Obtaining a money judgment against another party gives a creditor access to tools that are not available outside of civil litigation. One of them is the writ of execution. A writ of execution is a court order compelling the local sheriff to seize and sell property in order to make payment. Can you guess what works best?
If you guessed real estate, congratulations! You are spot on. Real estate is such a powerful collection tool that initiating a property search is among the first things collection agencies do.
What Creditors Should Look For
Real estate comes in all shapes and sizes. So what should a judgment creditor look for? Let’s start with what is off the table: in judgment debtor’s primary residence. Most states prohibit going after a debtor’s primary residence, or at least a portion of it. We should examine both options.
The most common scenario involves a primary residence being completely off limits. A creditor cannot touch the home a debtor lives in regardless of the size of the debt or the value of the property. This is how most states operate. Yet there are states that protect only a portion of a debtor’s primary residence. There are two possibilities under this model:
1. Homestead Exemption
Most states have homestead exemptions. This is a certain value of a person’s primary residence not subject to property tax. Some states apply the same exemption to debt collection.
Let’s say the homestead exemption is $100k. If a home is valued at $150k, a creditor still might get a writ of execution understanding that the maximum he could see from a sale is $50k.
2. Nonexempt Land
a few states protect a debtor’s primary residence but not excess land around the house. So the structure and perhaps one acre are protected against writs of execution. But if the debtor owns ten acres in total, the other nine would be up for grabs.
Other Types of Real Estate
Primary residences and their associated land are generally the only types of protected real estate. Any other real property owned by a judgment debtor would theoretically be subject to a writ of execution. A judgment creditor could go after:
- Vacation properties
- Second homes
- Rental properties
- Hunting cabins and land
- Business real estate
Wits of execution can also go after a variety of business assets, including unpaid invoices and company-owned equipment and machinery. But real estate tends to be the most lucrative asset for judgment creditors to target.
2 Real-World Examples
Judgment Collectors is a specialized collection agency that pursues money judgments in nearly a dozen states. The Utah-based agency prefers real estate as their primary collection tool. Two real-world cases from their files explain why.
The first case involved a debtor who claimed he did not have the assets to pay his judgment. A property search revealed an airplane hangar in a neighboring county. Faced with action taken against the hangar, the debtor decided to pay up.
The second case involved a doctor who was making efforts to avoid paying his judgment. Judgment Collectors located a second home and initiated the process for obtaining a writ of execution. The good doctor decided it was better to refinance the property and pay his debt than have the home seized and sold.
Property is a powerful collection tool because judgment debtors do not want to lose it. If you are attempting to collect a money judgment and not finding much success, start digging around for real estate. It could be your ticket to getting paid.
