2009 UPDATE--When the lawsuit is necessary to collect your money
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Since these are difficult economic times, we’ve heard recently from clients who want to employ various degrees of compassion for consumer debtors.
While your debtor may not have the ready cash, or any cash to pay your bill immediately, a plan should nonetheless be forthcoming. If it is not and you hear nothing from your debtor, you must consider a lawsuit to secure a Judgment (in District Court-NOT “Small Claims”) to protect your interest. More on why Small Claims court is not recommended later.
If they own a home, your court Judgment will have more weight than simply a credit bureau “derogatory.” Your docketed judgment will be a Judicial lien against that particular parcel (or any they may own in the state the judgment was taken) should they sell or become deceased.
After a Judgment is awarded, the Court Officer will “Levy” Herewith an explanation (although these can vary a bit from state to state.)
“Active Levy” – this is a court ordered levy that will always take assets away from the debtor. Usually these are assets that are cash (in a bank) or can easily be conveyed to cash, i.e. valuable artwork, collector car. Usually a judge will not order the sale of a debtor’s home to pay a debt, unless there are extenuating “fraud-type” or possible criminal circumstances. It can, in fact, happen for a debt, but it can be time consuming, unreliable and costly. Welfare benefits, Social Security benefits, SSI, Veterans' benefits or unemployment benefits cannot be levied upon. In New Jersey the only item that can’t be levied, other than the above benefits is clothing.
“Constructive Levy” – This is a “softer” levy. Assets are encumbered (liened) but are not sold. Your Judgment is a lien against, for instance an elderly debtor’s home and they will not have to pay during their lifetime (or until the home is sold, transferred, etc.). Judgments sit for 20 years in NY and NJ and can be renewed. Pennsylvania at 5 years, is much shorter, but can be renewed.
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If you don’t know of your debtor’s assets: While once again varying from state to state, the attorney can file an “Information Subpoena” or [obtain an] “Order for Supplemental Subpoena” (Discovery) to ask as many questions of the debtor regarding his assets until he is satisfied. If these subpoenas are ignored, our attorneys (if the claim warrants) can issue a Warrant of Arrest.
“Small Claims Court”: It is not recommended to use Small Claims Court for your collection suits as Small Claims Court may present problems for businesses. Other than the fact that SCC has the historical feeling of a consumer’s court, the judge must invoke Rules of Evidence and Rules of Procedure, which you would be unfamiliar with as a lay person.
Garnishment of a debtor’s wages (not in Pennsylvania): If place of business is known, or can be found, the Court Officer will be directed to the debtor’s employer to have funds deducted from his paycheck (provided he earns more than $127.50 per week in NJ).
See Also Older Blog: "To Collect Money Suit Should Not Be Your First Choice"
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