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Reach and Apply Injunctions

In Massachusetts, a reach and apply injunction is a way for a creditor to recover what they are owed from their debtor. The injunction lets the creditor reach around the debtor and take money that other parties are paying to the debtor.

The business credit lawyers at the Katz Law Group use reach and apply injunctions in conjunction with collections demand letters, to help businesses in Massachusetts collect the debts that they are owed.

How Do Reach and Apply Injunctions Work?

A reach and apply injunction works by letting a creditor access their debtor's revenue streams. This helps the creditor collect the debt that they are owed and keeps the debtor from hiding money and continuing to refuse to pay back their debt.

For example, imagine a business creditor who has loaned money to another business. The debtor business gets the loan and then does not pay it back. However, the debtor business is still conducting business – it is still generating income by selling goods or providing services for its clients or customers.

The business creditor is owed money because of the loan that it provided. But the debtor business is refusing to pay. A reach and apply injunction is a court order that allows the business creditor to intercept the debtor business' incoming payments. Once the injunction is in place, when the clients of the debtor business pay for the services that it provided, the creditor can jump in and take the payments before they reach the debtor. The creditor can continue to do this until the debt has been paid in full.

Reach and apply injunctions are allowed in Massachusetts under Massachusetts General Law Chapter 214 § 3. They are an important part of debt collection law because they give creditors a powerful option for pursuing unpaid debts before the statute of limitations makes them time-barred.

How Can I Get a Reach and Apply Injunction?

Creditors can get a reach and apply injunction by filing a motion in court. The motion asks the judge to issue a court order that allows the creditor to collect the debtor's income to satisfy the judgment.

This is a very complicated and demanding process, for two reasons.

First, courts are wary of granting a reach and apply injunction because it would strip the debtor's ability to generate revenue. While this is a powerful tool for creditors, it can be crippling for debtors. Courts know this and want to make sure that a reach and apply injunction is justified before issuing one. The last thing that they want to do is let the creditor collect the debtor's revenue without a good reason to do so.

Second, courts will not issue a generalized reach and apply injunction. Instead, creditors have to identify a particular source of the debtor's revenue before the court will issue an injunction for it. This means that creditors have to gather proof that the debtor is generating revenue from a particular source, and then not using that income to pay the creditor what is owed. Legally obtaining reputable and accurate financial information about the debtor's income is not easy.

Once the motion is filed in court, the judge will likely schedule a hearing to decide whether a reach and apply injunction is justified. The evidence presented by the creditor will be looked at very closely to make sure that the injunction should be issued.

When Are These Injunctions Issued?

Many reach and apply injunctions are requested after a creditor has brought their debtor to court and the court has issued a judgment against a debtor. After the court has legally recognized the debt and ordered the debtor to pay it back, the onus is still on the creditor to enforce the judgment and collect. If the debtor is still refusing to pay the debt, the creditor can turn to a reach and apply injunction.

However, it is often wise to file the motion and request a reach and apply injunction before judgment has been issued – sometimes as early as the initial debt collection claim. This can keep the debtor from hiding their revenue or collecting their income in ways that are more difficult for their creditors to access.

Who Can Use These Injunctions?

Any creditor who is struggling to collect a debt can use a reach and apply injunction in Massachusetts. However, these injunctions are far more potent when the debtor is a company, contractor, or service provider who generates revenue from a variety of business clients.

These types of companies are better targets for reach and apply injunctions because it is easier to find their customers or clients. This makes it far easier for a creditor to gather the evidence necessary to convince a court to issue an injunction. It also gives creditors a steady stream of options to target: Every new paying client that the debtor gets can be targeted with a reach and apply injunction, so their payments go to the creditor rather than to the debtor company.

Importantly, these clients and customers of the debtor do not have to be in Massachusetts. They can be in any other state and still be targeted with a reach and apply injunction.

Massachusetts Business and Contract Litigation Lawyers at the Katz Law Group

Collecting debt is never an easy thing to do. Debtors who cannot pay do not have the means. Debtors who do not want to pay will go to great lengths to keep their money. Reach and apply injunctions are a very powerful tool for creditors to pursue this second type of debtor. By taking their income from the source and not allowing them to hide it away where creditors cannot access it, these injunctions can ensure that creditors get the payment that they deserve and that the debtor agreed to pay.

The business and contract litigation lawyers at the Katz Law Group can help business creditors enforce their rights in Worcester, Framingham, Marlborough, and the rest of Massachusetts against delinquent and non-cooperative debtors. Contact them online or call their law office at (508) 480-8202.

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