People frequently believe that winning a small claims court judgment means that they will automatically collect their money from the person that lost the case. Unfortunately, the court may rule in your favor but the collection of small claims judgments is an entirely different matter called “execution” on a judgment. You may not see satisfaction on your judgment for at least 30 days and probably longer if the losing defendant debtor does not cooperate.
The Demand Letter
After obtaining your judgment, you will need to make arrangements with the defendant, the person you sued, as to how you will collect on the ruling. Typically you will first need to write a “demand letter” which you should send via a verifiable method of mailing. Typically a demand letter post judgment will consist of all of the following:
- the date of the case
- the case or “docket” number
- a copy of the judgment
- a statement of the amount of the judgment
- a demand for the judgment amount to be paid to you
- acceptable methods for it to be paid to you
- a reasonable period of time for payment (usually 30 days)
If the defendant refuses to cooperate, you will likely need to start collection procedures and may require the assistance of the court. This can be a costly matter and be a very slow process.
Default Judgments and Appeals
One of the reasons that you must provide time after a judgment for the debtor to pay is because the debtor will have a set period of time after the judgment to appeal the judgment. The defendant may claim that a critical mistake occurred during the hearing and that the appeals court should set aside the verdict and allow a second, fair hearing.
Frequently the defendant may not show up in court. You will still need to prove to a reasonable degree that you have a valid claim against the defendant. If the court finds that you had a valid claim, the court may enter a “default judgment” in your favor. But the defendant has an opportunity to respond to your demand letter by appealing to the court and claiming that the defendant has a good reason for not showing up in court and, if there was another opportunity to do so, the defendant would have a valid defense and could potentially win the case. If the defendant does not appeal the judgment and simply ignores your demand letter, there are different methods that you can legally use to collect on the ruling.
Periodic Payments via Court Order
Certain states have made provisions for the collection of judgments to be made by court order. The court will assign payment amounts and dates on which the debt is to be paid back to you. The debtor can be called back to appear before the judge if they fall behind on the payments. They will have to give account to the judge as to why they have fallen behind on their payments to you.
Recording a Judgment or Lien
The small claims court clerk can provide instructions to you on how to record a judgment or lien against the debtor’s property. If they sell the property, you will then be paid what is owed to you out of the proceeds of the sale. The judgment lien can also be transferred when the debtor buys new property if your judgment has not been paid in full.
Financial Disclosure of the Debtor
You can file paperwork for a disclosure hearing on the debtor. This is a way to force the debtor to reveal information on his property holdings, debts and employment status and income. At the hearing, you can ask the debtor for:
- information about any real estate he or she owns
- debtor’s marital status and information on spouse’s employment and income
- debtor’s social security number, their driver’s license number
- name of bank, location and account numbers held by debtor
- name of debtor’s employer, address, pay dates and amounts
- debtor’s other income such as part-time income or rental income
- whether debtor owns stocks or bonds or has an inheritance
- questions on what vehicles they own
- inquiries regarding any other property or cash you have not asked about
Debtors are obligated to show up for financial disclosure hearings. If they do not show up for the hearing, the judge will issue and arrest warrant.
Information Subpoena and Restraining Order
After your judgment, you may ask an attorney or the small claims court clerk to help you fill out an information subpoena in case you know where the defendant may have a bank account or may work. An information subpoena may be sent to the defendant to compel the defendant to answer questions, as mentioned above. But an information subpoena can be used to compel a third party, such as a local bank, to tell you whether the defendant has a bank account. A restraining order can be used to freeze the bank account up to the amount of your judgment. You may also be able to serve the defendant’s employer in order to garnish the defendant’s wages. Collection on any accounts or wages, however, will likely require the intervention of the county sheriff or marshal. There will likely be a fee, which may later be added to a judgment. More details are explained below.
Writ of Execution or Attachment
A judgment holder may make a request to the court to instruct the local sheriff to confiscate property from the debtor to be sold in order to pay your judgment. A process server will be required to serve the debtor with a “Writ of Execution” order. A bond is often times required to be posted for the protection of the sheriff’s office from being sued, in the event that the property they confiscate is owned by someone other than the debtor. You will be the one responsible for posting the bond. You will also have to pay for storage of the property until it is sold. These expenses can be added to the judgment amount so that you get them back when the property is sold. This will amount will be listed along with your judgment amount.
When there is real estate involved, you should get the advice of an attorney. Real estate rules can be complex and certain properties can not be taken by the Sheriff. Income such as social security benefits, disability payments, welfare benefits, etc, cannot be seized by the sheriff.
Wage Garnishment and Bank Accounts
You can file for a court ordered wage garnishment to collect upon your judgment. Once in place, the employer will withhold a certain amount of the debtor’s paycheck to pay the judgment. Each state has certain laws regarding the garnishment of wages. State specific laws limit how much the employer can withhold from each paycheck to pay the judgment. Wage Garnishment orders are served on the debtor’s employer. The employer will be given a certain time period to begin wage garnishment collections.
Bank accounts can also have a garnishing order to withhold from funds from deposits into the debtor’s bank account. The garnishing order must be served on the bank to withhold deposits. This order can not be placed on joint accounts when the joint account holder is not part of the judgment. These types of joint bank accounts are exempt from garnishments.
Cash Register or Till Tap
Certain states will give authority to the Sheriff to go the place of business of the debtor and remove money from the cash register to pay back the judgment. You have to file for a court order to get that authorization for the Sheriff. The clerk at the small claims court can advise you on this process.
Notice to Suspend Driver’s License
When a motor vehicle accident is involved in a small claims court matter and judgment has been ruled in your favor as a result of the accident, you may be able to contact the Department of Motor Vehicles in your state to suspend the debtor’s driver’s license. Typically this may be done only in the event that the debtor was driving without automobile insurance at the time of the accident.
If the debtor has filed for bankruptcy and your judgment is listed in the bankruptcy proceedings, you can no longer try to collect the judgment. Trying to collect it will put you in jeopardy of being held in contempt by the Federal Bankruptcy Court. You will need to file as a creditor with the bankruptcy receiver and a determination will be made as to how much you may receive upon your judgment, in full satisfaction.
Satisfaction of Judgment Filing
Hopefully you have received full payment on your judgment and all costs. After payment, you will need to file a “Satisfaction of Judgment” with the small claims court that heard your case. This is so the judgment will no longer be listed as outstanding and the credit record of the debtor can be cleared. You are required by law file this “Satisfaction of Judgment.”
Finding County Specific Information
You may also find other valuable information about many of the topics covered in this article in a small claims guide that may be provided by your local small claims court where you filed your lawsuit. Contact the clerk of the small claims court in your county.