What are Judicial Creditors' Remedies?

Although more informal methods of debt collection are often effective, when negotiation and other nonjudicial means of collection are unsuccessful, a creditor may have to resort to assistance from the court system to collect a delinquent debt.

Court Assistance

In simplified terms, a creditor who is owed a debt that is in default can go to court and get a judgment against the debtor. Judgments can be paid or satisfied using assets of the debtor, which can be secured with the court's help either before or after the judgment is procured. The creditor can go to the court before the judgment is entered, or prejudgment, for help securing the debtor's property for eventual satisfaction of a potential judgment. Another option is for the creditor to utilize court assistance in collecting the debtor's assets after the judgment is entered, or postjudgment.

Prejudgment Remedies

In cases involving emergencies or other extraordinary circumstances, the creditor may be able to seize or have preserved the debtor's property even before the court decides the matter. The property is either used to satisfy the judgment or if the debtor wins the lawsuit, the property is returned back to the debtor. Here are some of the more common prejudgment creditors' remedies:

• Attachment. Attachment is a procedure set forth in state statutes with the particular details varying from state to state. In an attachment proceeding there is usually a court hearing, after which the court issues an order authorizing the creditor to take the debtor's property or its title, or otherwise to prevent the debtor from selling, transferring or destroying the property.
• Garnishment. Garnishment is an action parallel to attachment, except that the debtor's property is in the hands of a third party or takes the form of a debt from the third party to the debtor. An employer, for instance, may be required to withhold a certain portion of an employee's wages and turn it over to the creditor in order to pay back to the creditor what the employee lawfully owes it.
• Receivership. To preserve, protect or manage property of the debtor that the creditor is trying to reach to satisfy a debt, the court may appoint a receiver, an impartial and uninterested person.
• Temporary injunction. The court may issue a temporary order to prevent the sale or destruction of a debtor's property in anticipation of the main lawsuit on the underlying debt.

Postjudgment Remedies

The creditor will be entitled to an enforceable judgment if it proves its case or if the debtor fails to contest the claim. The most common creditors' remedies after obtaining a judgment include:

• Execution. In most states, recording a judgment creates a judgment lien on the debtor's property. If the debtor does not pay the judgment voluntarily, the lien can be enforced by the local sheriff, who takes the property and arranges for its sale, the proceeds of which are used to satisfy the judgment.
• Garnishment. Garnishment is a legal proceeding to transfer to the judgment creditor property of the debtor in the hands of a third party or owed to the debtor by a third party in order to satisfy the judgment.
• Receivership. In complex lawsuits, sometimes a receiver will be appointed to help manage and preserve the property after judgment is entered with the goal being to eventually satisfy the judgment. Additional court proceedings may be needed.

Other Remedies

• Replevin. In a replevin action, a creditor sues a debtor for possession of property, most commonly where the creditor has a security interest in the property as collateral pursuant to the original agreement. Ordinarily, the local sheriff must execute the order of replevin, seize the property and deliver it to the creditor.
• Involuntary bankruptcy. If none of these debt-collection tactics is successful, multiple creditors may be able to initiate an involuntary bankruptcy proceeding during which the debtor may be forced to liquidate his or her assets to pay off his or her debts, or the debtor may be able to file a reorganization plan that sets out how the debts will be paid. If the creditors initiate such a proceeding in bad faith, however, they may be subject to severe financial penalties, including punitive damages.

Creditors have various legal rights, both through self-help and court intervention, to collect money lawfully owed to them. If you have questions about collecting on a debt or if you are the subject of collection actions, contact an experienced debtor-creditor law attorney to learn how to protect your rights.

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