Money judgments represent a court declaration that a legal liability exists. Unfortunately, obtaining the judgment is oftentimes only half the battle. HSLC attorneys and paralegals are well versed in the post-judgment collection process. Our team regularly works with the court clerk’s and county sheriff’s to sell property as a means to pay off a judgment. Other times, we find ourselves examining a judgment debtor as a means of identifying assets and breaking through a scheme designed to hide assets from creditors. Our attorneys have successfully litigated complex fraudulent transfer proceedings involving multiple corporate entities, which were designed in an attempt to withhold funds which rightfully belonged to our clients. Regardless of the situation, HSLC strives to keep our clients informed of the post-judgment collection process such that they can make the decisions which best serve their given situation.
FREQUENTLY ASKED QUESTIONS
What steps must occur between the time the court signs the judgment and the Sheriff gets to the debtor’s doorstep?
Corporations: The creditor must serve the corporate debtor with a copy of the judgment and a letter notifying the debtor of the judgment. The debtor then has a 30-day period in which it may appeal the judgment. Thereafter, the creditor may submit a Writ of Execution to the Clerk of Superior Court in the county in which the judgment was granted and once issued, submit the Writ to the Sheriff.
Individual: The first steps remain the same as above in terms of serving a copy of the judgment and the appeal period. However, before the Writ of Execution can be issued, the creditor must submit a Notice of Right to Claim Exempt Property (NOR) to the Clerk of Superior Court and have this document along with copies of a motion to claim such property. The Clerk issues the NOR which must be served by Sheriff or Certified Mail on the individual debtor. If the debtor avoids service by these means, then the creditor must re-send the documents by first-class mail to the debtor’s last known address. If service is completed by the Sheriff or Certified Mail, then the debtor has 20-days to submit the Motion to Claim Exempt Property. If service is accomplished by first-class mail, then the debtor has 20-days to file the Motion. If a motion is filed, then the Clerk determines what property is to be exempted before a Writ of Execution is issued. If no motion is filed, or if the motion is submitted late, then the Writ is issued without exemptions.
Why are NORs necessary?
The North Carolina Constitution as well as the North Carolina General Statutes provide for safe harbors for debtors to protect certain property – real and personal – from creditors. Therefore, the NOR form provides debtors with instructions as to what can be exempted and the form of the Motion acts as a guide for claiming those exemptions.
What property may be levied by a Sheriff?
Presuming no exemptions are claimed, a deputy may levy on the debtor’s real property unless the debtor is married and the spouse is not subject to the judgment (property owned as tenants in the entireties). A debtor’s motor vehicles are also at risk. Any “toys” (motorcycles, boats, ATVs) or other personal property (including furniture, jewelry, stocks, bonds, etc.) are subject to levy. A debtor’s bank accounts may also be levied upon, but not IRA’s or other pension plans. There is an old adage that you do not want to levy against anything you have to feed or house (think: a race horse or herd of cattle). There is some truth to that adage, but you must evaluate on a case by case basis.
How does a “levy” work?
If a deputy identifies property which may be subject to levy, there are two general avenues of action. In most counties, the deputy will contact the creditor to report what assets have been located, whether they are subject to liens, and how much money must be provided as a “levy fee.” The creditor can then decide what, if anything, it is willing to advance fees to sell. After receipt of the fees, then the deputy will seize the property, store it, advertise the sale, and conduct a Sheriff’s auction. The Sheriff’s Department collects a commission, and the remaining proceeds from the sale are delivered to the Clerk of Court which then credits the judgment for the amounts received and forward the funds to the creditor. In some counties, the Sheriff undertakes all these steps without requiring a levy fee or informing the creditor. First notice in these cases arrives in the form of a check from the Clerk’s Office.
What if the Writ is returned unsatisfied?
North Carolina is a debtor-friendly state – or so most creditors will tell you. If a Writ is return unsatisfied, the creditor has the door opened for additional tools to search for assets. A creditor may seek an Order in Aid of Execution to obtain access to a debtor’s bank accounts though it should be noted that there are questions at this time as to whether the old practice of obtaining this type of order via ex parte hearing is still available or whether an actual hearing in open court with prior notice to the debtor is required (needless to say the latter makes the effort unlikely to succeed in locating assets). An Order in Aid can also be utilized to seize accounts receivable owed to the debtor (but not to garnish wages). The debtor may be served with Supplemental Interrogatories or may be summoned to appear at the Clerk’s Office in the county in which he/she resides to submit to a Supplemental Examination (similar to a deposition) regarding his/her assets.
What is a “transcript of judgment”?
A transcript of judgment is used to record the judgment in counties other than the one in which the judgment was obtained. Creditors often elect “home court advantage” to file an action, then transcribe the judgment to the county in which the debtor resides and any other county in which the debtor owns property or maintains assets.