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.