Collecting a judgment: Persistence pays off
The association’s attorney has worked diligently to obtain a judgment against a delinquent homeowner. What can be done to ensure that the association gets paid? Is all hope lost if the judgment is initially not collectible?
The inability to immediately collect on personal judgments against delinquent homeowners is a major setback for associations and becoming more common in light of the current state of the economy, with unemployment rates at unprecedented levels and fewer homeowners having extra cash sitting in their bank and brokerage accounts. However, periodic follow-ups on files deemed initially non-collectible often result in favorable outcomes for associations.
Once a judgment has been entered, the association’s attorney must determine the most efficient, timely and economical manner to collect the amount owed. The most common methods of collecting a judgment include requesting a garnishment of a homeowner’s wages (‘continuing writ of garnishment’) or funds being held in their bank/brokerage account(s) (‘bank writ’).
A bank writ is a feasible option if the association can locate identifying bank information from a homeowner, such as a check copy. It is recommended that the association or its management company retain check images or copies from homeowners to ensure that this information is readily available if needed. Once a bank writ is prepared, it is served on the bank (referred to as the garnishee in these proceedings) which then has 10 days to file a response indicating whether there are any funds being held by them on behalf of the homeowner. If so, the funds are immediately “frozen” until such time as the writ is released by the association or ordered by the court. A copy of the writ is then served on the homeowner. If no objection is filed by the homeowner, the bank releases the funds to the court who then disburses the funds to the association.
Another method of collecting on a judgment, if the homeowner’s current employer can be identified, is by serving a Continuing Writ of Garnishment on their employer. Assuming that the homeowner remains employed, up to twenty-five percent of their wages are disbursed to and retained by the association until such time as the association’s judgment is paid in full.
So what happens if a homeowner’s bank information or current place of employment cannot be located? The association can serve Interrogatories on the delinquent homeowners. These are written questions requesting information about the homeowner’s assets, including bank accounts and brokerage/investment accounts, and current place(s) of employment. A homeowner is required to answer the interrogatories completely and under oath within ten days. If the homeowner fails to answer the interrogatories or answers them incompletely, they may subsequently be held in contempt of court which may result in the court assessing fines or even ordering the incarceration of the homeowner.
In some cases, the association may not be able to obtain any information about a homeowner’s assets and/or current place of employment, even after a contempt citation has been issued. As a general rule, it is our recommendation that these accounts not be “written-off”. For a nominal charge, it is recommended that we follow-up on these accounts every four to six months. A follow-up oftentimes results in us discovering the following critical information:
- That the delinquent homeowner is now currently employed enabling us to garnish their wages
- That a previously filed bankruptcy has been discharged or, better yet, dismissed
- A current, valid address for a homeowner where interrogatories can be served
Although we recommend at least two follow-ups, each collection file should be analyzed on a case by case basis to ensure that a collection matter is being handled as efficiently and economically as possible. The association may also want to consider a receivership or foreclosure as an option to collect the outstanding debt; these remedies will be discussed in future articles.