I had a phone call once with a man who owed my client several thousand dollars for business supplies that my client sold on credit. The account was six-and-a-half years past due. We had done the usual:
- We sued the man,
- Obtained a “judgment” by default (in this case, a judgment is a court order that awards the plaintiff money),
- Issued a “writ of execution” (the document that instructs the local Sheriff to locate and seize the debtor’s assets for sale), and
- Asked the Sheriff to seize assets.
Sadly, the Sheriff didn’t find anything. The case lingered. By the time the case was assigned to me, the client wanted to close the file. I was just about a brand-new lawyer, and I wanted to impress in my first few weeks on the job, so I told the client to give me one more chance, that I wanted to call the man, just to feel him out. The client gave me the OK, so I dug through the file and dusted off some old paperwork with the man’s cell phone number on it and dialed him up. I introduced myself, told him whom I represented, and then I asked him, more or less, “What do you want to do about this judgment?”
“What judgment?” he said.
“The judgment we have against you for [several thousand] dollars.”
“I didn’t know there was a judgment.”
“What do you mean? You’ve spoken with the Sheriff, right?”
“The Sheriff called, sure, but I didn’t pick up. He came to my house one time and said I needed to make payments, but I didn’t know anything about a judgment.”
“Well, we have one. And it’s against you, and what do you want to do here?”
I thought his answer would be, “Hang up.” Instead, he offered to pay the judgment off in two installments.
I asked, “Why didn’t you do this before?”
“I don’t know. Nobody asked me,” he said. We hung up the phone. Three months later, my client was paid in full.
What Should A Creditor Do?
The most important part of judgment collection is making sure that you, the creditor, remain an active part of your debtor’s life until you get paid. I call it the “Hassle Theory” of judgment collection. If you and your lawyer get a judgment and then sit back and wait for that judgment to collect itself, the debtor forgets about you. He or, in the case of a business, it, goes about the day as normal. If you insert yourself into the debtor’s everyday life, on the other hand, there’s no way to forget. Or, there’s only one way: pay up.
How do you do this? Well, let’s look at bad collections practice versus good collections practice by way of illustration.
Bad Collections Practice
In bad collections practice, you get your judgment, issue a writ of execution, and then sit back and hope the Sheriff finds something worthwhile. The Sheriff then makes a few phone calls to the debtor, runs the debtor’s name through DMV’s databases, does a bank levy (if you’re in the right county), and maybe, just maybe, visits the debtor at his home or business once or twice. When the writ dies 90-days post-issuance, the Sheriff returns it unsatisfied, and your lawyer calls you to let you know that, whoops, the Sheriff didn’t find anything.
Good Collections Practice
In good collections practice, you do all of the things you do in bad collections practice, but you also make use of North Carolina’s Supplemental Proceedings statutes. Located at Article 31 of Chapter 1 of the N.C. General Statutes, supplemental proceedings allow you, the judgment creditor, to take all sorts of actions to try to collect your debt. Not sure if the debtor has assets? Have the court order him to submit to a sworn examination (or serve him with debtor’s interrogatories.) Has DMV reported that the debtor owns a car that the Sheriff can’t find? Get a turn over order requiring the debtor to bring that car to the sheriff ASAP. Concerned that your debtor might sell or otherwise dispose of or transfer assets? Get an order that forbids the debtor from doing any such thing, ever, for as long as your judgment remains unsatisfied. Is your debtor a business with accounts receivable? Get an order requiring your debtor’s customers to pay you. Finally, is your debtor a shifty fraudster? Have the court appoint a receiver to take charge of all of the debtor’s property in the state.
What if Someone Doesn’t Pay a Judgment?
Now, you might be asking: why would a debtor who has ignored a judgment care about other orders in supplemental proceedings forbidding transfers of property, etc.? The answer has to do with the nature of the orders you obtain in supplemental proceedings. A judgment is great, but once it’s entered, it’s your job to collect it. It’s not a crime not to pay a judgment (at least, it’s not anymore), so no court in North Carolina is going to lock someone up when they come up empty handed. Violation of a court order to turn over property, forbidding property transfers, or compelling answers to interrogatories, however, is punishable by civil contempt (if your debtor is an individual.) And yes, that means jail time, at least until the debtor corrects the non-compliance.
Are you starting to get the picture? While the information that you can obtain in supplemental proceedings can certainly be important, the biggest benefit to following through with post-judgment collections efforts is the serious burden that doing so imposes on your debtor’s life. Who wants to spend their days testifying at a debtor’s exam about that boat they sold a year ago, or listing out bank account numbers in answer to debtor’s interrogatories? Answer: no one. What’s more is that, if the debtor does what he, she, or it is supposed to do and gives the testimony or the written answers, then you’ve just found a myriad of ways to make living with a judgment even more onerous.
Certainly, judgment collection is about patience and persistence. When I realize in the course of investigating a debtor’s assets that the judgment may be uncollectible, my practice is to tell the client immediately. But when you have a chance to collect, when you’re actively pursuing a debtor, it’s not enough to wait and see. “Hassle Theory” is about more than being a nuisance; it’s about using the tools at your disposal to make sure you get what you’re owed.
If you need help with judgment collection, contact the Charlotte business debt collection and civil litigation attorneys at Weaver, Bennett & Bland, P.A. for a free consultation. Call (704) 844-1400 today.
Bo Caudill is a civil litigation, business law, and personal injury attorney at Weaver, Bennett & Bland, P.A. Contact Bo at Weaver, Bennett & Bland, P.A. at (704) 844-1400. The information contained in this article is general in nature and not to be taken as legal advice nor to establish an attorney-client relationship between the reader and Bo Caudill or the law firm of Weaver, Bennett & Bland, P.A.