How to Collect on a Judgment

Darrell R. Zall
dzall@kmksc.com
(414) 962-5110

Imagine that a business tried to address the open account balance with one of its customers, but these efforts were ignored. The business then filed a lawsuit to recover the funds, the lawsuit was contested, and after successfully litigating the case, the Court awarded judgment in favor of the business and entered an Order requiring the defendant to pay damages. What happens next? How do you turn an Order to pay into actual payment?

A Judgment is a legal decision made by a court or judicial body, which determines the rights and obligations of the parties involved in a legal dispute. Although it is the vehicle that permits collection of the sums awarded, it is incumbent upon the prevailing party to pursue actions that will result in collection. In other words, a Judgment is a piece of paper establishing one’s entitlement to a sum due as determined by the court. But unless the party who obtained the Judgment takes further steps to collect on it, the Judgment remains just a piece of paper.

Once entered, the party who was awarded the Judgment becomes the Judgment Creditor, and the party against whom the Judgment was entered becomes the Judgment Debtor. After successfully obtaining a Judgment, the Judgment Creditor may begin the process of collecting the amount owed under the Judgment (generally referred to as “post-judgment remedies”). The post-judgment remedies available to a Judgment Creditor can vary from state to state. Here are some steps that a Judgment Creditor seeking to enforce a Judgment in Wisconsin may take to collect the balance. Statutory law governs the tools available for collection; it is the implementation of these remedies that will establish if the Judgment will be collected.

1. Supplemental Proceedings. An Order is served upon the Judgment Debtor (or if the Judgment is entered against an LLC or Corporation, a Member or Officer) requiring that party to appear before the court to be interrogated under oath as to the assets of the Judgment Debtor. The scope of the demands and questions are far-reaching. The Order requires the Judgment Debtor to produce financial records, including tax returns, bank statements and any other material documents enabling the Judgment Creditor a comprehensive evaluation of the Debtor’s assets and liabilities. The Creditor may also request that the Court Order the Judgment Debtor to turn over assets to satisfy the Judgment.
2. Garnishment.
   1. Non-Earnings Garnishment. This is a legal process by which the Judgment Creditor can collect the Judgment owed by the Debtor by seizing property or funds held by a third party, such as a bank, credit union or an employer. A Non-Earnings Garnishment can also include rent or commissions due by a third party. Procedurally, a Complaint is drafted using the Judgment awarded and naming the third party. Once served with the Garnishment Complaint, the third party must freeze the Debtor’s assets and send notice to the Judgment Creditor, Debtor, and Court, informing them of the amounts attached awaiting further Order from the Court. In Wisconsin, certain types of property and income are exempt from Garnishment (including but not limited to, social security benefits, Worker’s Compensation benefits, disability benefits, retirement benefits).
   2. Earnings Garnishment. The Earnings Garnishment is a remedy available for a Debtor who is actively employed, a wage earner, and has available disposable non-exempt earnings that can be attached. Under Wisconsin law, a Creditor may garnish up to 20% of the Debtor’s disposable earnings for most types of debts, including Judgments. Disposable earnings are defined as the amount of Debtor’s earnings that remain after legally required deductions, such as taxes and social security. To initiate a Wage Garnishment, the Judgment Creditor, using the Judgment entered, must obtain a Court Order authorizing the attachment of the Debtor’s wages. The Creditor then serves the Order on the employer. In Wisconsin, if there are disposable earnings, they are attached for a 13-week period and must either be renewed by re-filing the action or securing a stipulation allowing the attachment to continue until the Judgment has been paid in full. There are also some professions that permit the attachment to remain active as a matter of law until the Judgment is paid in full.
   3. Execution Against Property. A Sheriff’s Execution permits the Sheriff to seize and sell the Debtor’s assets to pay the Judgment. Before a Sheriff Execution can proceed, the Creditor must post a Bond with the Court. The Bond is a guarantee that the Creditor will pay any damages that may result from the seizure of assets, if it is later determined that the seizure was wrongful or that the Creditor did not have the legal right to seize the assets. Once the Bond has been posted, the Sheriff will seize the Debtor’s non-exempt assets, and sell them at a Public Auction. The proceeds from the sale will be used to pay off the Judgment. Prior to pursuing an Execution Against Property, a determination must be made as to the value of the potential assets to be seized and whether they are exempt, the available equity, along with the anticipated costs with the seizure, storage and sale.

Collecting on a Judgment involves numerous strategic and legal decisions to harness available methods to pursue payment in an efficient manner that maximizes the likelihood of full recovery. It can be a complex and time-consuming process, and the laws governing Judgment collections vary depending upon the jurisdiction. It is important to consult with a qualified attorney to understand the legal options available. If you have a Judgment and are seeking help collecting on it, or have any questions about collection matters, please contact KMK Attorney Darrell R. Zall at dzall@kmksc.com or (414) 962-5110.