In every state, including New Jersey, obtaining a judgment is just the first step in repaying a plaintiff for an injury they have suffered. Whether it be a default judgment or a drawn out trial, oftentimes the judgment is the easy part of making a plaintiff whole. Once a judgment has been entered, the plaintiff, now the creditor, needs to collect the amount owed. Post-judgment collection practices are an important, albeit tedious, part of the legal process, and creditors must follow specific rules and procedures when attempting to collect a debt. In this blog post, we'll take a closer look at post-judgment collection practices in New Jersey.
What is a Judgment?
Before we dive into post-judgment collection practices, it's important to understand what a judgment is. A judgment is a court order that declares one party (the debtor) owes a debt to another party (the creditor). In New Jersey, a judgment can be entered against a debtor in a variety of legal actions, including breach of contract cases, personal injury lawsuits, and foreclosure actions.
Once a judgment has been entered, the debtor has a legal obligation to pay the amount owed to the creditor. If the debtor fails to pay, the creditor can take legal action to collect the debt. This is where post-judgment collection practices come into play.
Rules and Procedures
Creditors must follow specific rules and procedures when attempting to collect a debt after a judgment has been entered. In New Jersey, these rules are outlined in the New Jersey Court Rules and the Fair Debt Collection Practices Act (FDCPA).
Under the New Jersey Court Rules, creditors must first obtain a writ of execution from the court before engaging in post-judgment collection practices. The writ of execution gives the creditor the legal authority to take certain actions, such as wage garnishment or property liens, to collect the debt. The creditor files this writ with the court and, once the judge signs it, sends it to the sheriff with instructions on how to execute.
Creditors must also provide notice to the debtor before engaging in post-judgment collection practices. In New Jersey, creditors must provide notice of the writ of execution and the specific post-judgment collection practice they intend to use at least 10 days before taking any action.
Typically, a creditor will want to docket any final judgment against the debtor with the Clerk of the Superior Court. This will create a judgment lien against all real estate owned by the debtor, and prevent them from selling prior to paying the judgment.
One important piece of information to keep in mind is that writs for wage executions can last for 20 years, but all other writs expire in two years. After those two years, the creditor can choose to either (1) request a new writ of execution from the court or (2) request to have the judgment recorded against any real estate the debtor owns. Once the judgment is recorded in the Superior Court, the debtor cannot sell with clear title any real estate owned in New Jersey until the debt is paid.
How to Find the Debtor’s Assets
The next step in post-judgment collections is typically finding where a debtor may be keeping their assets. Be it real estate, a motor vehicle, or bank accounts, a creditor needs to know where to direct the sheriff to begin collecting.
Generally, the first step is an information subpoena. The creditor will send the debtor a subpoena, requesting information as to assets, bank accounts, real estate owned, and any other information as to how the creditor may collect on their judgment. While this may seem like something a debtor would choose to ignore, failure to comply may result in a warrant for the debtor arrest to come before the judge and answer the subpoena.
Another option is to request a court order of discovery. To accomplish this, the creditor must file a motion with the court, who then issues an order requiring the debtor, or anyone with information about the debtor’s assets, to answer questions at a specified place and time. This order can only be issued once per year. Failure to appear and failure to answer specified questions may result in enforceable contempt sanctions.
Post-Judgment Collection Practices
Post-judgment collection practices refer to the various legal methods available to creditors to collect a debt after a judgment has been entered. Once the writ of execution is obtained, the creditor must give the sheriff some instruction on the assets to be collected. In New Jersey, the following are some of the most common post-judgment collection practices:
- Wage Garnishment: Wage garnishment is the process by which a portion of the debtor's wages are withheld by the employer and paid directly to the creditor. In New Jersey, wage garnishment is limited to 10% of the debtor's gross income or 25% of the debtor's disposable income, whichever is less. A creditor cannot collect judgments from welfare benefits, social security, SSI, veteran’s benefits, or unemployment benefits. The debtor must work in New Jersey and earn more than $217.50 per week.
- Bank Account Levy: A bank account levy is the process by which a creditor freezes the debtor's bank account and takes funds from the account to satisfy the judgment. In New Jersey, a creditor can levy up to the amount of the judgment, plus any applicable interest and costs.
- Property Liens: A property lien is a legal claim against a debtor's property that gives the creditor the right to take possession of the property or sell it to satisfy the judgment. In New Jersey, a creditor can place a lien on real property, personal property, or both.
- Judgment Debtor Examination: A judgment debtor examination is a court-ordered hearing where the debtor is required to answer questions under oath about their assets and income. The purpose of the examination is to help the creditor locate assets that can be used to satisfy the judgment.
- Seizure of Personal Property: A creditor can also seize the debtor's personal property, such as a car or furniture, and sell it to satisfy the judgment. In New Jersey, a creditor must obtain a writ of execution from the court before seizing the debtor's personal property.
