How to Collect a Judgment
by
Ronnie Fischer on Jan. 09, 2017
Lawsuit & Dispute Lawsuit & Dispute Lawsuit Lawsuit & Dispute Litigation
Summary: There are four methods that a judgment creditor may utilize in order to collect on monies that it he or she is owed. But the judgment creditor must be aware that there are certain assets that are exempt from collection.
This legal article is written as an outline regarding how to collect a judgment.
In analyzing this issue, there are two questions to be answered. The first is what actions a judgment creditor can take to try to collect assets from a debtor. The second is whether there any assets that are exempt from these collection efforts.
The first, and most common way a judgment creditor may collect on its debt, is to have the wages or salary of a judgment debtor garnished. This is effectuated by obtaining an order from the Court to garnish a judgment debtor’s wages, and then serving this order on the employer of the judgment debtor. The order from the Court will include the amount of the judgment, in addition to interest and costs; therefore the amount of the order will be higher than the judgment. Once the employer is served with this Order, the employer is obligated to withhold a certain sum of money from the judgment debtor’s wages each pay period. Garnishment is based on a calculation used to determine “disposable earnings”, in a similar way in which the term is used for tax purposes. C.R.S. §13-54-104. Then the disposable earnings figure is used to calculate a percentage. See, C.R.C.P. Forms 26 and 27; C.R.S. §13-54-104(2)(a). The state legislature has set out several different methods to determine the percentage, however the rules require that each method be used and whichever comes out with the smallest number will be applied.
In a garnishment, in addition to the judgment amount, interest and fees that must be paid to the court to get a garnishment will be added to the judgment, which increases the overall amount due by an indebted party. See, C.R.C.P. Form 26. A garnishment is good for 180 days, after that the process must be renewed. See, CRCP 403, § 1.
A second method available to a judgment creditor to collect on its judgment is to garnish personal property of the judgment debtor. Although personal property of a judgment debtor encompasses many different categories, the most typical personal property that is garnished by a judgment creditor is a bank account of a judgment debtor. Bank accounts that are held jointly are also subject to garnishment. Charles P. Brackney, Debt Collection: Using Garnishments and Liens in Colorado 26 (Bradford Pub. 1999). A judgment debtor obtains an order of the Court, in the amount of the judgment, interest, and costs, and then serves this Order on the bank. The bank would then be required to “freeze” this money. If no proper objection is posed by the Judgment debtor, the bank would then withdraw the money from the judgment debtor’s account, and send it to the Judgment creditor.
A third method available to the Judgment creditor is a lien against real property owned by the indebted party. C.R.S. § 13-52-102. Once a lien is recorded, the judgment creditor technically has the right to execute on the property by sale, in order to satisfy its judgment. See, C.R.S. § 13-52-102(1). However, because the transaction costs of a foreclosure are very high, judgment debtors generally just allow their liens to remain in the public records. The effect of this is that if the judgment debtor sells the property, the lien will be satisfied from the proceeds of the sale. The lien will remain against the property automatically for six years from the date of judgment. See, Id. After the expiration of six years, the judgment creditor must take affirmative action to revive both its judgment and lien. See, Id.
The final option that may be used to satisfy a judgment is a writ of execution. A writ of execution is an order by the court to allow the sale of personal property owned by the indebted party. A common example of its use would be when a creditor takes a person’s car to satisfy judgment. However, this method is usually extremely costly, because fees incur quickly for required use of the sheriff, towing companies, publication of notice of sale for a month, and storage fees during that time. Further, some personal property may be subject to exemptions as discussed below, which further eats up the amount left over for satisfaction of the judgment. See generally, Brackney, supra; C.R.S. § 13-57-101, et seq.
The second question to be answered is what assets are exempt from sale to satisfy a judgment creditor’s debt. This is applicable to the last three methods discussed above. As discussed in the section related to garnishment of wages, there is a separate method for calculating wages exempt from collection by the Judgment debtor.
The Colorado statutes identifies many of the different types of property of an indebted party that is exempt from collection to satisfy a judgment. See e.g., C.R.S. § 13-54-102. Other exemptions are found throughout the code and in federal law. Many of the Colorado assets are subject to ceilings, after which, the property becomes subject to collection.
(1) Clothing apparel up to $1,500.00.
(2) Watches, jewelry, etc. up to $2,000.00.
(3) Library, family pictures, and school books up to $1,500.00.
(4) Burial sites and mausoleum space, one site/space for debtor and each of debtor’s dependents.
(5) Household goods up to $3,000.00.
(6) Provisions and fuel up to $600.00.
(7) Any pension, compensation, or allowance arising out of service as a member of the armed forces, not subject to any limit. However, this exemption does not apply to child-support. Also included, are all Veteran’s Administration benefits.
(8) Supplies, machines, tools, equipment, books, and business materials used for the indebted party’s occupation up to $20,000.00. This exemption cannot be claimed in addition to the exemption for agricultural occupations.
(9) Library of a professional person used to carry on profession up to $3,000.00. Cannot claim this exemption in addition to the exemption above in (8).
(10) One of more vehicles or bicycles up to $5,000.00. If the person is elderly or disabled, the limit raises to $10,000.00.
(11) Cash surrender value of policies or certificates of life insurance up to $50,000.00.
(12) All proceeds of policies or certificates of life insurance upon death and paid to the beneficiary/indebted party. But if the beneficiary is the estate of the indebted party, then the exemption does not apply.
(13) All proceeds from a claim of loss, destruction, or damage due to fire or casualty.
(14) All proceeds from a claim of damages for personal injury.
(15) All federal or state tax returns for the EIC of Child Tax only.
(16) Any prescribed health aids.
(17) Any rights to traceable crime victim’s reparations.
(18) All security or utility deposits held by third parties.
(20) Public or private disability benefits up to $3,000.00 a month.
