There are seven critical mistakes judgment creditors make when attempting to collect their judgment. Last week, we covered mistake #1, “Conducting a Debtor’s Exam (Deposition) of the Judgment Debtor as Soon as the Judgment’s Awarded”. Now, let’s identify the problem we are dealing with this week. Read our next blog for Mistake #3 of 7.
MISTAKE #2: EXPECTING THE JUDGMENT DEBTOR TO ACTUALLY APPEAR FOR THE DEPOSITION, TELL THE TRUTH, AND PRODUCE THE SUBPOENAED DOCUMENTS
There is a significant money judgment in place that needs to be enforced (collected). The standard operating procedure by most creditors’ attorneys is to issue a subpoena duces tecum for the judgment debtor to appear before a court reporter, bring all the subpoenaed documents and records, and to truthfully answer all questions concerning the type, location and value of all assets and liabilities. This process is designed to aid the judgment creditor in recovering his losses.
Having attended hundreds of depositions over the past 50 years, I have never—not one time—seen a judgment debtor fully comply with the subpoena. Once the deposition finally happens (usually after the debtor’s attorney has sought multiple postponements due to “health emergencies”), many (if not all) of the key documents that have been subpoenaed are not produced. Frequent excuses include:
- I didn’t understand you wanted ALL my various bank accounts.
- I didn’t know you wanted records prior to this year.
- I don’t have a current financial statement.
- My accountant has not completed my tax returns for last year.
- I couldn’t find a copy of my homeowner’s insurance policy with the schedules of my personal property.
- I have changed phone companies and didn’t keep my old phone records.
- My other attorney has the only copy of my Will/Trust and he is out of state in a long trial.
- I don’t remember the address of that little ranch we bought in Texas.
- I’ll have to ask my wife if we still own that stock. She told me years ago she planned to sell it.
- We have now identified the second problem. It is going to be very difficult, if not impossible, to get the truthful information we are legally entitled to from the judgment debtor.
We have now identified the second problem. It is going to be very difficult, if not impossible, to get truthful information we are legally entitled to from the judgment debtor.
In order to counteract this problem, you must get the answers to your questions from independent sources long before you try to depose the debtor. Subpoena the records directly from the third parties, NOT from the debtor. Get bank records (i.e. loan applications with support documents such as tax returns and financial statements) as well as at least 24 months of credits and debits for each account via subpoena to the debtors bank(s), plus copies of the last 6 to 12 payment instruments from which you may find additional bank accounts.
The debtor’s bank or mortgage company can provide the name, address and policy number of the debtors’ homeowners insurance company. A proper subpoena will have a copy of the policy with the scheduled valuable personal property such as artwork, jewelry, furs, antiques, guns, collector items, etc.
Only depose your debtor after you have documented the answers to most of the questions. During the depositions, allow the debtor to commit as much perjury as possible before refreshing his memory several times with the documents you’ve obtained. Once you have the debtors’ undivided attention, you can ask the questions you do not have the answers to and probably get truthful answers.
Never expect the judgment debtor to be truthful unless forced to do so by the evidence you produce (and the threat of perjury). You should have sufficient evidence for the court to award you the assets you have documented, with or without the debtor’s cooperation. You will be more successful when you do your homework without depending on cooperation from the debtor. This is not a quick or easy process. It takes a commitment from the client and diligent work by the entire judgment enforcement team.