People looking to evade payment of an outstanding judgment find all sorts of creative ways to hide assets from their creditors. Unless a creditor knows what to look for and how to look for it, hidden assets could remain unknown perpetually. But give a judgment collection agency the opportunity to find hidden assets and it’s a whole new ballgame. The real fun starts when assets are found.
At Judgment Collectors, a judgment collection agency who services California, asset discovery is a normal part of the process. It is fairly routine. They say that the ability to uncover what debtors are trying to hide gives a collection agency an advantage. Once assets are discovered, the collection agency has considerably more leverage.
The Assets They Look For
Judgment creditors and their collection agencies look for certain kinds of assets as allowed by state law. States differ in their approach to judgment enforcement, so not all of them allow targeting the same kinds of assets. Creditors and judgment collectors are looking for anything they can legally leverage to encourage a creditor to pay.
Here are just a few examples:
- Real estate
- Financial accounts
- Retail securities
- Valuable collectibles
- Valuable jewelry
- Cars, boats, planes, etc.
Discovered assets can be leveraged in a multitude of ways to motivate payment. But once again, creditors and their collection agencies must do what they do within the scope of state law. Certain types of assets are untouchable, like a debtor’s primary residence for example.
Filing Liens Against Property
When a recently discovered asset turns out to be real property, one of the first considerations is filing a lien against it. A lien is a legal instrument that establishes a financial interest in the property on which it is placed. For all practical purposes, a debtor could not sell a piece of property with a lien on it without satisfying the debt associated with the lien.
The only difficulty with property liens is lien position. The lien holder in the first position is the first to be paid with proceeds from the sale. Second, third, and subsequent lien positions are paid in order.
Assets Prove Ability to Pay
Newly discovered assets can be leveraged by a collection agency to demonstrate that a debtor does have the resources to pay. Being able to demonstrate as much against the debtor who previously claimed to be judgment proof gives a creditor or collection agency additional leverage to take further legal action.
Discovering previously hidden assets of relatively high value could even ward off the threat of ending collection efforts by filing bankruptcy. High-value assets make it a lot more difficult for judges to approve bankruptcy requests.
There Is Always Asset Seizure and Sale
Discovering hidden assets also opens the door to judgment collection games and the ‘nuclear option’: asset seizure and sale. As a case in point, Judgment Collectors once worked on a case involving an individual who had been evading bank collection for some time. They discovered a piece of real property the bank did not know about.
When the debtor was made aware that his asset had been discovered, he suddenly faced the possibility of either a lien or the property being seized and sold. He was suddenly able to make financial arrangements to pay off the judgment against him.
When judgment debtors evade payment, their assets could end up being the difference maker. That’s why judgment collection agencies work so hard to find hidden assets. Once those assets are found, the real collection fun begins. It is when debtors have to decide whether or not they want to keep fighting.