Looking to execute on a judgment but need more information about the judgment debtor’s assets to collect? If so, you might consider a debtor’s exam.
A debtor’s exam provides an opportunity for the creditor to question the judgment debtor and discover information related to the defendant’s assets.
The information sought is meant to identify assets that can be used to satisfy the plaintiff’s judgment.
Types of Questions Asked
Many of the questions asked are background questions intended to learn more about the debtor. Questions typically fall within the following categories:
- Personal data and background
- Family relationships
- Past and present employment information
- Interest in other businesses or business ventures
- Banking affiliations
- Brokerage accounts, other investments, cash apps, life insurance, possible inheritances
- Ownership of or interest in real estate, investments, partnerships, business ventures, and capital
- Information related to possible income derived from business ventures, real estate ownership, or rental agreements
- Information relating to litigation (present, future, and past) and claims that may be asserted by the debtor against any parties, including but not limited to promissory notes and assigned claims
- Information related to insurance coverage maintained by the judgment debtor, utilities
Additional questions asked that are more specific, based upon the type of judgment debtor (e.g., individual or corporate), the underlying facts leading to the judgment, the industry, the judgment debtor’s assets, and more.
Example of a Judgment Debtor Exam
The following is an example of a judgment debtor exam. We were hired to enforce a judgment obtained in a personal injury action for $1,300,000 against an individual judgment debtor.
The judgment was entered against an 80-year-old individual who owned a private multi-story home. It was unclear whether they lived at the premises.
Our questions included the general topics above and more. We focused on information related to the property and other real estate owned by the judgment debtor. Once we identified the assets, we asked about the occupancy of the assets, the income derived from them, and the flow of money from the asset, or investment to the judgment debtor.
In this case, the judgment debtor rents to three separate tenants. Because of the debtor’s exam, we now know the names of those tenants. With this information, we can now restrain rents that would be paid to the judgment debtor and redirect them to pay the judgment.
We also asked about the underlying insurance policy on the property where the plaintiff’s minor child was injured. Normally, in a personal injury action, the insurer would step in and defend the case on behalf of the property owner. However, no such action was taken by the insurer in this case.
In addition to identifying the carrier, we can subpoena the insurer to learn how the judgment debtor pays the premiums and identify further banking information to restrain.
Benefits of a Debtor’s Exam
Other than the ownership of the property, nothing was known about the debtor, the underlying insurance, assets, or more until the debtor’s exam.
Although we wish to enforce the judgment, our job is for the plaintiff to be paid. If there was active insurance in effect at the time of the accident, there is a possibility that by pursuing the carrier, potential counsel for the debtor may apply to vacate the judgment, and the case could be litigated with the carrier participating. This could ultimately lead to payment by the carrier and possibly a deficiency to be paid by the judgment debtor.
For this particular case, the 80-year-old judgment debtor has no equity in the underlying property. If we were to restrain the rents, based on testimony, it would trigger a default in the underlying mortgage of the property.
Have questions about debt collection? Contact Frank, Frank, Goldstein and Nager by email or call +1 (212) 686-0100. We have the experience that pays.
