Wednesday, September 12, 2012
THE LEGAL COMMUNITY
Playing Cards: Finding the Money
By DAVID J. COOK
(The author is the senior attorney for Cook Collection Attorneys PLC and publisher of CollectionLawReporter .com )
Fourth in a Series
WHAT HAPPENS AT THE END OF THE EXAMINATION HEARING?
At the end of the examination hearing, the judgment creditor can ask that the court compel the judgment debtor to assign or transfer tangible key assets to the Sheriff for purposes of sale, and ultimate liquidation of the judgment itself. In other cases, the judgment debtor can be the subject of a restraining order which would permit the judgment creditor an opportunity to reach certain assets while they are in a status quo position. Turnover orders are common at the end of an OEX, and sometimes is the only method to reach personal property in the hands of the judgment debtor.
Orders of examination likewise might reveal out-of-state assets, assets not readily known, or assets which are difficult to reach. Judges are frequently inclined to tie-up these assets through a restraining order or injunction. At the conclusion of these hearings, the judgment creditor should have a form of restraining order ready to go.
Did the judge deal you the OEX card, and that you leveraged into capturing the debtor’s financial statement that reveals jewelry, artwork and antiques? Good show. You are good to go to get a turnover order of the valuable personal property listed on the financial statements reposed with the lenders and now in your hands.
The most common asset to reach is a bank account. The judgment creditor can reach this asset through the Sheriff by executing a “levy” upon the account. This is called a garnishment. The judgment creditor causes to be served on the bank, through the Sheriff, a copy of the Writ of Execution, Notice of Levy, and Memorandum of Garnishee. If the bank is holding funds at that moment, precisely due the judgment debtor, the bank ultimately will turn over those funds to the Sheriff. As expressed previously, names are everything.
Certain Sheriffs decline to do routine garnishments, such as the Santa Clara, San Mateo, Alameda and Contra Costa County Sheriffs. A judgment creditor must retain the services of a private process server to serve a garnishment. The private process servers sometimes will prepare the bulk of the paperwork, for a small fee. Some banks have a centralized system of handling garnishments, which means that a levy on one branch is a levy on every branch, such as Wells Fargo Bank, Bank of the West, among others. The cost to levy a bank account is $35.00 for each levy due the Sheriff, and about $75.00 to $100.00 for service by a private process server.
How do you find out where the debtor banks? The answer is that many judgment creditors will do a random levy and attempt to reach those banks which are closest to the debtor’s home or business. Generally, this works well up to the last few years, but is no longer sure fire. Many businesses, and even consumers, can “remote deposit,” meaning that they can deposit checks through the email or an ATM machine. In other cases, the bank information appears in credit applications, financial statements, account references, or common sense, such as the fact that the bank is in the same building where the debtor has an office. If the creditor can confirm that a bank has provided financing through a recorded deed of trust or a financing statement, chances are that the bank who is doing the financing also maintains a deposit account. These are educated guesses.
Other banks predominate in a certain area and cater to certain industries, such as Silicon Valley Bank. In other cases, the creditor may intuit the bank because the judgment creditor may have previously paid money to the creditor, such as payment on account. Of course, the OEX would compel the debtor to reveal the bank account.
Are you dealt the bank cards? We had one debtor, a local attorney in a small town. We commenced a campaign of mass levies going from east to west, hitting every bank in town. Not a dime from this investment. The debtor called and after usual pleasantries, the debtor said “So you have hit every bank from east to west.” “Yes,” I said. “You missed.” That hand: a push, but the debtor paid.
A judgment creditor can garnish the customers of the judgment debtor and reach the receivables due the judgment debtor from its own customers. In the digital age, the judgment debtor might maintain an active website which might reveal “satisfied customers.” In certain industries, likewise, the identity of the customers might be apparent. If the judgment debtor is providing certain high-tech products, the judgment creditor could guess as to who the potential buyers would be. In other cases, the customers of the debtor might be apparent, given their type of business. For example, dentists, doctors, chiropractors, pharmacists, convalescent and related healthcare facilities, all bill the insurance companies for services provided to patients. A levy on the insurance companies, e.g., might generate accounts and accounts receivables. Culling through court records might reveal the names of the customers of the judgment debtor, if they filed suit against their own customers. The County Recorder’s Office might reveal judgments against the debtor owed by its customers.
If the debtor is in business, garnishment of accounts might bring the debtor to the bargaining table because the debtor suffers through embarrassment if the account (and usually biggest customer) is garnished. Even if no money is owed, the debtor still must respond to the phone call for information. Cost: $35.00 for the Sheriff, and about $75.00 to $100.00 for private process server.
What wage levy cards were you dealt? These were the cards that we were dealt. We were engaged by a defendant wrongly sued by a priest over child abuse allegations. The case cratered and defendant recovered about $30,000 in fees. How were we going to collect this one? Wage levy served on God? No. Wage levy served on the Church? Yes. Is St. Peter the agent for service of process? Well no, but some angel came to this person’s rescue and paid the judgment.
In most consumer cases, the wage levy is the most effective (and only) means to enforce a judgment. To initiate a wage levy, the creditor will seek from the court a Writ of Execution, draw up an application for an earnings withholder order, and deliver the completed package to the Sheriff. Most Sheriffs decline to serve the routine wage levies and compel the judgment creditor to hire a registered private process server. Most process servers, for a modest fee, will complete the paperwork. Cost: $35.00 for the Sheriff; and private process server about $75.00 to $100.00.
Upon service of the wage levy, the debtor’s liability is no more than 75% of the net. However, if all the wages are necessary for the support of the debtor and family, the entirety of the wages are exempt if proven by the debtor. Judges routinely hear claims of exemption and the outcome is negotiated resolution, such as $100 per month. At these hearings, a Judge will ask the debtor what the debtor can pay, and seek some type of payment.
What cards are in the wage levy? Everything and nothing. Sometimes the wage levy is the only resort, but the debtor is self employed by his own corporation. This wage levy will die on the vine. Answer: take another card and examine the corporate employer accompanied by a turnover of all records. At the OEX of the employer, score a turnover order of all monies, regardless of characterization, to Sheriff. The turnover order asserts personal jurisdiction over the employer subject to the powers of contempt and continuing supervision.
Copyright 2012, Metropolitan News Company