If you were to bring in a judgment collection agency after winning a money judgment in civil court, one of the first things that agency would do is begin an independent asset search. Agencies look for every possible asset that could be leveraged for payment. No stone is left unturned.
Agencies like Utah-based Judgment Collectors are thorough and exhaustive in their asset searches. Rest assured they do not put so much time and effort into searching for no particular reason. There are a number of reasons – including the top two, which will be discussed in this post.
Why Assets Are Important
Before getting to the reasons, it is important to explain why assets are so important. A judgment debtor with the means to pay what he owes may still resist doing so for whatever reason. When there is resistance, a debtor’s assets become leverage for the creditor.
Imagine Judgment Collectors discovering a piece of real estate a reluctant debtor failed to disclose when asked about assets. The property represents the creditor’s ability to either file a property lien or ask for a writ of execution against the real estate. No debtor in his right mind wants to jeopardize his property. So once Judgment Collectors knows the property exists, the debtor is highly motivated to pay.
2 Reasons Agencies Look for Every Asset
With the preliminaries out of the way, we can get to the reasons behind such thorough and exhaustive searches by judgment collection agencies. Here are the top two things that motivate them:
1. Some Assets Are Exempt
First and foremost is the fact that some assets are exempt from property liens and writs of execution. Those assets vary by state. However, most states include a debtor’s primary residence on their lists. A debtor’s primary residence can be protected in one of three ways:
- House and Land – The most secure protection involves both house and land. Neither is subject to enforcement actions.
- House – Some states only protect the house but not the land on which it sits. A portion of the land could still be seized. Other states protect the house and the immediate land on which it sits. The rest of the land is up for grabs.
- Property Value – A number of states protect a certain value of the home and its land. That value, regardless of the amount, is protected from seizure even if the property is sold.
Under the property value scenario, imagine a state with a homestead exemption of $100k. If a debtor’s primary residence were seized and sold for $120k, the first $100k of the proceeds would go to the debtor. The remainder would be subject to a structured disbursement, which leads to the second reason.
2. Creditors Don’t Get All the Money
Collection agencies conduct exhaustive asset searches because they know that creditors do not get all the money when property is seized and sold. Proceeds are generally disbursed in the following order:
- Sheriff – To cover the department’s costs.
- Creditor – Only to cover the creditor’s court costs.
- Other Lien Holders – Payment to others with older liens on the same property.
- Creditor – Whatever is left over goes to the judgment creditor.
The reality of how proceeds are dispersed suggests that a single asset may not be enough to cover the entire judgment. So collection agencies look for multiple assets they can target. If it takes 10 assets to satisfy the judgment amount, so be it.
Assets equal leverage in the judgment collection game. The more collection agencies can find, the greater its chances of convincing a debtor to pay up.d
