Collections: Post Judgment Collection

     Various methods are available to collect judgment debts. Every collector is aware of the option of garnishment of wages and bank accounts. Most collectors are aware of sheriff's levies on personal property. However fewer collectors are aware of perfecting judgment liens against real estate owned by the debtor. 

     When judgment is entered in the General District Court, unless appealed, it becomes final in ten days; Circuit Court judgments become final after thirty days. Once final, judgment creditors can request abstracts of the judgment from that Court (free for some counties and cities, $.50 cents per abstract in others). These abstracts can then be recorded (for $10.00 per abstract) in the Circuit Court in any county or city in which the debtor may own real estate. District Court judgments are good for ten years; Circuit Court judgments are good for twenty years. Each, upon motion to the court, can be renewed for an identical period of time. Since docketed judgment liens are good for twenty years, this docketing can provide a long-term hope for recovery. Once such a lien attaches, creditors may be able to bring suit to enforce the lien, or simply wait until such lien is paid at the sale of the property. 

     These liens can sometimes survive bankruptcy as well. If the lien is docketed for at least ninety days prior to a filing for bankruptcy, the lien should survive, and may eventually be paid. Note, however, that the real estate must be owned by the identical parties against whom judgment was taken. Thus, judgment against one of the tenants by the entirety does not entitle the creditor to the benefits described.

     What can be done when there is no information about your debtor from which to devise a post judgment collection plan? Virginia law provides for a good start -- Debtor's Interrogatories. For the price of a summons (usually $41.00) an attorney can Summons the debtor to appear before a Commissioner in Chancery (a lawyer appointed by the court) to answer questions about income, assets and the debtor's general ability to pay. This Summons is enforceable by a Capias (arrest warrant) which is issued through the court. This statute does allow debtors to request that the interrogatories be held at a court most convenient for the debtor. Therefore, if the debtor moves far from the creditor's area, it may not be cost effective to pursue the interrogatories.

     The law firm of Lafayette, Ayers & Whitlock, PLC aggressively pursues all collection cases from initial demand through final payment. We account to our clients with monthly statements and reports, and immediate responses to client questions. We are willing to assist in client collection matters piecemeal as well. If our assistance is needed just to proceed with interrogatories, an hourly fee can be arranged. Please call me at 545-6250 for a free initial consultation.

Collections: Garnishment/Arbitration

     The Richmond Circuit Court case of Va. Builder's Supply, Inc. v. Brooks & Co. Gen Contractors Inc. serves as a good example of judicial recognition of the rights of judgment creditors in arbitration proceedings. 

     In Va. Builders, the creditor, a building supply company, issued a garnishment summons upon a general contractor for sums due from the general contractor to the judgment debtor, a subcontractor. The contracts between the contractor and the subcontractor, under which the judgment creditor sought to garnish the sums due the subcontractor, included clauses for mandatory arbitration. The garnishee sought arbitration after being served with the garnishment. The garnishee refused to allow the judgment creditor to participate. The garnishee received a garnishment award indicating that it owed the subcontractor no sums. The garnishee answered the garnishment that no sums were due. The Richmond General District Court agreed. The Richmond Circuit Court disagreed, and sent the case back for further review. The Richmond Circuit Court reasoned that the garnishee should not be able to affect the potential funds due the judgment creditor while prohibiting the judgment creditor from participating in the proceedings. 

Collections: Garnishments Out-of-State

     While I have had good results in issuing garnishments out of state, especially when the garnishee is a bank that operates nationwide, success is not always guaranteed. Diversity in jurisdiction does create some issues. A good example of this arose in a case in the United States District Court where the Court granted a debtor’s motion to quash a garnishment summons after finding that the debtor’s wages were not located in Virginia. The garnishment summons had been issued by a Virginia creditor that was a Virginia hospital. The debtor was a Pennsylvania resident doctor. The garnishee was an Ohio company. The court ruled that the garnishment summons issued by the court was ineffective to garnish the wages not located in Virginia.

Collections: Post Judgment Collection - A Focus on Debtor's Interrogatories

     Once judgment is entered, what is next? Although all creditors would like for the judgment amount to "fall from the sky", it does not. Sometimes debtors will pay, either in full or in incremental payments. Sometimes creditors can garnish wages or accounts, or issue a levy on property. Sometimes creditors can bring a creditor's bill to sell real estate. But what can be done when the above listed remedies are not, or at least are not yet, options, or when there is no information about the debtor from which to devise a post judgment collection plan? Virginia Code §8.01-506 provides a good start - Debtor's Interrogatories. For the price of a summons to answer interrogatories (usually $44.00 plus service charges) an attorney can summon the debtor to appear before the court granting the judgment (or other court should the matter be transferred by the judgment court) or a Commissioner in Chancery (a lawyer appointed by the court to serve in this capacity) to examine the debtor's personal estate, specifically, to answer questions about income, assets and the debtor's general ability to pay in order to attempt to satisfy the judgment. The summons is enforceable by a capias (arrest warrant) which is issued through the court.

     The interrogatory procedure is summary in nature. No pleadings are required. No trial by jury is available. Under recent amendment to Virginia Code §8.01-506, the creditor may, as part of the interrogatory system, require the production of account books or other writings that contain evidence of the judgment debtor's estate, provided that the creditor gives an affidavit stating that he believes the books exist and identifies them with reasonable certainty.
     Virginia Code §8.01-506 allows a debtor to request that the interrogatories be held at a court most convenient for the debtor. Therefore, if the debtor moves far from the creditor's area, it may not be cost effective to pursue the interrogatories.
     It is important to note that a creditor cannot conduct debtor's interrogatories - only an attorney can. This certainly can be frustrating for creditors who take their own uncontested judgments and file their own garnishments, but it is a reminder as to why creditors are better served by turning all accounts over to counsel for collection prior to seeking judgments so that counsel can assess the attorney's fee provided in the contract or note, and can keep the entire process moving.

Collection: Child Support Exemption for Garnishment

     In the case of General Electric Capital Auto Lease, Inc. v. Turner, the City of Richmond Circuit Court denied a debtor's exemption to garnishment claim.

     In Turner the debtor claimed an exemption based on the amount of monthly child support the debtor owed. The Court noted that the specific exemption claimed by the debtor on the garnishment form was the exemption created by Virginia Code §55-165. The judgment creditor argued that this code section only applied to assignments of wages executed and approved by a judge under the procedure specifically set out in Virginia Code §55-161 through 167. That procedure included notice to and consent of the debtor's creditors, the appointment of a trustee, and so on. The Court found as fact that none of those things were done in this case. Therefore, the Court ruled that an exemption under Virginia Code §55-165 did not apply. The Court also considered all the other exemptions from garnishment listed in Virginia Code §8.01-512.4, and none of those exemptions applied either. Accordingly, the debtor's claim of exemption was denied.

Collection: Garnishment of Domain Name

     The Fairfax County Circuit Court ruled in favor of a creditor in a unique garnishment action. The case was Umbro International, Inc. v. 3263851 Canada Inc. and Network Solutions, Inc. The Court in Umbro ruled that Umbro, an international sporting goods company that won a judgment against a “cybersquatter” who had staked a claim to the Internet domain name “umbro.com”, could garnish other domain names owned by the judgment debtor.
     The issue in this case was whether the domain names registered by the judgment debtor with Network Solutions, Inc. (“NSI”) are the kind of property that is subject to garnishment. The court noted that Virginia Code §8.01-501 clearly states that a writ of fieri facias is a lien on all the intangible property of the judgment debtor. The lien, however, only attaches to the extent that the judgment debtor has a possessory interest in the intangible property subject to the writ. The Court, as a result, noted that it was required to determine if the judgment debtor had a possessory interest in the domain names it registered with NSI.
     NSI argued that a writ of fieri facias could not extend to domain names because the contract rights set forth in the registration agreement were dependent on unperformed conditions. These conditions included NSI’s rights to indemnification and the registrant’s continuing obligation to maintain an accurate registration record. The Court found that this argument failed on several grounds. First, in the dispute policy NSI undertook to abide by any court order. Such orders have included mandatory injunctions that a registrant takes all actions necessary to transfer a disputed domain name to a third party. Thus in the dispute policy NSI had agreed to subject to other liens that affect the value of the property. There was no unperformed condition under the registration agreement that could prevent a registrant from the full use of the domain name registration.
     NSI also argued that the contract right to the performance of a service was not garnishable because, among other things, it would force NSI to perform services for those with whom it may not desire to do business. The Court found that this assertion was entitled to little weight, as in the short time of its existence, NSI had registered some 3.5 million domain names, and registration applications were made by e-mail without human intervention in 90 percent of registration transactions.
     The Court noted that until Umbro, domain names apparently had not been subjected to garnishment. Nevertheless, the court ruled that there was no reason to conclude that this new form of intellectual property was thus immune. The Court found no reason why a judgment creditor should be precluded from satisfying a valid judgment just because its creditor had a possessory interest in intangible intellectual property resulting from technology of recent vintage.
     The lesson of Umbro - sometimes you have to be inventive and think outside the box in order to collect on judgments.

Collection: Fraudulent Conversion or Removal of Property Subject to Lien or Title

     The Richmond Circuit Court case of Va. Builder's Supply, Inc. v. Brooks & Co. Gen Contractors Inc. serves as a good example of judicial recognition of the rights of judgment creditors in arbitration proceedings.
     In Va. Builders, the creditor, a building supply company, issued a garnishment summons upon a general contractor for sums due from the general contractor to the judgment debtor, a subcontractor. The contracts between the contractor and the subcontractor, under which the judgment creditor sought to garnish the sums due the subcontractor, included clauses for mandatory arbitration. The garnishee sought arbitration after being served with the garnishment. The garnishee refused to allow the judgment creditor to participate. The garnishee received a garnishment award indicating that it owed the subcontractor no sums. The garnishee answered the garnishment that no sums were due. The Richmond General District Court agreed. The Richmond Circuit Court disagreed, and sent the case back for further review. The Richmond Circuit Court reasoned that the garnishee should not be able to affect the potential funds due the judgment creditor while prohibiting the judgment creditor from participating in the proceedings.