How does a business actually collect a court judgment from someone who owes money?

You hired a lawyer, won in court, and have a judgment for money owed to you. Congratulations. Now the defendant is not paying the judgment. How do you get paid? Is it even worth it to chase the money? It usually takes more effort than you think.

Answer this question first: how much will you actually recover? If you actually plan on recouping the whole balance, that’s great, but if the amount you will actually recover is less than the balance owed, you need to think about not how to recover the debt, but how much to spend trying to recover the debt. Once a court issues a judgment against a defendant, most assume that they will recover the amount of the judgment.

This assumption is not always true. You may recover less than the balance that the defendant owes. It may take time and expense to recover from the defendant, even if the full amount is attainable. Weigh these factors when making a decision on whether or not to attempt to collect.

The Law Prevents Collection

There are two main reasons you might not get your money: The defendant might not have the funds and, if they do have the funds, the law might forbid collection. For obvious reasons, if the debtor has no money there is nothing for you to collect. Yet even if the debtor has assets, there are times when the law prevents collection.

For example, some debtors file bankruptcy. The bankruptcy might discharge (or wipe out) the debt. This means that the debtor is no longer liable for the balance. Sometimes the debtor pays less than the balance due. In either case, the filing of the petition triggers an automatic stay to prevent collection, and it usually stays in place for the entire bankruptcy unless the bankruptcy court permits a specific collection.

If the opposing party appeals the court’s decision, that does not stop collection. But a stay pending appeal can stop collection for months or years.

Right Jurisdiction

Even if there is no legal bar to collection, there may still be practical hurdles. You have to collect in the right jurisdiction. A court order in one place is typically insufficient to force someone to act in another state.

Example: assume you have a judgment for a debt from an Ohio state court. The debtor has no assets in Ohio. You will need to take that judgment and have it filed in the state where the debtor’s assets are.

Three Primary Tools for Collection

Now that you are in the right court, there are three primary tools for collection, which can be described in broad terms as liens on property, wage garnishment, and account liens or garnishment.

Each state has a different set of rules about collection. In wage garnishment, the debtor’s employer withholds part of the wage and sends it to the creditor until the debt is fully paid. In Ohio, garnishments are generally limited to 25% of the debtor’s disposable income. After the debtor receives notice, the court issues a garnishment order. The debtor has the opportunity to ask for a hearing.

Property liens and bank garnishment work differently from wage garnishment. Unlike wage garnishment, these two can be used against both people and businesses. The judgment creates the lien against the property and when the debtor sells the property, you get paid. A bank garnishment takes some of the money from a bank account. There is also a limit on what you can collect. For instance, in a garnished account, you must leave some money in the account.

You need to know where the debtor works, where the debtor owns property, and where the debtor banks. This information is often impossible to get before judgment. This becomes a problem because you have to do more steps, pay more, and create more time and delays if you don’t have that information. You can perform post-judgment discovery which usually adds cost and time.

This is an overview of the process and a few of the reasons you may not get paid. There are other reasons, and there are also other restrictions on your ability to collect. Talk to an experienced collection attorney before you try to collect.