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Category: Debt Collection

My Debtor has Transferred a Valuable Asset, What Can I do About it?

As we have discussed on our firm’s website, most judgments go unpaid.  Courts do not collect or force judgment debtors to pay judgments outright.  Often obtaining the judgment against the debtor is just the first step, and usually the Debtor has to be legally coerced into paying anything. 

Many debtors, while litigation is ongoing, attempt to judgment proof themselves.  This becomes inevitable, when the debtor knows they will not prevail in the underlying suit, and a big verdict or judgment is looming. Often with the threat of judgment, debtors fraudulently convey assets to third parties, in an attempt to conceal those assets from creditors.  

Luckily, there are procedures for attacking (and unwinding) these fraudulent conveyances, so that the transferred asset can be attached or levied for satisfaction of the underlying judgment.  We will briefly discuss here, Florida’s laws on fraudulent transfers.

Fraudulent Transfer Defined

Under Florida’s version of Uniform Fraudulent Transfers Act (“FUFTA”), a fraudulent transfer is generally defined as “a transfer made or obligation incurred by a debtor if made with actual intent to hinder, delay or defraud any creditor of the debtor” or a transfer made “without receiving a reasonably equivalent value in exchange for the transfer or obligation.”  Fla. Stat. § 726.105(1)(a)(b).  The purpose of the act is to bring back fraudulently transferred assets back to the judgment debtor (and thus reachable by the creditor) or to render a money judgment against the transferee.

Actual and Constructive Fraud under FUFTA

There are basically two broad types of fraudulent transfers under FUFTA.  Those types are “actual” and “constructive.” An “actual” fraudulent transfer, in one which focuses on the transferor’s intent to delay, defraud or hinder creditors (Fla. Stat. § 726.105(a)).   This is differentiated from “constructive” fraudulent transfer, which focuses—not on the transferor’s intent—but some of the circumstances surrounding the transaction (Fla. Stat. §§ 726.105(1)(b); 726.106(1) and 726.106(2)).  Of course, proving actual intent of a debtor can be difficult, so FUFTA provides a list factors—or “badges of fraud”—which a Court can use to infer the debtor’s intent (For example, transfer of the asset to a close family member or “insider” as defined by the act).  See Fla. Stat. § 726.105(2).  Proving a constructive fraudulent transfer, on the other hand, requires proof that the debtor (i) did not receive reasonably equivalent value for the asset; and (ii) the transfer rendered the debtor insolvent.  Fla. Stat. §§ 726.105(1)(b); 726.106(1) and 726.106(2).

Remedies under FUFTA

FUFTA sets forth six basic remedies available to creditors: (1) avoidance of the transfer; (2) attachment of the asset; (3) injunctive relief to prohibit further transfers; (4) appointment of a receiver; (5) levy and execution; and (6) “any other relief the circumstances require” Fla. Stat. § 726.108(1)–(2).

Usually, a creditor will seek the remedy of avoidance of the transfer or a money judgment against the transferee of the asset.  “[FUFTA] is either an action by a creditor against a transfer directed against a particular transaction, which, if declared fraudulent, is set aside thus leaving the creditor free to pursue the asset, or it is an action against a transferee who has received an asset by means of a fraudulent conveyance and should be required to either return the asset or pay for the asset (by way of a judgment and execution).”  Yusem v. South Florida Water Mgmt. Dist., 770 So. 2d 746, 749 (Fla. 4th DCA 2000).

If the creditor does not seek to unwind the transaction, alternatively the creditor can look to obtain a money judgment against the transferee.  The money judgment will be in the amount of the value of the asset transferred, at the time of the transfer, or the amount necessary to satisfy the creditor’s claim, whichever is less.  Fla. Stat. § 726.109(2).

Closing

FUFTA provides a powerful tool in the judgment creditor’s arsenal to go after debtors who attempt to judgment proof themselves, prior to judgment being entered.  We discussed in a past journal, how FUFTA and Fla. Stat. 56.29 are often used in tandem to attack fraudulent transfers.  If you have any questions on how Andre Law Firm P.A. can assist you regarding fraudulent transfers contact us today.

My Debtor has a Valuable Asset, How do I Get it???

We are regularly retained by out-of-state creditors to go after local debtors.  We often domesticate foreign judgments for our clients here in Florida.  Often, those creditors already have an idea on what they want to do from a collection standpoint.  Perhaps these creditors might have analysts or have already used a private investigator to research the Debtor before they come to us. Often creditors may have identified assets they seek to levy before they contact us

Look More Closely at the Asset

The Creditor might say “I can see the Debtor owns a 2020 Mercedes AMG GT Coupe (MSRP $116,000); can I take that?”  My answer, which is often maddening to my clients, is often “it depends.”  “What do you mean?  I want that car!”

Locating certain assets which may be subject to execution is a relatively straight-forward process (assuming there hasn’t been fraudulent transfers that is).   Things like cars require title registrations that come up easily in public records searches.   The questions that are rarely considered after a client locates such an asset are: 1) is the asset owned outright by Debtor (or is it being leased or financed); 2) Is that asset owned individually owned or subject to an exemption or claim of another; and 3) are the costs associated with levying this asset worth what the asset will get you at a levy sale.

One thing that many are not readily clear about.  A levy is when the county sheriff seizes an asset and sells it an auction. The sale proceeds are then used towards satisfying the judgment.  I know many know this, but you’d be surprised how some folks think it means you get the asset handed to you.  While judgment creditors are usually entitled to a credit bid up to the amount of their judgment, it’s important to know this.  Assuming you have perfected your judgment lien as we discussed here, other considerations must be made before the levy is effectuated.

Levy Considerations

In your 2020 Mercedes example, if your car is leased, you cannot take it because title belongs to the lessor (though if the lease is pre-paid there might be an argument that the pre-paid lease is an asset, but this hyper technicality will not be discussed here).  What if our debtor owns the vehicle jointly with her spouse or domestic partner?  Again, you may not be able to levy the asset if it is subject to an exemption like tenancy by the entireties. Is the car subject to financing?  If so you would take subject to the car note.  Finally, would the asset be worth it even if these hurdles are not present?  

The Auction

In our 2021 Mercedes example, if the debtor owns the car outright (high roller) it most likely worth it.  If you levy the car, the car will then be in auctioned. Then, if the auction is competitive, you may be able to collect a good amount.  It is important to note: often auctions are not well publicized, and bidding can be outright pathetic.  

If you have specialized assets like art or collectibles, you might need to market the auction so bidding can be competitive.  Otherwise, at the sale you will have a bunch of bargain shoppers, looking for a deal.  In this instance, you might want to reach out to car dealers in the area and notify them of the levy sale in an attempt to raise competitive bidding.  Of course, check with Florida Bar to determine what information you can provide and in which manner you can provide it.  

We had one levy where we levied the contents of a storage unit and someone purchased boxes/personal effects and asked me for the contact information of the debtor so he could sell the guy’s family photos back to him…. I of course did not cooperate, but man it’s a dog-eat-dog world out there friends.

It’s my hope this article was able to illustrate some of the numerous issues tangential to a levy. Contact our firm today to discuss any post judgment collection questions you have.

Post-Judgment Detective Work

Value of Information

Post-judgment collection, like most litigation, is more art that science.  Often, successfully collecting on a non-paying judgment debtor is made possible by the proper pressure point being leveraged into a positive result for your client.  Most of time, a collection is not made because you found some hidden asset or bank account to levy or garnish.

More often than not it is information you discover, that leads to your collection.  In the bulk of our collections practice,  we deal with closely-held concerns who can nimbly hide or conceal assets. Treating these debtors like they are Fortune 500 company is an exercise in futility.  Judgment Debtors consisting of closely-held entities or individuals are some of the hardest to collect against. They routinely ignore post-judgment discovery requests and subpoenas with little fear or respect of court sanction.

Third-Party Discovery

The key to finding valuable information starts with obtaining as much third-party discovery as possible to paint a picture of your debtor’s financial condition.  In our experience, we have found even the most “scrupulous” of people, when faced for a debtor’s exam or deposition in aid of execution (or any post-judgment discovery), will gladly lie to the examining lawyer’s face or flatly perjure themselves in their interrogatory responses or fact information sheet.

It is incumbent upon the judgment creditor’s attorney to get as much information from third parties who have no incentive to lie about the financial information requested.  Obviously, if you are aware of where the judgment debtor has banking relationships, banks are a perfect place to start, but a lot of useful financial information can be held by customers, utility companies, title agents, etc.  The list of possible valuable information is quite simply endless.  Only when you have a lot of verifiable third-party information is a good deposition in aid of execution of the judgment debtor recommended, and most often it is still more often used as a tool of coercion (they are typically not pleasant, so debtor’s seek to avoid them especially if they plan on perjuring themselves anyway).   So, in this respect the collection attorney turns into part private investigator to find useful information and piece it together.  In the best cases this may lead to an asset or a pressure point.

Use of Third-Party Discovery

For example, recently our firm was hired by another law firm to collect a modest judgment against an auto body shop.  We were able to quickly satisfy a portion of our judgment via quick garnishment, but the trail went cold thereafter.  Our firm then sprang into action and researched the debtor closely and found a real estate transaction where the judgment debtor was seller.  A subpoena was served on the purchaser for documents regarding the sale (how the purchaser purchased the property and the like).  When we were speaking to the subpoenaed deponent about the document production, the deponent mentioned that the judgment debtor moved its business across the street and renamed it.  A quick search with the Florida Department of State Division of Corporations found that the judgment debtor had started a whole new business incorporated by its principal’s wife across the street, giving rise to a successor liability claim (successor liability to be discussed in future blog).  We then approached judgment debtor’s counsel with this information and a signed and finalized motion to commence proceeding supplementary (which impleaded the wife and the successor entity, which we threatened to file) a full settlement was reached shortly thereafter.

It was not the court or sheriff that led to this settlement.  Not a garnishment or levy.  It was confronting the judgment debtor with its actions and the threat of putting other creditors on notice of the judgment debtor’s essentially fraudulent transfer in the form of successor liability that led to the positive result for our client. 

Andre Law Firm P.A. is well-versed on creative and sophisticated methods of debt collection that assists our clients (and other law firms) in collecting against judgment debtors.  Please contact us today, to see how we may be of service.

Domesticating or Registering an Out of State Judgment

Commercial Litigation Lawyer Miami

Often an out-of-state creditor contacts our firm regarding going after a debtor who lives in Florida. What can a creditor do to obtain relief in Florida Courts? Here is a brief overview:

State Court Judgments

While counties in Florida do the domestication process slightly differently, the overall process is universal. The out of state creditor will require an “exemplified” of the original out of state final judgment. An exemplified copy is essentially a certified copy of a judgment that is also signed by a judge verifying the clerk’s certification. A judgment creditor’s affidavit is also required in support of the domestication. A local attorney should prepare a judgment creditor’s affidavit. The affidavit should offer details about the judgment and the contact information for creditor and debtor. These two items are filed with the local clerk’s office, along with a filing fee. While you can file the judgment in any county in Florida, it is best practice to file in the county in which the assets you would like to seize or take a lien against are located. Having an experienced collection firm like Andre Law is crucial in navigating any potential pitfalls.

The clerk will record the judgment and affidavit in the county official records and send a formal statutory notice to the judgment debtor. The judgment debtor then has 30 days after the notice is provided in which he or she can challenge the validity of the judgment. This will only happen in very rare instances. If the judgment debtor takes no action, the judgment will be considered final and will have the same effect as a judgment made in Florida. No collection activity can occur during this 30-day window, something that the client should be well aware of. After the 30-day window has lapsed, the creditor can use every Florida judicial collection tool at his or her disposal to collect on the judgment.

Federal Court Judgments

“Domesticating” a federal court final judgment rendered in an out-of-state federal court is a bit easier of a process and is governed by federal statute. The process is also referred to as “registering.” Typically, a certified copy of the original final judgment, a form called a “Clerk’s Certification of a Judgment to be Registered in Another District,” along with a small fee is all you technically need to register your judgment in Florida. Again, you should do this in the District Court division that services the area your judgment debtor’s assets can be found in (e.g. for a debtor residing in Boca Raton with assets there, it would be ideal to register in the Southern District of Florida West Palm Beach Division).

Once the judgment is registered, the federal rules of procedure allow the creditor to use either applicable federal procedure or state procedure/laws for the collection of the judgment. Andre Law, with its vast experience in this area, can guide creditors on what procedures or tools are available to best effectuate enforcement of the out-of-state judgment. Learn more about our foreign judgment domestication practice.