Collecting on Your Judgment
By Jacob Kring
An attorney just won at the trial court and the judgment has been signed. Now it’s time to turn that judgment into money.
Do not wait until appeal deadlines run to take action. Unlike requesting a writ of execution, it is unnecessary to wait for appeal deadlines to expire before filing an application for a post-judgment writ of garnishment or an application for a post-judgment turnover order. A diligent attorney will pursue both remedies as quickly as possible, especially in instances where funds can be transferred at the click of a mouse. Both an application for a post-judgment writ of garnishment and an application for post-judgment turnover order may be issued ex parte. In Dallas County, the clerk’s office will issue the post-judgment writ of garnishment. An application for turnover order, however, will need to be presented to the court before the clerk’s office will issue the turnover writ.
Properly advise client of risks. The attorney should conduct a thorough search of both assets and encumbrances of the judgment-debtor. The search for encumbrances should include a search for UCC filings. It is important for a judgment-creditor to know that it may garnish an account with millions in it or have property seized that, if unencumbered, would fully satisfy the judgment, but the judgment-creditor may not see a penny if another entity maintains a prior perfected lien. Furthermore, in the event an account is garnished that does not have any funds in it, the judgment creditor will be responsible for paying any attorneys’ fees incurred by the bank in responding to the application for writ of garnishment. If a constable or sheriff seizes property for execution, the property will need to be transferred and stored prior to its sale. The judgment-creditor will be responsible for paying any towing and storage fees that are not satisfied by the sale of the property. Therefore, a judgment-creditor should be careful to ask a constable to seize property that will be expensive to store (large property that is not easily moved), property with little value, or property that likely has a prior perfected lien on it.
Utilize the procedures available. As a matter of course, an attorney should always obtain a writ of execution and abstract of judgment to be filed in the county where the judgment debtor maintains any real property, including oil and gas interests. Both a writ of execution and an abstract of judgment are inexpensive means to get a judgment-creditor paid. Dallas County offers a simple one page “Post-Judgment Request Form” to be used when applying for an abstract of judgment or a writ of execution.
Another effective procedure available to a judgment-creditor is a turnover order. A turnover order is appropriate for property that cannot be readily attached or levied by a writ of execution or some other legal process. Most physical property can be levied upon by a writ of execution. Typical types of property subject to a turnover order are accounts receivable, payments to be made pursuant to a promissory note, or shares of stock in a corporation.
With respect to ownership interests in a limited liability company, limited partnership or limited liability partnership, a judgment-creditor will only be able to obtain a charging order on ownership interests held by a judgment-debtor. A charging-order places a lien on the ownership interest and is a relatively ineffective mechanism to collect on a judgment. A charging order only allows a judgment-creditor to receive distributions made from the entity that would otherwise have been made to the judgment-debtor. A charging order is ineffective because it does not allow a judgment-creditor any control over the entity and a savvy judgment-debtor, still in control of a particular entity, will likely choose to not make a distribution under the circumstances.
Jacob B. Kring is a business litigation trial attorney at The Kring Law Firm, PLLC and he serves as treasurer of the Franchise & Distribution Law Section. He can be reached at firstname.lastname@example.org.