You Have a Judgment But How Do You Collect?
Written by Jacquelyn A. Bouwman and Jordan J. Feist
Congratulations, you won your case and obtained a judgment. You are now a judgment creditor, and the person or entity you obtained the judgment against is the judgment debtor. A judgment creditor is a person or entity to whom an amount of money is owed due to the judgment that has not been paid or executed. A judgment debtor is a person or entity who owes an amount of money due to a judgment that has not been paid or executed.
How do creditor collect a judgment from a debtor? After all, a judgment is only a piece of paper unless you can collect what is owed.
In addition to the practical questions a judgment creditor might have about the proper steps to collect, three main options are discussed below: writs of execution on personal property; garnishments; and real property execution sales.
Where and how long is my judgment valid?
Before attempting to collect on a judgment, a judgment creditor should understand where, and how long, the judgment is valid. A judgment is initially valid in the state in which it is obtained. However, if the judgment debtor has assets in another state, the judgment can be transferred to that state, where it is typically then enforceable.
In South Dakota, a judgment automatically becomes a lien against all real property owned by the judgment debtor located in the county where the judgment is docketed. However, if the judgment debtor owns real property in another county, the judgment can be docketed in that county where it will also attach to the judgment debtor’s real property located there.
A judgment is enforceable in South Dakota for a period of twenty years. However, the judgment lien that automatically arises after a judgment is docketed is valid for ten years, unless timely renewed. Before the expiration of ten years from the date the judgment is entered, the judgment lien may be renewed for an additional period of ten years. A judgment creditor should consider calendaring a deadline for 9 years after the judgment was entered to renew the judgment prior to its expiration.
A judgment debtor may still sell real property to which the judgment has attached, but the presence of a judgment lien will prevent the seller from transferring clear title to the real estate unless the judgment is satisfied.
The seller or the closing agent will typically arrange to satisfy any judgments at the closing of the real estate sale, which should result in payment of the judgment amount. If the real property is sold to a third-party without payment to the judgment creditor, the judgment will remain attached to the property until it expires, is satisfied, or is otherwise released by the judgment creditor.
Post-judgment interest
In South Dakota, most money judgments accrue interest at the statutory rate of 10% per year until paid in full.
Identifying assets
As an initial step, a judgment creditor should attempt to determine the type and location of any assets that might be owned by the judgment debtor. For example, does the judgment debtor have bank accounts or other personal property? Is the judgment debtor employed and receiving wages? Does the judgment debtor own real property?
One method of determining what assets are available is by engaging in post-judgment discovery related to the judgment debtor. This typically involves serving interrogatories or requests for production of documents, or the examination of the debtor under oath. These methods are designed to uncover the debtor’s assets that might be available for execution or garnishment.
Even if a judgment debtor does not have assets, obtaining a judgment can still be useful in the event assets later become available. However, when pursuing and enforcing a judgment, a creditor must carefully consider the facts of each case to determine whether certain collection efforts are worth the effort and expense.
Writ of execution on personal property
After a judgment is docketed, the judgment creditor can request a writ of execution from the Clerk of Courts. Except as ordered by the court or when a default judgment is obtained, a writ of execution cannot be issued until the expiration of 30 days from the time the judgment is entered.
A writ of execution allows the County Sheriff to seize assets from the judgment debtor that can be sold to satisfy the debt. It is often helpful to provide the Sheriff’s Office with a list of assets of the judgment debtor, to the extent known.
If the Sheriff’s Office is unable to locate any assets, it will return the writ of execution as unsatisfied.
Garnishments
Although a judgment creditor can garnish against amounts owed to a judgment debtor by a third party, or against any property belonging to the judgment debtor that is being held by a third party, there are two primary types of garnishments: bank garnishments and wage garnishments. If a judgment creditor has identified a bank account owned by the judgment debtor, a bank garnishment may be appropriate.
A wage garnishment, on the other hand, is a more familiar form of garnishment. Requests for wage garnishments are sent to a judgment debtor and their employer. The employer uses a statutory form to calculate the portion of the judgment debtor’s income subject to the wage garnishment.
A continuing lien on wages is valid for 120 days in South Dakota. However, if an amount is due on the judgment at the end of the 120 days, a new continuing wage lien can be served. Wage garnishments have specific statutory requirements that must be meticulously followed, and the required documents must be properly served on the judgment debtor and employer before wage garnishment can begin. It is important to visit with an attorney about the proper steps and documentation to ensure your wage garnishment is valid and enforceable.
Real property execution sales
If the judgment debtor owns real property in the county where the judgment is entered or docketed, a real property execution sale might be appropriate. An execution sale (also called a sheriff’s sale), as the name implies, involves a sale of the judgment debtor’s real property to raise funds to pay towards the judgment. An execution sale is similar in some ways to a foreclosure sale. Just as with execution sales on personal property, a judgment creditor first seeks a writ of execution from the Clerk of Courts.
An execution sale usually makes most sense when a judgment debtor owns property free and clear of liens and encumbrances, or where a judgment debtor has substantial equity in the property. Homestead exemption rights apply to execution sales, so it is important to visit with an attorney about how the homestead exemption, and other encumbrances against the property, might dictate whether an execution sale is a viable option.
An execution sale is advertised in a legal newspaper prior to the date of the sale, and the sale itself is held at the front door of the courthouse in the county where the real property is situated. At the execution sale, the Sheriff conducts an auction, where the highest bidder wins. A Certificate of Sale is issued to the purchaser of the real property.
If the real property is sold for less than the amount of the judgment, the judgment is usually released as to the piece of real property, but the remainder of the judgment is still due and owing. If the real property is sold for the amount of the judgment or higher, the judgment will be satisfied.
The judgment debtor has a one-year right of redemption, during which they can redeem the property by paying all outstanding amounts due in connection with the execution sale, including the amount of the highest bid and the expenses of sale. Junior lienholders also generally have a right to redeem the property.
Upon expiration of the period for redemption, a Sheriff’s Deed to the real property is issued to the purchaser. The Sheriff’s Deed vests title in the property just as title had been previously vested in the judgment debtor.
Debt collection practices and bankruptcy
When attempting to collect on a judgment, it is important to act with respect towards a judgment debtor. Furthermore, the law imposes certain limitations on debt collection practices. For example, if a judgment debtor files for bankruptcy, the judgment creditor must cease attempts to collect against the judgment debtor, and the judgment creditor’s recourse is to file a claim in the bankruptcy case. It is important to seek the advice of an attorney licensed in federal bankruptcy court who can assist with filing a claim to protect your rights.
Our Team
Woods Fuller has a team of experienced attorneys to assist creditors with protecting and exercising their rights in bankruptcies, execution sales, mortgage foreclosures, and other collection actions.
