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You Won in Court - Now What?

Litigation is common in real estate matters, mobilehome parks and businesses. Many clients view the trial as the end but often do not realize that obtaining a monetary judgment and actually collecting the dollars can be two very different things.  Statistically about 80% of all judgments awarded are never collected and for many collection is the most difficult part of winning a lawsuit.  While the court has the sole responsibility to award the judgment, once the successful party has the judgment, it is their sole responsibility to enforce the judgment and collect the dollars.

Judgments are generally enforceable immediately upon entry; however, if the debtor files an appeal, a judgment may be stayed.  Further, in California, judgments may only be enforced for ten years, although after 5 years a judgment can be renewed for an additional ten years.  From that point on, it can be renewed indefinitely if consistently renewed every five years.

The good news is that Judgment Creditors are entitled to interest at the rate of 10% per year.  Interest begins accruing the day the judgment is entered.  

Judgments can be collected in one or a combination of several methods:

  1. The debtor and judgment creditor can negotiate a payment plan or arrangement in order to clear their credit report;
  2. The judgment creditors can apply for an "Abstract of Judgment," to create a lien and cloud on the title of any real property owned by the debtor within the county in which it is recorded (an effective tactic to collect as the judgment debtor cannot sell or refinance the property without negotiating with the creditor or paying off the lien);
  3. Place a levy on the judgment debtor's vehicle for the Sheriff to take possession and sell (does not usually result in a net collection for the judgment creditor due to other liens on the vehicle and costs of collection;
  4. If the judgment debtor is a business or owns a business, a Judgment Lien on Personal Property can be very effective in collections.  If a Judgment Lien on Personal Property is filed with the Secretary of State, the document creates a lien on accounts receivable, equipment, farm products, inventory and negotiable documents of title;
  5. For businesses, "Till Taps" can be effective. The Sheriff can take money directly from the cash register, which is commonly called a Till Tap.  For high volume businesses and large judgments, the Sheriff may leave a "keeper" in charge of the business for up to 8 hours to collect all the cash and checks that come into the business for that day.
  6. For wealthier individuals or individuals with stable employment, a bank account levy can be effective. The Sheriff will issue a notice of levy, effectively freezing the bank accounts of the judgment debtor and transferring the funds to the creditor.  The  Sheriff can also notify the debtor's employer to withhold money from the debtor's paycheck up to 25%.

Likelihood of collection is an important factor that many plaintiffs fail to consider when embarking on litigation. In nearly all collection methods, substantial cost in the form of filing fees, sheriff's fees and attorneys' fees must be incurred in order to execute the collections and even then, collection is not guaranteed. The likelihood of collection, or lack thereof, may substantially change the strategy of a case. For example, it may be much easier to extract money in the form of a settlement than to fully litigate the case and end up with an uncollectable judgment. In other circumstances, litigation may make sense where the potential debtor has substantial assets and would likely be a prime candidate for collections.

Liam Perry is an Associate Attorney at The Loftin Firm. For questions relating to this blog post or any other California real estate, land use, corporate, or estate planning matter, contact The Loftin Firm at (760) 814-9649.

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The Loftin Firm, P.C.
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Carlsbad, California 92008-4713

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