An Overview of Creditor-Debtor Law and Judgment Enforcement Techniques

 

CAUTION STATE LAW VARIANCES ! ! !

Judgment enforcement law is about as non-uniform

between the various states as any body of law.

 

Enforceability of Judgments on Appeal

What if a judgment is entered against a debtor, but the debtor initiates an appeal of that judgment: Is the judgment still enforceable despite the appeal? In most circumstances, it is -- the judgment is in fact fully enforceable although the debtor has taken an appeal.

To prevent the creditor from enforcing the judgment during the pendency of the appeal, the debtor will usually have to post an appellate bond, sometimes known as a supersedeas bond, for the amount of the judgment plus some amount to cover the creditor's attorneys fees and costs on appeal (for fraudulent transfer cases, the bond is sometimes double the amount of the value of the property transferred). In obtaining the appellate bond, the debtor will usually have to pledge sufficient assets to the issuing bonding company (read: insurance company) so that the bonding company is not exposed to losses in case the bond has to be paid. If the creditor wins the appeal, the creditor can simply collect against the bond, and then the bonding company will collect against the debtor.

If the debtor doesn't post a bond, then the creditor is usually free to collect on the judgment even though the appeal is simultaneously going on. If the debtor loses the appeal, then the creditor is of course free to keep whatever has been collected in the interim. But if the debtor wins the appeal, then the debtor can obtain a judgment against the creditor for the amounts that the creditor collected. Thus, most of the time (but not always), the creditor will set aside whatever is collected during the appeal into a special accounting pending the outcome of the case -- certainly this is the "best practice".

What if, as so often happens, the judgment exceeds the net worth of the debtor such that it is impossible for the debtor to obtain such a bond? In some states, the debtor can apply for what amounts to a hardship relief from the court staying enforcement of the judgment until the appeal is heard. In other states, well, too bad so sad. If the debtor cannot obtain such relief, it is a common practice for the debtor to file for Chapter 11 bankruptcy relief, which can buy some time for the debtor to pursue its appeal; however, this can be a bad gamble in particular circumstances, as no state court has anywhere near the immense powers of the federal bankruptcy courts to separate a debtor from its wallet.

The Fugitive Disentitlement Doctrine

Debtors who are appealing a judgment must be especially cautious not to do anything that would cause them to be held in contempt, for the creditor may use the contempt to have the debtor's appeal thrown out under the so-called "fugitive disentitlement doctrine", which basically posits something to the effect that one in contempt of court cannot simultaneously seek to obtain aid from the court. Thus, when a debtor is appealing the underlying judgment and has not posted a bond to stay the appeal, a creditor will often try to mousetrap the debtor into a contempt situation so as to get the debtor's appeal thrown out, or at least paint the debtor as an unworthy appellant before the eyes of the court.

 

Recent Articles by Jay Adkisson on Creditor-Debtor Law

 

2016.8.28 … Registered Agent Sanctioned $234,983 For Helping Ex-Husband Hide Documents Abroad In Sergeeva

2016.7.24 … Sham Mortgage Loan Flops In Pivaroff

2016.7.17 … Wyly's Private Annuities Not Exempt Under Texas Exemption Law Says Bankruptcy Court

2016.6.12 … How Olins' Antique Collection Led Him To Prison For Cheating Civil Creditors

2016.4.30 … 529 Savings Accounts Not Exempt In California Under O'Brien

2016.2.28 … Repatriation Order for Offshore Assets Denied in Lewis

For Past Articles click here

Site Pages

Other Websites By Jay Adkisson

© 2017 by Jay D. Adkisson. All rights reserved. The materials herein may not be produced in full or in any part without the express, written permission of the author. No claim to original U.S. government, state or local works. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction.  This site http://www.collectingonajudgment.com  Contact Jay Adkisson by phone to 702-953-9617, by fax to 877-698-0678, or by e-mail to jay [at] jayadkisson.com