Many states forbid judgment creditors from seizing a certain amount of equity from debtors. These rules mean that homes, vehicles, investment accounts, electronics and jewelry can be tough to seize.
• Occasionally, you can file judgments with licensing boards. If the judgment debtor is a remodeling or building contractor, you may be able to file your judgment with the relevant state licensing board. In doing so, your debtor could lose their license if they do not comply with the judgment. However, this route is viable only in extremely specific circumstances.

Given the above considerations, you’ll need to weigh the ease of collection against the urgency of the debt repayment. Should you pursue wage garnishment but wait far longer to collect your full debt? Are you willing to work with sheriffs or marshals for business asset collection? Is the potentially large value stored in your debtor’s personal assets worth the work to obtain the amount you’re owed?

4. Renew your judgment.

As mentioned above, judgments aren’t permanent. However, they are renewable — a feature that can help with debts that take years to collect (which aren’t unheard of). A renewed judgment is often valid for as long as the original judgment was valid, starting from the date of renewal. Each state’s court system handles judgment renewals differently, so speak with a debt collection lawyer about how to go about this process.

5. File a satisfaction-of-judgment notice.

After the debts are paid, the judgment creditor submits a “satisfaction of judgment” notice to the court. This notice informs the court that it can close the case. Similarly, if you perfected a lien on the debtor, you would file paperwork with the aforementioned recorder’s office.

6. Hire a collection agency.

Using a collection agency is often viewed as a measure to be taken after standard communications with a nonpaying client have failed but before a lawsuit is filed. Some collection agencies, however, specialize in collecting debts from debtors who defy judgments.

There are freelance creditors, too. However, for small business debt collection, agencies may be too expensive to merit their work, given what they are likely to recoup. Some agencies may take up to half of the debt they collect as their payment, though others may take closer to 25 percent. In either case, you’ll pay quite a bit.

If, though, you feel that a collection agency is your best route for collecting on a judgment, consult our recommendations for the best collection agencies to find the right partner for your needs. 

Judgment debtors and assets

Shortly after a judgment is issued, the debtor must file a financial disclosure statement. In this statement, the debtor lists all of their assets. If they fail to complete this step, a contempt-of-court charge can be issued.

Alternatively, a judge can demand the debtor to appear in court for a debtor’s examination. Judgment creditors should attend this examination, and the debtor should disclose all of their assets in each of these categories:

• Cash
• Checking and savings accounts
• Investment accounts
• Business ownership shares
• Trusts and inheritances
• Safes, vaults and other secure storage spaces
• Real estate
• Personal property, including homes, vehicles and jewelry
• Property transfers, as properties transferred for prices below their fair market value may indicate fraud intended to circumvent debt

If a judgment debtor doesn’t appear for an ordered examination, the judge may issue an arrest warrant.

Which judgment debtor assets should you pursue?

In an ideal world, a judgment against a debtor would immediately compel the debtor to repay their financial obligation to you in cash. However, some debtors may still resist payment. In this case, you may be able to seize certain assets by doing the following:

• Garnishing the debtor’s wages
• Taking cash or assets directly from businesses the debtor owns
• Seizing real estate or vehicles

Often, the first two approaches are easier than the third one.

How long does it take to enforce a judgment?

Judgments are valid for different periods of time, depending on the state in which the lawsuit was filed. For example, Pennsylvania has an enforcement period of five years, while approximately a dozen states allow enforcement for up to 20 years. Consult the applicable state court, or speak with a lawyer to determine how long you have to enforce the judgment.

However, as mentioned earlier, a judgment is not, in and of itself, enforceable. If the judgment debtor still refuses to pay, only certain authorities can move forward with enforcement.

Collecting on judgments the right way

If a client’s nonpayment is affecting your bottom line, you have recourse. But even if you already have a legal ruling in your favor, you’ll need to put in more work. Following your ruling, you should pursue repayment or hire a collection agency to obtain the money you’re owed. 

While this process can be emotionally turbulent, you’re chasing the debtor because they failed to live up to the promise of paying you. And when money is how you sustain your life and business, going after what you’re owed only makes sense.