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How Do Creditors Collect on a Judgment Against an Individual Debtor?

Many of you have heard the expression "paper judgment" or "empty judgment." Those terms apply to situations where a creditor gets a judgment and cannot subsequently enforce the judgment within a reasonable period of time after the judgment has been obtained because the debtor has no assets. The creditor always has to consider, in the first instance, whether spending the money to litigate against the debtor is viable particularly if the debtor does not have sufficient assets to satisfy a judgment. Assuming that a creditor obtains a judgment and assuming the debtor has reachable assets then a creditor can avail itself to the following remedies and procedures under Massachusetts law: 

1.Bank and real estate attachments. These remedies have been addressed in earlier blogs but are certainly worth mentioning again. Quite often, when the Katz Law Group has obtained a judgment for its clients we have, without notice, attached the debtor's bank account or real estate. The fact that the attachment is without notice gives our creditor-clients a huge advantage in securing their judgments particularly if they can demonstrate facts to the court that would otherwise demonstrate the debtor is likely to conceal, assign or transfer his assets. In those situations where a creditor cannot show that the debtor is likely to conceal, assign or transfer assets then the alternative route is to seek an attachment with notice. Under Massachusetts law, there exist other kinds of attachments such as attachments of both vehicles and boats. Those remedies will be discussed in future articles.

2Actions to reach and apply. This is a statutory remedy under G.L.c.214, section 3 which enables the creditor to "reach and apply" monies "due or about to become due" to the debtor. For example, if a creditor has a judgment against the debtor and the debtor is going to be receiving money from a third party for rent, monies paid on a loan and /or investments, as examples, the creditor then has the opportunity to "reach and apply" those payments that "are due or about to become due" a debtor in order to satisfy the judgment.

3Appointing a receiver. A receiver is a lawyer appointed by the court under G.L.c.214, section 1 to manage the financial affairs of either an individual or corporation. In order to have a receiver appointed the creditor first has to obtain a judgment and, secondly, a creditor must demonstrate that it has made an effort to collect on that judgment and failed. An appointment of the receiver is not automatic and a creditor will need to demonstrate to the court why such an appointment is necessary ( i.e. some form of egregious conduct). Once appointed, a receiver has the power to take over control of a debtor's assets and is given wide discretion by the court to liquidate the assets in order to pay off the creditor or creditors as the case may be. A receiver also has the ability to investigate and review a debtor's financial records and can look to retrieve assets that a debtor may have tried to conceal from creditors. The receiver also has the inherent statutory power to retain brokers, auctioneers and other professionals to assist in marketing and liquidating a debtor's assets.

4. Rule 69 Deposition. Under our rules of civil procedure, a judgment creditor can take an asset discovery deposition of a debtor in order to locate assets by which to enforce a judgment. Post-judgment discovery can be used to request information about and documentation evidencing bank statements, paychecks, and tax returns. At a deposition, a debtor may be required to provide information under oath regarding income, location of bank accounts, investment accounts, real estate, vehicles, boats, jewelry, art, collectibles, inventory, machinery, equipment, and other financial asset information.

5. Supplementary ProcessWhen all other remedies fail to make a creditor whole a creditor always has access to the supplementary process under G.L.224, section 14. The supplementary process is a procedure by which a creditor may file a supplementary process summons and complaint. Once served and a hearing scheduled, a judgment debtor must appear in court and demonstrate to a Court why that debtor cannot pay the judgment. The debtor will then submit to an examination by a Court under oath as to a debtor's ability to satisfy the judgment. Here, it is extremely helpful to subpoena certain tax returns of a debtor prior to the hearing so that the Court has these documents as part of its examination. If the Court determines that there is an ability to pay the judgment in whole or in part, a Court will enter a payment order based on the examination requiring a debtor to make a single or recurring payment to a creditor until the judgment is satisfied. Additional information can be brought before a court for consideration as to any change in circumstances of a debtor's financial situation. 

If you are a creditor and have a judgment, whether from a Massachusetts court or from another state court, the Katz Law Group can assist you in finding creative ways to enforce that judgment. For further information on what we can do for you, call us at 508-480-8202. 

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