Collecting on a judgment even in ideal circumstances can often be a time-consuming and complex process, and that presumes the debtor is solvent, and doing business and/or making money.
When the judgment enforcement against a debtor who is a company or legal entity, which appears to be (or is) out of business, the process can be considerably more troublesome and taxing.
Know Who or What Owes You
As with all legal matters, it is vitally important to prepare ahead of time. The best way to handle a judgement against an out of business debtor is to avoid it in the first place. Before you sue your debtor, you should gather all the information you can and be aware of the fact that if you are trying to collect against a business in California, that business may have assets and an identity distinct from the people who manage or own it. It also may have another identity that is different than the name you know the company by, and might have an identity different from the one that issues your paychecks. For example, ABC, INC. might issue your checks and might be on the company signs, but XYZ, Inc. might be the corporation that the company uses when it gets paid by its vendors or customers. Or, the owners of the corporation might personally take the company payments. These are facts you should investigate and figure out prior to suing! (These are things a good judgment collection attorney will look into)
Out of Business?
“Out of business” can mean a number of things, each of which has a different legal definition and a different effect on your ability to collect. For example, if the company has filed bankruptcy, then any attempt to collect on your part is governed by an “automatic stay” under Federal bankruptcy law and cannot proceed except in bankruptcy court.
However,”out of business” can also mean, the lights were turned off, everyone was told “sorry but you aren’t getting paid” and everything was packed in a U-Haul and trucked north on interstate 5 to destinations unknown- in which case, you may have recourse, since the business might just continue somewhere else, perhaps under a different name, in order to avoid it’s debts. In fact, the business owner may have the new corporation ready to go, and plan the whole scenario out, where he racks up a lot of debt and unpaid wages, then stiffs everyone and starts the same business over again elsewhere. It happens all the time. This is why it is absolutely crucial that you know exactly the legal conditions under which the judgment debtor is “out of business” and you do as much diligence as possible on issues of other corporations and other business names and locations, before you sue and get your judgment, which has only the name of the one “out of business” entity on it. With some research, you may have had the owners on there personally, or some other corporations of the owners you never knew about.
If your debt is considerable, collecting against a business, especially when there is a risk the owners will attempt “shenanigans” to avoid the debt, is very often a situation that demands the assistance of someone with experience. A knowledgeable collection attorney, for example, can be invaluable in figuring out what is going on and obtaining information about the business from various sources like tax authorities, county and state records offices and licensing agencies.
Very often, almost all of this information can be obtained before the case is adjudicated, which saves a ton of trouble- a bit of research up front can often be the difference between your debt getting paid in full, and you coming up totally empty-handed!
So What Do You Do?
First, understand that as someone who is owed money, you are now part of an ancient war that dates back to the first human beings: The battle between those who are owed, and those who owe. Lending of money appears in caveman days, Ancient Rome, The Bible, The Middle Ages, The Renaissance, all the way up until today- those who owe debts have been running from those they owe debts to. There are many methods of avoidance which have evolved over the years, and it is important to be familiar with them.
Secondly, understand that in general, people will do whatever they need to do to protect what (they think) is theirs. Do not underestimate what someone is capable of- Believe me when I tell you, strange and outlandish things happen all the time in the business of debtor/creditor collections.
Ultimately, if you are owed a substantial debt, you should almost always talk to a competent collection attorney in order to protect your interests. Our office fields phone calls from creditors on a daily basis and would be happy to speak with you about your matter.