One of the many powers given to a judgment creditor is the right to subpoena either the debtor or a third party in aid of enforcing a civil money judgment entered in a New York state court. A judgment creditor may serve the judgment debtor with a “subpoena duces tecum,” wherein the judgment creditor notices the judgment debtor to appear for a deposition on a certain date and time. A process server typically must serve the judgment debtor. Therefore, the judgment creditor should provide enough time so that the judgment debtor knows to appear on the date indicated on the subpoena.
Assume there is a judgment entered against a self-employed owner of a company who has never provided any financial information to the client in their business dealings. In circumstances like these, it will be difficult to know where the debtor has assets to execute. By having the debtor appear for a deposition, the judgment creditor can obtain the books, papers, and records of the judgment debtor and determine a viable route to satisfy the judgment.
The Deposition
The deposition is usually taken before a court reporter so that it is “on the record” to ensure that the judgment debtor is being truthful in its answers to the judgment creditor’s questions regarding their assets. The judgment debtor often will be represented by counsel at the deposition. The judgment debtor’s counsel may object to certain inquiries if they are not relevant to permissible assets that would satisfy the judgment.
The judgment creditor’s attorney can ask not only about where the judgment debtor has bank accounts, but also for copies of bank statements, tax returns, and names and addresses of parties that owe money to the debtor. The judgment creditor may also ask about the judgment debtor’s past business dealings to see if the debtor purposely transferred assets out of its possession in order to avoid creditors. Purposely transferring assets is known as a “fraudulent conveyance.” If proven true, the judgment creditor can bring an action against the judgment debtor to either have the transfer reversed or provide the judgment creditor with the market value of the asset fraudulently transferred. Often debtors will fraudulently transfer assets shortly after suit has been brought. The judgment debtor will often do this because the new lawsuit is perceived as a threat to its asset holdings.
Proceeding With Duces Tecum
A duces tecum is not for all cases. It is usually reserved for those judgments where the judgment debtor’s assets are not obvious and of a monetary amount that would warrant the expense of billable time for a deposition and the expense of a court reporter.
One obvious benefit of the debtor’s examination under a duces tecum is that by having the judgment debtor come in to provide answers regarding their assets, the debtor may be more inclined to resolve the outstanding judgment.
Another benefit of the debtor’s examination is that, if the parties come to a settlement arrangement, the creditor will then have a much clearer understanding of the defendant’s assets. Therefore, if there is a default of the settlement arrangement, the creditor will know the best method of enforcement to satisfy the judgment.
Should the debtor ignore the subpoena, the penalties are the same as they would be for ignoring any subpoena. First, the judgment creditor’s attorney will make a motion to compel (appearing for the deposition) against the judgment debtor for failing to appear. Normally the court will order the judgment debtor to appear for the deposition on a certain date and time. Should the debtor again ignore the judge’s order and fail to respond to the subpoena, the creditor can ask the court to hold the judgment debtor in contempt and have them arrested.
If you have a debt collection matter you need assistance with, contact Frank, Frank, Goldstein and Nager for a consultation.
