Paying the Piper: What Happens After You Get A Judgment?

We touched on this issue very briefly in Basics of Negligence, and this one seeks to delve into the issue of judgment execution on a more detailed level.  If you haven't read that article, or if it's been awhile, you should think about reading it carefully to draw some valuable context.

Two years ago, you suffered a closed-head injury in a devastating car accident, which was caused by an 18-year-old.  The at-fault driver's vehicle was covered by a $50,000/$100,000 liability policy, and your own policy includes underinsured coverage in the amount of $100,000.  So over the two years that follow, you treat and treat and treat with an assortment of medical providers.  Neurosurgeons, occupational therapists, chiropractors, you name it.  When it's all said and done and you're at your maximum medical improvement, you've racked up $350,000 in medical bills.  Since your maximum amount of coverage is $100,000 ($50,000 from the teenager's liability policy and $50,000 from your own underinsured coverage), you're left with a deficit of $250,000.  This means that settlement, even at policy limits, probably won't be a good idea in your case, so let's assume you take your case in front of the jury.  The jury sees things your way and renders judgment in the amount of $500,000 after general damages are taken into account.  

So that's great, right?  Once the judgment is rendered, that's game over, isn't it?  Welp, not so fast, folks.  Assuming that the defendant doesn't appeal the case (which is relatively common), you still have to enforce the judgment.  That means that you have a piece of paper from the court saying that you're owed an amount of money, but that all means jack squat unless you can actually collect that money from the defendant.  In most cases, this is far easier said than done.  So how do you actually go about enforcing your judgment?

Generally, you enforce your judgment by collecting a cash payment from the defendant or more often by forcing the sale of the defendant's assets, such as vehicles, vacation property, electronics, and the like.  It's important to know that (i) there is a lot of property that the law allows the defendant to exempt from an execution of judgment, and (ii) the defendant has to be put on notice of their right to exempt property before you can move forward.  It follows that the first thing you want to do is go to the Clerk of Court's office and ask for two forms; a (i) Notice of Right to Have Exemptions Designated, and (ii) a Motion to Claim Exempt Property.  You'll want to fill out the caption, case number, and other identifying information, then you'll serve these forms on the defendant via mail or sheriff.  

Once the defendant (or for our purposes, "judgment debtor") receives service of these forms, he or she has 20 days in which to move to exempt property.  This can include a certain interest in real property the debtor uses as a residence, an interest in one motor vehicle, and up to $9,000 in household items.  If the debtor doesn't move to exempt property, or doesn't have exempt property, then your next move will be to ask the Clerk to issue you an "execution."

The Clerk then sends the execution to the sheriff in the county of residence for the defendant; or in the alternative, where the property subject to execution is located.  The sheriff will personally deliver the execution to the defendant and demand payment.  If the defendant can't (or won't) render payment, then the sheriff will enforce the execution by seizing the property listed therein.  This property is then sold, and the proceeds are turned over to the Clerk of Court for satisfaction of the judgment.  If the proceeds are sufficient to satisfy the judgment, then it's very important for you (as the "creditor") to ask the Clerk to mark the judgment as being paid as soon as possible.  If you don't, the debtor can ask the court to make you do it, and guess who gets to pay the debtor's court and attorney costs if that happens?  You do!

An important note here; under the "homestead" exemption (which exists in judgment enforcement and in bankruptcy), you can't levy judgment against real property that the debtor uses as his residence (you can still levy against vacation or rental property).  However, the judgment does entitle you to a lien against all of the debtor's real property.  This means that the property can't be sold or refinanced until you're paid.  The lien against the debtor's real property automatically attaches to real property located in the county where the judgment was rendered.  If the property is in another county, you need to deliver a copy of the judgment docket (sometimes called a "transcript") to the Clerk of Court in that county.  

You may be asking a very important question at this point; "How in the world do I know if the debtor has real property in another county?"  Great question!  There are several ways to figure out what the debtor's assets are and where they're located.  First, you can ask the court to order the debtor either (i) to appear in court to testify about his or her assets, or (ii) to allow you or your attorney to look over the debtor's records pertaining to his or her assets.  Second, you can submit a set of written questions called "interrogatories" regarding the debtor's assets.

If you're thinking ahead, you're probably breaking out in a cold sweat thinking about the ramifications for the common man subject to an execution of judgment.  Today's economy, well, sucks.  Think about the most valuable assets that the average person has.  You've maybe got the house (exempt), the car (exempt), and some household items (most likely exempt).  There might be a little bit of money in the bank, but it's almost certainly insufficient to satisfy your judgment.  I like to refer to this as being "judgment-proof," and it's possibly the biggest reason why upwards of 90 percent of personal injury claims are settled before trial.

Let's return to our example.  You get a jury verdict of $500,000 and receive the maximum coverage amount of $100,000, leaving you with a deficiency judgment in the amount of $400,000.  So you're trying to enforce a $400,000 judgment against a now-20-year-old kid whose assets include no real property, a crappy old Subaru, and $218.74 in the bank.  Pretty much all of that is exempt, and North Carolina law doesn't allow you to garnish the debtor's wages.  Are you seeing the problem here?  You've won the battle by getting the judgment, but you've lost the war because there isn't any money on the other side of that piece of paper that the Clerk gave you.  The hill you're climbing gets steeper still if the debtor decides to file bankruptcy.

Yeah, I know.  It's unfair and it leaves injured (and often disabled) plaintiffs with a mountain of medical bills and no way to pay them.  But the cold hard truth is that a judgment is useless unless there's money to back it up.  That's why good insurance coverage is so important, and why it's crucial to have a good personal injury attorney in your corner if things go sideways.