Judgment creditors, the winning parties in civil judgments involving a monetary award, have the unenviable task of searching for debtor assets. Unless a debtor is willing to be forthcoming and truthful, a creditor might never know the full extent of his assets without actually doing a search. But here is the thing: any such search needs to be done quietly.
Looking for debtor assets quietly does not mean breaking the law. It does mean conducting a search without letting the debtor know what you are doing. The reasoning is simple: debtors made aware of property searches could take steps to hide property so that it cannot be leveraged for payment.
Liquid and Non-Liquid Assets
Judgment Collectors, a Salt Lake City collection agency specializing in judgment collection in multiple states, says that judgment creditors are after different types of property. They can all be divided into one of two categories: liquid and non-liquid assets.
The simplest way to understand liquid assets is to think of cash. Liquid assets include things like:
- Wages and bonuses
- Cash in checking and savings accounts
- Earned income (apart from wages)
- Lottery winnings
- Gambling winnings
Liquid assets are incredibly attractive to judgment creditors because a writ of garnishment makes those assets available for debt payment. Where liquid assets are insufficient, creditors will look for the second type of asset: non-liquid.
Non-liquid assets are so named because they need to be converted to cash – or liquidated. The most common example of a non-liquid asset is real estate. Real estate is valuable, but it has to be converted into cash through a sale or transfer.
Debtors Try to Protect Their Assets
As one might expect, debtors attempt to shield their assets from debt collection. And in some cases, they do so on advice of their attorneys. But even without such professional advice, a debtor who suspects that a creditor is looking for assets is more likely to go out of his way to hide them.
Liquid assets can be hidden by transferring them to undisclosed bank accounts. Non-liquid assets can be hidden by transferring ownership to a family member. If a non-liquid asset is located outside of the county in which the judgment was rendered, a debtor may simply refuse to disclose its existence.
Judgment Collectors once worked on a case involving an airplane hangar located in a neighboring county. The judgment debtor did not bother to disclose the existence of the hangar initially. But Judgment Collectors found it through a typical property search. Once found, it provided leverage that encouraged the debtor to pay up.
Debtors Don’t Need to Know Creditor Plans
The whole point of searching quietly is to not give debtors any inkling of a creditor’s plans. Going back to the airplane hangar example, the debtor may have taken further steps to shield his property had he known Judgment Collectors was conducting a property search. Any attempts to hide the property would have further delayed payment. A worst-case scenario would have been not discovering the property at all.
Here is the deal: if a creditor needs to go through a property search to find hidden assets, he is likely dealing with a debtor who has no intention of paying. That debtor doesn’t need to know the creditor’s plans. In fact, it’s best that he does not know them.
Property searches should be conducted quietly. Creditors should do everything within their power to not disclose what they are working on. Otherwise, debtors and their attorneys can take steps to protect assets. They can take steps to avoid paying what is rightfully owed.
