Collection law suits in California
What often brings a prospective bankruptcy client to my office is the filing of a collection suit by a creditor. Almost invariably, the client has leapt to two incorrect assumptions: one is that the world as they know it is coming to an end; and two, they don’t have to do anything until the date set for the case management conference, months down the road.
On the issue of the implications of a lawsuit, it is a step toward a judgment in favor of the creditor. A judgment is a determination that the debtor owes the amount of the debt and usually the creditor’s expenses to get the judgment. A judgment entitles the judgment creditor to enlist the coercive power of the state to collect that judgment by levy, lien or garnishment.
A judgment in California does not automatically constitute a lien on the debtor’s assets, as it does in Georgia where my colleague Jonathan Ginsberg practices. Jonathan writes that a judgment creditor is automatically a secured creditor.
In California a creditor with a judgment must take an additional step to create a judgment lien. A judgment lien on real estate is created when an abstract of judgment, issued by the court after entry of judgment, is recorded in the records of the county recorder. A judgment lien on personal property is created by filing a notice of judgment with the Secretary of State.
A judgment lien allows a creditor to execute on that lien through the courts. In that process, even outside of bankruptcy, the judgment debtor may claim an exemption in certain kinds of property. The California state exemptions are set out in Bankruptcy in Brief.
In short, getting a judgment is just a step toward actually taking something from the judgment debtor. All these steps take time and cost the creditor something. The filing of a suit may be a good indicator that the client needs to do something proactive about their financial situation but it is not an emergency.
More about the second erroneous assumption tomorrow.
March 27th, 2007 at 8:31 am
[...] Original post by Administrator [...]
March 27th, 2007 at 9:07 am
[...] If a judgment has been issued against you in a collection case, your creditor becomes a secured creditor instead of an unsecured creditor. Secured creditors have more rights than unsecured creditors. In most States, a judgment creditor can satisfy its judgment by garnishment against your bank account or your wages, although in some States (such as California), the judgment creditor must take additional steps to have the right to take your property away from you.  A judgment creditor can also place a lien against any real estate that you own in the public record. This lien will encumber your property and will need to be paid before you can sell your real property. Every State has its own rules about how much a judgment creditor can seize from you at any one time and about the judgment creditor’s rights against real and personal property. In Georgia, where I practice, the process by which a judgment creditor can move against a judgment debtor is relatively fast and not particularly burdensome. In other States, the judgment creditor must expend time and money to secure its judgment. California bankruptcy lawyer Cathy Moran writes that judgment creditors must file additional court paperwork before it can excercise their rights against California judgment debtors. In a Chapter 13 bankrupcy, a judgment creditor has the right to file a secured claim. Typically, secured claims are paid in full in a Chapter 13 and they are paid before unsecured creditors. [...]
April 24th, 2007 at 2:06 pm
We were in a Chapter 13 bankruptcy in Tennessee and one of our creditor’s was not discharged. As a matter of record, the judge issued a judgment against what was owed to this one creditor and their atty’s fees. So, the saga begins…The creditor has never issued a levy, lien or garnishment. We have attempted to set up a payment arrangement or something with the creditor but they will not agree to anything…actually they will not even talk to us. Our question is, How long does the judgment stay associated with the SS# or credit report?
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