As always, before reading my post please review my disclaimer by following the link above or by clicking on this link. As always, any legal principles discussed apply only to the Commonwealth of Virginia.
Introduction
Yesterday I was at the Fairfax County Courthouse to do some paper filing. Getting in was a challenge because a local middle school's entire 8th grade was there for a Civics field trip. Personally, despite the hallway traffic jams they create, I love these field trips. Nothing makes me happier than to see young people learning how our legal system really works, away from the movies and TV shows.
After I did some filing, I bumped into a group that asked me if I was a lawyer. I said yes, and, filled with curiosity, they asked me what I had just done. I told them I had filed a garnishment. The quizzical looks I got in response told me this was a new concept so I asked, "If you sue someone and win, how do you think you actually get them to pay you?" The response I got was, "Well, won't they go to jail if they don't?"
This is not an entirely uncommon belief that I encounter. Some people think you go to jail if you don't pay, others think your assets just start disappearing, others still think that nothing happens at all except maybe a ding on your credit. Today's blog post, I will discuss how you make someone actually pay you after winning a lawsuit.
Judgment vs. Order of Payment
Back in September, I wrote a post that, in the context of contract law, explained the difference, to some degree, between equity and law cases, along with between judgments and injunctions. This is important to understand. The vast majority of lawsuits for money are common law cases, not equity cases, and as a result, they result in judgments. A judgment is not an Order to pay someone, it is just a piece of paper saying that the court has found that you owe someone this amount of money. This means it is not contempt of court to refuse to pay, and as such you cannot go to jail for failing to pay.
There is such a thing as an Order of Payment. This is when, usually in an equity case, the court orders you to pay someone something. In those cases, it is contempt to refuse to pay, and you can go to jail for that refusal. The most common situation in which this arises is family law. Child Support and Spousal Support orders are orders of payment. Orders to reimburse the other party their attorneys' fees in an equity case are also orders of payment. Again, these are distinct from judgments - this is not a court saying you owe someone money, it is a court ordering you to pay someone money. The vast majority of civil lawsuits, however, do result in only judgments.
Agreement
The simplest way to collect on a judgment is to reach out to the judgment debtor (what we call the person who lost the lawsuit) and see if you can work out a payment plan. Judgment debtors frequently are willing to work towards this for a number of reasons. First, a judgment kills your credit rating, but the faster the judgment is "satisfied" (paid off), the faster it goes off your credit. Second, an agreement gives the judgment debtor some control over how much is paid and when. Finally, an agreement prevents assets from being frozen, which protects the judgment debtor from running afoul of other creditors.
Garnishment
By far the most common way to collect a judgment is a garnishment. A garnishment is a process by which the court tells someone who owes money to the judgment debtor that they have to instead pay that money to the judgment creditor (what we call the person who won the lawsuit). The person who owes the judgment debtor money and is thus ordered to pay that money to the judgment creditor is therefore called the garnishee. The most common garnishees are employers and banks. Employers have to pay a portion of the judgment debtor's paycheck to the judgment creditor (usually 25% of the take-home pay), while banks have to pay the entirety of any bank account held by the judgment debtor with that bank to the judgment creditor (unless, of course, the bank account holds more than the judgment - then they just need to pay the judgment amount).
A garnishment actually is an Order of Payment directed to the garnishee. That being said, failure to comply with a garnishment by a garnishee does not result in jail time for the garnishee (which makes sense since most garnishees are companies, not people). Instead, failure of a garnishee to comply with a garnishment can result in a judgment being entered against the garnishee for the full amount of the original judgment. If that happens, the judgment creditor now has two judgment debtors against whom he can collect, and he is more likely to target the former garnishee since the garnishee will likely have more money available to pay. The result of this rule is that garnishments, at least issued to companies, are rarely ignored, and barring issues raised by the judgment debtor, are usually successful.
Levy/Writ of Fieri Facias
A less common way to collect a judgment is through filing for a writ of fieri facias. The writ of fieri facias is actually issued pretty much any time post-judgment collections is engaged in, and it orders the sheriff to seize any property of the judgment debtor the sheriff comes across to make good on the judgment. However, in most cases the writ of fieri facias is largely meaningless, since the sheriff will not enter the judgment debtor's home if, for example, she is merely serving a garnishment.
If with your writ, however, you seek what's called a "levy," you are asking the sheriff's department to go and actually seize any personal property of the debtor they find to sell at an auction to try to get your judgment. This is not a popular option because it is cumbersome (you need to identify the precise property to be seized in your filing), and expensive (there is a substantial bond you need to pay for this to be done in case anything turns out to be seized wrongfully). Further, Sheriff's sales tend to bring in much less money than the seized property is worth.
The levy approach is usually only used when the judgment debtor has significant personal property while also having no job, a very low paying job, and minimal money in bank accounts.
Judicial Foreclosure
The vast majority of judgment debtors do not own real property. To some degree this makes sense - if you don't have enough money to pay your debts, you probably don't have enough money to own a house. If, however, you find yourself in the rare situation where the judgment debtor does own real property, and has equity in that property, you can try to engage in judicial foreclosure. This is a very unpopular choice amongst judgment creditors, however, for reasons I will get to.
By law in Virginia a judgment serves as a lien against any real property owned by the judgment debtor. That lien, however, does not attach (become effective) until the judgment is recorded in the land records of the circuit court for the jurisdiction where the property is located. Judgments are usually automatically recorded if the judgment was won in the Circuit Court - but it behooves you to double-check (I know I found a judgment from several years past at one point that had not been recorded like it was supposed to and it could have caused major problems if I hadn't caught it). If the judgment is from the General District Court, however, or is from a county or city other than the county or city where the judgment debtor's real property is located, you will need to obtain a "judgment abstract" (a document signed by a court official confirming that a judgment was entered in the amount stated) from the court where the judgment was entered and take it to the land records for the jurisdiction where the property is located to record.
Most judgment creditors do want to ensure that their judgment is recorded because if the judgment debtor happens to sell his or her property while the judgment has not been satisfied, the judgment creditor can likely get his money that way. Moreover, it is the recordation of the judgment, not the issuance of the judgment itself, that causes a report to go to the credit bureaus and drives down the judgment debtor's credit - inspiring the judgment debtor to hopefully take action to pay off the judgment.
Enforcing the lien via judicial foreclosure, however, is another story. First, the judgment creditor must prove that renting the house out for five years would not bring in enough money to satisfy the judgment. If he does that, he still must prove that, if all higher priority creditors with liens on the property are paid first, there will still be equity left to go to the judgment creditor. Finally, if the judgment creditor gets through those hoops, a special commissioner has to be found to conduct the sale, you get stuck with the special commissioner's bill which you probably cannot assess to the judgment debtor, and there's still no guarantee the sale will happen.
Debtor Interrogatories
So, say you want to do one of the above, but you don't know anything about the judgment debtor's assets. You don't know where they work, where they have their bank account, what property they have, anything of the sort - what do you do? Well, Virginia has a process called debtor interrogatories. Debtor interrogatories are a legal process by which a judgment debtor is compelled to come to court and answer questions under penalty of contempt. It is entirely appropriate to ask for the judgment debtor's social security number, employment information, banking information, etc., and the judgment debtor is required by law to tell you, and to tell you truthfully. Failure by the judgment debtor to appear at the interrogatories is contempt of court and can result in the judgment debtor going to jail until he appears and answers your questions.
Statute of Limitations
In case you're thinking of just sitting on your judgment for a while, beware that there is a statute of limitations to taking any of the above actions. No action can be taken to enforce a judgment (including any of the above options other than voluntary agreement) if the judgment is more than 20 years old. Moreover, if the judgment was entered in the General District Court, that limit is 10 years, although it becomes 20 years if you do record the judgment in land records. There is one out in that you can get one extension of another 20 years if you show the court "good cause" as to why it should be extended (such as the judgment debtor having hid out for years, an agreed payment plan being ongoing, etc.). The catch, however, is that you must file your motion for that extension and get it granted before that original 20 year period expires. Failure to collect within this statutory period essentially renders your judgment uncollectable.
Other Obstacles to Collection
There are a number of other obstacles to collection that are too numerous for me to explain in detail here. Perhaps a future post. Just note that your ability to collect might be delayed, partially eliminated, or completely eliminated if the judgment debtor were to file for bankruptcy, claim one of the myriad of state and federal exemptions, or to make claims that something about your paperwork was improper.
A Note About Insurance'
There are few things judgment creditors love more than a judgment debtor with liability insurance. Specifically, when the judgment debtor has liability insurance, that insurance company is usually obligated to pay the full amount of the judgment (up to the coverage limits) pretty shortly after the judgment becomes final (which happens when all appeal and reconsideration periods have expired - usually 30-60 days after judgment). If your judgment debtor has liability coverage, there is likely nothing you need to do to collect, but this is still not a guarantee.
Conclusion
Winning a lawsuit can provide an exhilarating sense of vindication for a judgment creditor. The reality of collection, however, frequently settles in shortly thereafter. The means of collection are challenging, but they are there, and if utilized properly, there's still a good chance you will get your money. If you are looking to collect on a judgment you have already won, or defend against a post-judgment collection, please feel free to call (703)281-0134 or e-mail me at sleven@thebaldwinlawfirm.com to set up a consultation. Our initial consultations are free for up to half an hour!
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