Small Claims Court: You Won! Now What?

Kevin Anderson Judgments, Q & A, Small Business, Transportation

Question: We successfully go through small claims with some of our customers. What is the best way to handle or move forward to collect the judgment?

Response: Filing a lawsuit to collect a debt and winning in court gets you a piece of paper called a judgment. The judgment states the amount the judgment debtor owes you, but does not require the judgment debtor to automatically pay you.  If the judgment debtor has no money, no job, and no other assets, you probably will not be able to collect anything; the debtor is referred to as judgment proof.  So, before you start any lawsuit you need to satisfy yourself that you will be able to collect the judgment. It is not uncommon for judgments to be uncollectible, in which case you are out not only the original debt but also your time and expense in obtaining the worthless judgment.

Once you have a judgment, you should contact the judgment debtor and ask for payment. Many judgment debtors will pay. Others will need or want to make payments, which you should agree to if the judgment debtor is being honest and forthright. Any payment agreement should be in writing signed by the judgment debtor and provide that if the judgment debtor fails to follow through as agreed that you can pursue all of your rights to enforce the judgment.

If the judgment debtor refuses to pay the judgment, then the law gives you several tools to obtain payment. Unfortunately, you likely will find these tools more difficult to use than filing the lawsuit and getting the judgment.

1) Writ of Garnishment.  If you know a third party that owes the judgment debtor money, such as an employer or business that the judgment debtor provides services for as a contractor; or if you know a third party that is holding the judgment debtors’ funds, such as a bank, then you can issue a Writ of Garnishment to that third party demanding that they turn the money (to the extent of the judgment) over to you. Certain limitations apply to the garnishment of wages. You can file as many Writs of Garnishment as are necessary to collect the debt, however, each writ requires the payment of a fee to the third party.

2) Writ of Execution. A Writ of Execution is used when you want the sheriff to seize and sell property owned by and in the possession of the judgment debtor. A Writ of Execution is more complicated than a Writ of Garnishment since you need to involve the sheriff who will likely require you to post a bond.

3) Judgment Debtor Examination.  If you have no idea if or where the judgment debtor has assets, you can schedule a judgment debtor examination.  The judgment debtor is required to appear in court and answer your questions under oath. The judgment debtor examination is your opportunity to ask the judgment debtor about his job, assets, property and anything else which may lead to the discovery of assets from which to collect your judgment. Failure to appear by a judgment debtor constitutes contempt of court.  This method can be effective, but time consuming, to determine what assets the judgment debtor has.

4) Lien on Real Estate.  In Oregon, if your judgment is for $3000 or more, excluding interest, costs and prevailing party fees, your small claims court judgment automatically becomes a lien in the county where issued. If your judgment is for more than $10 but less than $3000 (with the same exclusions stated above), you have to go to the court and pay an additional fee to have the judgment become a lien. This should always be done since a judgment debtor will not be able to sell (and possibly buy) real property as long as there is a judgment lien in place.

If you know or suspect the judgment debtor owns real property in another county in Oregon, you can obtain a certified copy of your judgment and pay a fee to have it recorded in that other county. You should do this in each county where you know or have reason to believe the judgment debtor owns real property.

Further, you can register your judgment in another state, although the procedure can prove difficult depending on the state.

5) Life of a Judgment: 10 + 10. A judgment in Oregon is good for 10 years, but can be renewed for an additional 10 years if renewed before it expires. This means that a judgment can remain a lien and be subject to enforcement for a total of 20 years. So, although the judgment debtor may have nothing now, the judgment can be kept alive and enforced for up to 20 years.

As stated, enforcing your judgment can be more time consuming, confusing and difficult than obtaining the judgment in the first place. Your first step should be to talk to the clerk of the small claims court and find out what assistance and forms the court provides. This will vary from county to county, but it is the best place to start. The clerk likely will tell you to either go to a legal forms distributor (e.g., Stevens-Ness in Portland) to obtain forms or to contact your lawyer for assistance.