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Board Certified Business Bankruptcy and Creditors’ Rights attorney, Bob Bernstein, discusses post judgment discovery of assets and how a lawyer can enforce a judgment on a debtor and what it will cost you on this 5 Minute Legal Master Series video.

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Post Judgment Discovery of Assets Transcript

Once a judgment has been obtained then of course unless the debtor voluntarily pays, the lawyer has to figure out how to enforce it. The most obvious way to enforce it is to find some asset that can be levied on, have the Sheriff or the  Martial sale in order to get money to pay the judgment. This has the effect not only of creating a pot of money but also the act itself might convince the debtor that it’s time to pay.

So virtually every state has rules that permit the judgment creditor to inquire of various parties or persons about assets of the debtor. The rules generally allow the deposition or the taking of testimony under oath of any person does not have to be a party to the case does not have to be the defendant or related to the defendant.

So take the testimony of any person about the assets of the defendant. examples there might be the local banker to pose the local banker, might be the defendants spouse, might be defendants business partner in another business, might be a neighbor, any of these people may have information which the lawyer could use to create a picture of the assets of the defendant and then decide how to attack them.

The way that this post judgment discovery is implemented the ways can differ. One can be interrogatories written interrogatories served on this other person generally with a subpoena accompanying it.  Depositions are often helpful.  Request for production of documents if you were to deposing or making inquiry of the defendant herself they can be required to bring books and records with them so that the lawyer can actually sit down with this deposition and go through the checkbook or go through the Quicken  data file or the QuickBooks data file.

Same with any person that your deposing you can ask for information which is on reasonably calculated to lead to information about the assets of the defendant. This can be before or after an execution is issued. So if there’s a levee issue that returns nothing then you can go into this further discovery to try to learn where the assets are.

Sometimes this discovery is for the purpose of getting the attention of the defendant. One of my favorite stories is that years ago my father with whom I practiced subpoenaed a defendant’s wife and his girlfriend for depositions in aid of execution at the same time in the same place. Obviously when those two subpoenas were served the defendant did not want those two women in the same room at the same time and he came to us and we made a deal.   So that can be also a byproduct of the discovery process.

The court costs and fees related to that,  in a typical commercial collection matter the lawyer may decide that it’s in his interest to pursue this type of extraordinary remedy in order to collect the judgment.  Depending upon the fee arrangement he may want to ask the client to contribute something to work this.   Certainly the court costs should be paid by the client either in advance or agreed to be reimbursed they can be recovered from defendant.

Ultimately the many states have rules that allow the court costs and expenses, including fees, on this post judgment discovery which develops assets that are subject to execution allows these costs and fees to be added onto the judgment those are things that should be considered when the time comes to enforce a judgment.

Our next 5 Minute Legal Master video will feature Bernstein-Burkley, P.C. attorney Nick Krawec. He will discuss Confessions of Judgment.

The 5 Minute Legal Master Series provides expert explanations on a variety of business to business legal topics. All 5 Minute Legal Master videos feature board-certified attorneys, experts in their fields. If you are interested in hearing about a specific topic, email info@5minutelegalmaster.com.

Confession of Judgment can be a very powerful weapon in a Creditor’s Arsenal from the debtor’s point of view it can be a very onerous remedy.
One thing to keep in mind about confessions of judgment is that they can only be used in a commercial setting and for the most part never can be used involving consumer or consumer account. You may have heard of a confession of judgment by different names. It’s typically embodied as a clause in a judgment note. You may have heard of it as a cognovit note or a warrant of attorney. there’s a cognovit literacy warrant of attorney. In any event regardless of the name you put to it,each one of those documents we have a confession of judgment clause which provides certain remedies.
Now why did I say that can be a powerful weapon for creditor or an onerous remedy against the debtor? For the simple reason is that a confession of judgment note allows for the entry of judgment against the debtor or without any prior notice or hearing. Typically a confession of judgment note is used prior to the filing of a lawsuit the use of it a suit is filed will be a part another legal master presentation. I’m just going to look at it in terms of using the confession judgment note before you are in the law suit.

Judgment note or confession of judgment clause is often used in establishing an account, it can be used in credit applications, it can be used in guarantees, it can be used and has been used often in promissory notes as part of a loan transaction by lending institution. It can be used also by an attorney, we use them here often when a matter has been referred to counsel for collection,

This is a good tool, a judgement note, when payment arrangements are made by the debtor before is necessary to file suit presuming that the creditor who has referred the case for collection approves the payment arrangements.
What a judgment note can do is that memorializes the payment terms: sets forth the specific schedule and also, more importantly, sets forth the consequences that their faces in the event fo default in payment. The typical characteristically judgment note is the language that is used to establish that consequence in the event of default. You may have heard of the languages this is the undersigned hereby empowers any attorney of any court of record to appear for the undersigned and after one or more notices and after the default confessed judgment against the undersigned for the balance then due.
Typically a judgment would be confessed after a debtor has defaulted in payment. Alternatively you can negotiate in an arrangement with the debtor whereby the judgment can be confessed immediately. And either event the creditor would forbear from enforcing the judgment unless and until the debtor defaulted in its payment. You may want to use the immediate entry of judgment and forbearance if you are concerned about perhaps the debtor owning some real estate she might transfer before the payment is fully made. The immediate entry of the judgment in courts amicably a followed by payments also makes the judgment little bit more difficult to challenge.

You know if there is a history of payments made in strict accordance with the judgment note’s terms and then the debtor later defaults; it will be very difficult for the debtor to pull the tactic of I’m going to challenge the entry of judgment. Well, he’s established a history for what the payments are providing for, what notice provided for and it seems to be right along with what has been agreed upon. What’s required on a confession of judgment is that obviously the confession of judgment clause must be conspicuous.

You should include the language that the debtor is knowingly voluntarily and intelligently waived his rights to a notice and hearing prior to judgment if counsel is present in that negotiation. Specify that it was after consultation council. The signature of the debtor obligor must relate directly to the confession of judgment clause of you have debtor sign on two spots one right after the class itself and one at the end of the note. You cannot hide should not try to hide the confession of judgment clause on a separate page or the back of a credit application and don’t try to incorporate by reference in another document so the bottom level this is that confession a judgment can be very powerful weapon. Use it wisely, know the requirements and make sure you comply with requirements to make enforceable.

Thank you.

Bob Bernstein, managing partner of Bernstein-Burkley, P.C., and board-certified in creditors’ rights law and business bankruptcy law is proud to be the first featured attorney on a new educational video channel, The 5 Minute Legal Master.   The 5 Minute Legal Master Series provides expert explanations on a variety of business to business legal topics. Bob will be discussing the Use of an Involuntary Bankruptcy, who can file an involuntary and the benefits and considerations that filing entails. Videos will be released as regular intervals and will all provide helpful legal information in just five minutes.  All 5 Minute Legal Master videos will feature board-certified attorneys, experts in their fields. If you are interested in hearing about a specific topic, email info@5minutelegalmaster.com

Bernstein-Burkley P.C. is a highly regarded and respected law firm based in Pennsylvania with a national reach in Bankruptcy & Restructuring, Oil and Gas Law and in Creditors’ Rights.

There’s still time to register for this seminar!  Listen to Kirk Burkley and Kit Pettit discuss the legal issues of oil and gas law in Pennsylvania and the bankruptcy and collection issues that are associated.