Enforcing Judgments: Collecting on Your Wins
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Receiving a favourable court judgment can be a huge relief after months, or often years, of litigation. However, a court judgment is simply a piece of paper stating that a party is owed compensation. While sometimes the owing party may pay up their debt willingly after receiving the court order, often times it is a far more challenging and lengthy process to collect on a judgment.
A debtor may be insolvent, making enforcement impossible. Alternatively, shrewd people looking to avoid paying their debts often maintain a complex web of corporations in an attempt to limit their liability, or through the transfer or hiding of assets.
Conventional Ways to Collect on a Judgment
Garnishments can be used to collect money through an individual or institution that owes money to the debtor. Wages, commissions, tips, bank accounts, life insurance policies and estate payments can be garnished. In order to enforce an order through a garnishment, the creditor must obtain a notice of garnishment and serve it upon the garnishee and the debtor.
There are some limitations on what can be garnished. Up to 20 percent of an individual’s wages can be garnished. The remaining 80 percent of an individual’s wages are exempt from seizure or garnishment in accordance with the Wages Act. Additionally, bank accounts with one or more co-owners can only be garnished up to 50 percent without a court order specifying otherwise.
- Seizure and Sale of Personal Property
A writ of seizure and sale of personal property can be used to seize and sell personal property belonging to the debtor, such as a motor vehicle. A bailiff or sheriff can then seize and sell the property at a public auction for a fee. Money from the sale will then be used to pay secured creditors, if they exist, before unsecured creditors, such as ones enforcing a court judgment. In the event that there is additional money left over from the sale it will be returned to the owner.
Certain assets are exempt from seizure such as clothing up to $5,600, household furniture up to $11,300 and one motor vehicle worth less than $5,650. This ensures that the debtor can maintain the basic necessities.
- Seizure and Sale of Land
A writ of seizure and sale of land can be used to seize and sell real property belonging to the debtor. Once the writ is obtained, a creditor can direct the local sheriff to seize and sell the land. The sheriff has a duty to obtain a fair price for the land. Rule 60.07 of the Rules of Civil Procedure outlines the procedures that must be followed to seize and sell property. For example, the sheriff must wait 6 months after the writ was filed to sell the land.
Fraudulent conveyances occur when a debtor transfers assets to another individual or to a corporation in an attempt to shield their assets from a creditor. The Fraudulent Conveyances Act (the “Act”) offers some protection to creditors. Under the Act the court can deem transfers of assets void where they were completed with the purpose of hiding assets from a creditor. The creditor must prove that the conveyance occurred and a badge of fraud exists. The debtor then has to rebut the presumption of fraud.
- A close relationship exists between the parties to the conveyance;
- The transaction was completed in secret;
- The transfer documents contained false statements; or
- The debtor reserved the power to revoke the conveyance.
Before initiating litigation it is important to do your due diligence on the ability to collect from a possible defendant. Litigation can be very expensive and time consuming so it is imperative to ensure that you will be able to collect on your judgment before investing in litigation. Determining what income, assets and liabilities a possible defendant might currently have and whether they are likely to obtain assets in the future through income or an inheritance can assist in deciding whether to litigate. A defendant without any assets will be nearly impossible to collect from, making a court order utterly useless.
Please contact Michael Paiva for more information about collecting on judgments, or if you require assistance with a possible litigation.