You’ve “Won” Your Lawsuit – Now What?
In most civil lawsuits, if the plaintiff wins, the result is that a “judgment” for money is entered against the defendant. Sometimes, the defendant may admit defeat and stroke a check. But in many cases, “winning” may be far less satisfying than imagined. Often, there is no instant gratification, and collecting the money will take additional time and effort – or never happen at all. If a judgment creditor (the person who won the judgment) must engage in further efforts to collect, various additional steps may be needed.
• Automatic stay. The creditor may need to wait for an appeal period to expire before undertaking collection efforts. For instance, in North Carolina, the Rules of Civil Procedure “stay” (or postpone) “execution” on a judgment during the time that the debtor can file an appeal.
• Exemptions. In some cases, the debtor may be entitled to “exempt” certain property from collection. In North Carolina, the law allows individual debtors – people, not corporations – to keep a minimal amount of assets safe from being seized to satisfy a judgment. A judgment creditor must notify an individual debtor of his or her rights and allow the debtor an opportunity to claim the exemptions. If the exemptions are duly claimed, some assets will be off the table for collection purposes. If the debtor tries to claim exemptions that exceed what the law allows, court proceedings may be necessary to determine what is exempt.
• Execution. The sheriff can attempt to collect on a judgment by “executing” on the judgment. In North Carolina, the creditor can ask the Clerk of Court to issue a Writ of Execution to the sheriff. The sheriff can use various methods to collect, such as: seizing money from the debtor’s bank account (if you know where the debtor banks, and there is money in the account); or selling real estate or vehicles owned by the debtor (assuming that there is equity in the assets, after accounting for any mortgages or other liens that have legal “priority” over the judgment). Typically, before selling real estate or vehicles, the sheriff will require the creditor to supply “advance costs” for expenses like advertising a sale and storing any seized property.
• Supplemental proceedings. If the sheriff is initially unsuccessful in executing on the judgment, a creditor may be entitled to ask the debtor to supply further information about his or her assets in “supplemental proceedings.” In North Carolina, there is no limit on the number of times that a creditor can repeat the process of attempting collection through a Writ of Execution. So potentially, a tenacious creditor can obtain Writs of Execution — one after another — for several years, if necessary.
• Judgment renewal. Ultimately, a creditor can only attempt execution on a North Carolina judgment for ten years. However, a judgment can be “renewed” by filing a new lawsuit on the unpaid debt, effectively creating a 20-year period to undertake collection efforts.
When deciding whether to file a lawsuit for money (or settle a pending one), a creditor should understand the practical consequences of “winning.” Whether a debtor is likely to have sufficient assets to satisfy the judgment is a key consideration for creditors who want to efficiently invest in a lawyer’s services. Experienced litigators can navigate the procedural hurdles of collecting on a judgment and, when necessary, help decide when to quit devoting resources toward pursuit of an uncollectable debt.
Elliot has practiced law for 25 years and is a member of the Federal, North Carolina and Forsyth County bar associations. He is an experienced litigator with major case experience in state and federal courts and in private arbitrations.