New Number: 412.342.0992
The “Long Walk”
It is often said: “There can be a long walk from the courthouse to the bank.” This applies for those who have a great case in court against a person or company that is “judgment proof.” Or, you may be on the defense side of a civil litigation law suit, and wonder: “Can they get my assets, or my income, or my stuff?” Our Pittsburgh civil litigation lawyers handle these matters for plaintiffs and defendants.
Key Considerations
With any case headed for courtroom litigation, the first question should always be: is there insurance to satisfy a potential judgment? The second question should be, what if the Defendant has no assets, or is married? (A judgment against one spouse, alone, may not be enough to execute on marital assets owned jointly.)
Insurance
What kinds of insurance can cover claims made in a civil law suit? Automobile insurance covers claims regarding motor vehicles, of those injured in other cars or as pedestrian, or bicyclists. Home owner insurance, on the other hand, is much more expansive. It provides liability insurance for most kinds of negligence related to the home or otherwise, including the insured’s conduct far away from the home so long as it occurs within the policy period and is not subject to a policy exclusion. Another kind of insurance is for professional liability, for people such as doctors, lawyers, dentists, and contractors. Home improvement contractors in Pennsylvania are required to carry at least $50,000 coverage.
If the defendant to a claim turns in a timely claim to his liability insurance carrier, the carrier often pays all of the defendant’s legal expenses as well. You should talk to a lawyer about coverage issues as this can get very complicated.
Proceeding in the Absence of Insurance
OK, let’s say there’s no coverage or the available coverage is woefully inadequate to compensate the Plaintiff? Can the Defendant’s assets may be exposed to collection. Sure. Can the Plaintiff come and load the Defendant’s stuff into a U-Haul? Whoah, not so fast. First, a judgment is needed. Collection in Pennsylvania starts with the plaintiff filing suit then getting a judgment. If the Plaintiff gets lucky and the Defendant fails to timely respond to the suit, then the Plaintiff can take a judgment by default. Otherwise, the plaintiff must prove his case to get an award, which can become a judgment, assuming certain procedures are done. (Call us about those).
OK, so the Plaintiff gets a judgment, now what?
There is an expression in law in this area involving “long walks: There can be a “long walk” from the courthouse to the bank. When you contemplate collection, you need need to know what assets (such as wages, houses, bank accounts, and other stuff) can be executed upon to satisfy a judgment.
Real Property in PA
In Allegheny County, where our lawyers are located, a judgment against a defendant automatically constitutes a lien against any real property he owns within the county. The lien runs with the property until it is sold. Otherwise, the party holding the judgment must commence a garnishment proceeding against said real property to compel a sheriff’s sale, but be aware of the fees involved in compelling a sheriff’s sale.
Property in Other States
The full faith and credit clause of the United State Constitution allows you to easily transfer a money judgment from one state to another, which is necessary before you can commence collection in another state to garnish property of the defendant in another state. That said, the collection laws in the state where the property is located will govern the extent of collection. Thus, for example, if you seek to garnish real property in another state, such as Florida, said state may preclude the garnishment of real property to satisfy a judgment.
Assets That May Be Garnished
Let’s look at what assets can be garnished to satisfy a judgment. These include bank accounts in the debtor’s name, stuff (cars, clothes, furniture), ownership of stock, and intangibles (such as accounts receivable, trademark right, etc.).
Real property (including homes and investment property) can be executed upon (meaning you can take a person’s home to satisfy a judgment; in fact, a judgment in Allegheny County automatically operates as a lien against real property in this county.
Assets Beyond the Scope of Collection
In the Commonwealth of Pennsylvania, many types of assets are totally beyond the scope of collection.
Wages. This is the big one. You cannot garnish the defendant’s future wages unless in certain narrow circumstances, such as child support and landlord-tenant disputes. That’s significant, because many people rent their homes and lease their cars, leaving them with no real “asset” other than their income, if they live paycheck to paycheck. Note that you can garnish the money once it hits a bank account, but a crafty debtor (more are) will avoid depositing money in any account, and instead money orders, or cash for daily transactions, if there is some creditor out there ready to garnish a bank account.
Marital Property. The other major exclusion from collection are assets held jointly, such as by husband and wife. The technical term for this is tenancy by the entireties. But all this means is, if the defendant is married, you need to get a judgment against both husband and wife to execute on assets that they own jointly. Stated another way, you can’t cut off a spouses interest in property just because you have a judgment against the other spouse.
Assets Held by Another Entity or Person. We hear this often, “yes, I want to sue that person, his parents have lots of money.” Your judgment is only enforceable against the person specifically named on the judgment. Likewise, if your judgment is against a corporation, you cannot execute on the assets of the owners of the company, unless you pierce the corporate veil, which is an involved process through the courts, and not usually a “slam dunk.”
Thus, collection can be difficult. In many cases, settlement negotiations will turn on whether the Defendant is judgment proof. For these reasons, many lawyers describe the Commonwealth as debtor friendly because of other limits it placed on execution.
How to Approach These Cases
First, as mentioned, look creatively for any type of insurance that may be available. Insurance will cover the loss even if the Defendant files for bankruptcy. (You need to get special permission from the bankruptcy court to proceed with suit, however). The insurance claim may be denied, but often, it makes more sense be involved in a dispute concerning a fight over insurance coverage rather than fight against a judgment proof debtor.
If you are certain there is no possible insurance coverage, then the plaintiff needs to sit down with his counsel and do good investigation into the Defendant’s unprotected and recoverable assets.
Special Tools For Collection
An unsatisfied judgment will show up on one’s creditor report. If you, the Plaintiff, are fortunate, the debtor will be worried about his credit report and want to satisfy the judgment, or have a bank account he likes to use and thus does not want it frozen or garnished for any amount of time, even if there is never more than $500 in there.
Plus, those seeking a degree in medicine or law may need to satisfy certain credentialing requirements. An unsatisfied judgment can wreak havoc on any professional’s licensing status, potentially. Therefore, when a debtor claims he is judgment proof (and is thus offering to pay only pennies on the dollar to satisfy a judgment), the plaintiff may want to dig into the defendant’s background a bit.
Collection For Unpaid Construction and Renovations. Contractors, Subcontractors, and Suppliers may be entitled to not only sue for a money judgment for their unpaid labor and/or materials; rather than can hire a Pittsburgh lawyer to obtain a mechanic’s lien in many instances. A mechanic’s lien is a security interest against the property.
Judgments Relating to Vehicles. If the debt at issue relates to an automobile accident and the defendant’s failure to pay for damage or injuries caused on the road, the defendant is supposed to have insurance. If not, Pennsylvania provides a neat little remedy for those holding an unsatisfied judgment relating to motor vehicle use: you can get the defendant’s driver’s license suspended.
§ 1772. Suspension for nonpayment of judgments
(a) GENERAL RULE.– The department, upon receipt of a certified copy of a judgment, shall suspend the operating privilege of each person against whom the judgment was rendered except as otherwise provided in this section and in section 1775 (relating to installment payment of judgments).
(b) NONSUSPENSION WITH CONSENT OF JUDGMENT CREDITOR.– If the judgment creditor consents in writing, in such form as the department may prescribe, that the judgment debtor’s operating privilege be retained or restored, the department shall not suspend or shall restore until the consent is revoked in writing, notwithstanding default in the payment of the judgment, or of any installment thereof prescribed in section 1775, provided the judgment debtor furnishes proof of financial responsibility.
(c) FINANCIAL RESPONSIBILITY IN EFFECT AT TIME OF ACCIDENT.– Any person whose operating privilege has been suspended, or is about to be suspended or become subject to suspension, under this chapter shall be relieved from the effect of the judgment as prescribed in this chapter if the person files evidence satisfactory to the department that financial responsibility was in force and effect at the time of the accident resulting in the judgment and is or should be available for the satisfaction of the judgment. If insurance already obtained is not available because the insurance company has gone into receivership or bankruptcy, the person shall only be required to present to or file with the department proper evidence that an insurance policy was in force and effect at the time of the accident.
Collecting relative to a judgment requires an extensive understanding of the law coupled with the creative use of incentives to make a defendant pay. You should talk to a lawyer experienced in these matters to increase your chances of getting paid money owed to you.
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