So You Have a Money Judgment . . . Now What?

You filed a lawsuit for breach of contract, breach of warranty, or some other claim against a defendant, and after the trial - you won! As a result, the Court awards you a judgment for money damages against the defendant in the lawsuit. You now have a money judgment against an individual defendant, for some amount of money, e.g. $50,000.00. The Court's order states "judgment is entered in favor of plaintiff and against defendant in the amount of $50,000.00."

Since you won the lawsuit and were awarded a money judgment, the defendant now has to pay you the full amount of the judgment right away, correct? Not necessarily. The defendant -- who is now known as a "judgment debtor" -- may not want to pay your judgment or may claim (truthfully or falsely) that he does not have sufficient money or other assets to pay your judgment. In that case, having been awarded the money judgment by the Court, what can you do to get paid?

Asset Searches

With respect to an individual debtor, you can have your attorney perform an asset search on legal research databases to determine if the judgment debtor actually has assets, such as real estate, automobiles, etc., that could be taken to satisfy your judgment.¹

Citation To Discover Assets

In addition, as the "judgment creditor," you have the right to have the Court issue a "Citation to Discover Assets" against the judgment debtor. This tool – the Citation to Discover Assets - allows you to force the judgment debtor to appear in court and answer questions under oath regarding the extent of his assets that could be used to satisfy your judgment – such as bank accounts, real estate, investments, and income from employment. When a Citation to Discover Assets is served on a defendant, he is technically prohibited from making any transfers or other dispositions of, or interfering with, any property that is not "exempt" (see more below).

Collection Orders

If you are able to identify attachable assets at a citation hearing, and the debtor still refuses to pay your judgment, you have the ability to seek the Court's further assistance in having the debtor pay your judgment from these identified assets. Some of the fundamental ways the Court can assist in getting your judgment paid include:

1. a garnishment order -- this is a Court order requiring the judgment debtor's bank or other financial institution to pay over to you the debtor's money in a bank account to satisfy all or part of your judgment.
2. a wage garnishment or wage deduction order -- this is a Court order requiring the debtor's employer to pay over to you a portion of the debtor's wages every pay period until your judgment is satisfied.
3. a turnover order -- this is a Court order requiring the debtor to turn over to you one or more assets, i.e. car, boat, company stock, patents, notes receivable, accounts receivable, and so forth.

Reversing Fraudulent Transfers

In addition to these basic tools used to collect on a judgment, there are also more complicated ways to collect on a judgment. For example, it is not uncommon for a judgment debtor - in advance of losing the lawsuit – to transfer ownership of assets to a spouse or children with the intent to thwart future collection efforts.² But you can seek Court assistance to reverse these so-called "fraudulent transfers" that the judgment debtor made to hinder your collection efforts. If successful, the transferred asset is again returned to the debtor's ownership and can be attached by you in collection.

Judgment Liens

Another more complicated way to collect a judgment is to record your judgment with the Recorder of Deeds in the county where the debtor owns real estate. Assuming the judgment debtor has excess equity in his property (that is, value over and above any outstanding mortgages, home equity loans and so forth), your recorded judgment then encumbers (or ties up) this excess equity. While this action does not immediately put money in your pocket, it forces the debtor to pay you off at some later date when he wants to sell the property or perhaps refinance his current mortgage.

If you don’t want to wait for the judgment debtor to sell or refinance, the recorded judgment against the property allows you the legal basis to seek a foreclosure of the debtor's property. This would enable you to force a judicial sale of the property so that you can tap into the judgment debtor's excess equity.

Debtor's Exemptions

You should recognize that under Illinois law, there are some "exempt" assets that cannot be used to satisfy a judgment. In general, when a judgment creditor is trying to collect on a judgment, the judgment debtor may claim that his homestead and certain personal property are exempt from attachment and executions of a judgment; these exemption are also applicable in a bankruptcy proceeding.³

The State of Illinois permits a judgment debtor to claim a homestead exemption up to an amount of $15,000 in a property owned and occupied as a residence. Personal property which may also be exempt includes: wearing apparel; a bible; school books; family pictures of the debtor and dependents; the equity in one motor vehicle (not to exceed $2,400 in value); the equity in any implements, professional books, or tools of the trade (not to exceed $1,500 in value); and the equity in any other property (not to exceed $4,000 in value). In addition, professionally prescribed health aids, life insurance proceeds, social security benefits, veteran's benefits, disability, illness and unemployment benefits are all exempt from attachment.

Alimony or maintenance that the judgment debtor receives is exempt to the extent that it is reasonably necessary for the support of the debtor and any of his dependants. A debtor's interest in pensions, qualified annuities and retirement accounts are also completely exempt from garnishment or attachment. This recitation of exemptions is not exhaustive, and determining the exemptions a debtor is or may be entitled to can sometimes be involved and complex.

Remember that a judgment issued in the State of Illinois generally may be enforced (or collected) for a period of 7 years after it is entered, but it can be "revived" within 20 years after the date of entry.

These are just some of the ways to consider collecting on a money judgment against an individual judgment debtor. There are also similar ways to consider collecting on a money judgment against a non-individual, that is, a judgment debtor that is a corporation, LLC, partnership, or other business entity.

If you are having trouble collecting on a money judgment of any kind, give us a call and we will review your situation and guide you through the post-judgment collection process.

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¹We often perform these types of asset searches prior to filing a lawsuit so that our clients can feel comfortable that there will be some ability to collect a judgment assuming they are successful with their lawsuit.

²Some of our clients actively try to protect against the collection efforts of future (as yet unknown) judgment creditors by engaging in certain "asset protection" strategies. This topic was the focus of our November, 2009 C&A News Alert, "So...What is Asset Protection Planning?".

³The law governing exemption of assets from judgment collection varies significantly from state to state. As with pre-lawsuit asset searches, an understanding of the legal exemptions in the state of your judgment debtor's residence can be critical.

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