Collecting on a federal-court judgment: here's a step-by-step guide to actually getting that money you won for your client in federal court. The key: effectively using the powerful citation to discover assets.
Learning what the defendant owns--the citation to discover assets
Under FRCP 62(a), you'll have to wait 10 days before initiating collection proceedings, notes Ketterman. Then, he says, you'll need to know the collection procedures in the state in which the federal court that awarded the judgment sits, since FRCP 64 requires those procedures to be used.
Illinois law permits plaintiffs with judgments to require defendants or their representatives to appear and answer questions under oath about what they own by means of a citation to discover assets, Ketterman observes. This mandatory interview is conducted at a set time and date under oath, with a court reporter present, either in court or at the plaintiff's attorney's offices, as the plaintiff prefers. If the defendant does not show up, the plaintiff may begin contempt proceedings with a motion for a rule to show cause.
Ketterman provides a handy list of the items that the plaintiff should require the defendant to produce at the beginning of the citation. In addition to the defendant's federal and state income tax returns for the last two years, securities, checking and savings account records, documents showing any equitable or beneficial interest in real estate, and the titles or other evidence of ownership of motor vehicles and equipment, Ketterman requests records concerning leases, accounts receivable, notes due, estates and trusts of which the defendant is a beneficiary, accounts of any kind in which any person is holding any item of value for the defendant for safekeeping or as custodian or trustee, safe deposit box records, and lawsuits, claims, or causes of action.
Ketterman then details the information that the plaintiff should extract from the defendant during questioning. His list includes the obvious information about cash and securities accounts and financial institutions, safety deposit box locations, and real estate, vehicles, and tools that the defendant owns. But he also asks about jobs in progress, open bids in which the defendant is competing, liens, including tax liens, and other judgments against the defendant, pending or threatened lawsuits in which the defendant is a party, any loans of money or other property made by the defendant, any money owed to the defendant, and the names of the defendant's current officers, directors, and shareholders, if the defendant is a business.
Using a citation to freeze bank accounts
A plaintiff holding a judgment should also serve citations to discover assets on the appropriate third parties. In particular, immediately after the 10-day stay on judgment enforcement is up, the plaintiff should serve a citation on the defendant's bank or banks, Ketterman says. The citation will effectively freeze any money that the banks hold for the defendant.
In fact, he says, under the laws of most states, banks may freeze even more than the amount of the judgment. In Illinois, for example, banks may freeze double the amount. Banks may not release frozen assets until a court order permits them to do so. A plaintiff may also wish to serve citations on third parties who may owe money to the defendant, since doing so will prevent their paying the defendant until a court order permits them to do so.
In a citation directed to a bank or other third party, the plaintiff will need to name a representative to appear at a specified time and date. Include also an advisory that this appearance is waived as long as the bank or other third party provides the records to the plaintiff in advance of the time stated in the citation, Ketterman says.
As he does for citations directed to the defendants themselves, Ketterman provides handy lists of records that plaintiffs should request in their citations directed to banks and other third parties.
For banks, in addition to current account statements, Ketterman advises plaintiffs to request signature cards from each account belonging to the defendant, documents showing what accounts the defendant has closed, including the dates and reasons for closing them, documents reflecting any liens, garnishments, or secured interests in any of the defendant's accounts, documents reflecting any mortgages or other interest in any of the defendant's real property, and documentation of any loans to the defendant.
For other third parties, Ketterman includes documentation of any agreements or contracts with the defendant, invoices submitted by the defendant, documentation of payments made and owed to the defendant, and documentation of any secured interests in the defendant's real or personal property, among other items.
Complete these tasks, Ketterman says, and either you'll collect on your judgment or you'll be satisfied that you did everything you reasonably could have to find assets from which you could get the judgment paid.
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|Publication:||Illinois Bar Journal|
|Date:||Feb 1, 2010|
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