There are seven critical mistakes judgment creditors make when attempting to collect their judgment. Over the next 7 weeks, we’ll be discussing each mistake in detail . . . and how to correct it. Read our next blog for Mistake #2 of 7.
MISTAKE #1: CONDUCTING A DEBTOR’S EXAM (DEPOSITION) OF THE JUDGMENT DEBTOR AS SOON AS THE JUDGMENT IS AWARDED.
It is common practice, as soon as possible after the judgment is entered, for the judgment creditors to issue a Subpoena Duces Tecum to the judgment debtor to appear for a sworn debtor’s exam before a court reporter and to produce specific documents. The documents subpoenaed for production often include bank records, real estate records, corporate records including articles of incorporation with corporate amendments, annual reports, corporate resolutions, minute books, stock certificates, the stock ledger book, and all documents relating to LLCs, partnerships, trusts and other business entities. Other subpoenaed records typically include titles to vehicles, boats, planes, etc., plus any other records relative to the ownership, encumbrances, and transfers of assets.
The deposition is intended to allow the judgment creditor to discover information that will aid with the enforcement of the judgment.
The intended consequence of the early deposition typically just allows the judgment debtors and their attorney to find out what you know and where you are headed with your enforcement efforts, just by the very nature of your questions. This allows them more time to further hide their assets. Seldom, if ever, is any useful information provided.
Our experience indicates the better approach is to follow the money via deep forensic research, organized simultaneous execution of numerous discovery subpoenas, followed by in-depth analysis of the production documents, additional detailed subpoenas for specific documents based on the knowledge gained thus far. To the extent possible, simultaneous service of writs of execution, turnover orders, garnishments, charging orders, and other appropriate legal process should be executed on assets of the judgment debtor. Repeat as needed.
When all known non-exempt assets have been extracted from the judgment debtor, and if they have not already sought to settle the judgment, then serve them with an all-inclusive deposition Subpoena Duces Tecum. At the deposition, review all production including tax returns and financial statements in great detail on the record with the debtor.
Allow the debtor to commit as much perjury as he chooses to do without reacting or seeking a more truthful answer. At the conclusion of this exercise, confirm with the debtor that his statement under oath was that he had no “bank accounts.” Then, refresh his memory by producing bank records you previously obtained via subpoena and get his confirmation that this is (or was) his bank account. Repeat as necessary with each untruthful statement using the discovery you previously obtained.
I have found, on numerous occasions, that using this process to refresh the debtor’s memory three or four times often leads to a complete, or at least satisfactory, settlement.
Try it—it works!