You’ve Won! Now, How Do You Collect?

802 Legal Corner

Volume CIII, No. 6June, 2003

Harvey Mars, Esq.

In April’s column I discussed how to process a claim for money owed through the Small Claims Division of the New York Civil Court, when the amount due is less than $3,000.

Let’s now assume that you have successfully navigated your claim through either an arbitration or a trial in small claims court and you just received in the mail a judgment for the full amount of money you are owed. Congratulations! Your job is now half over.

Unfortunately, the court judgment itself doesn’t ensure that you will ever see one penny you are owed. It is essentially just a piece of paper. It is up to you now to seek its enforcement.

Judgment enforcement is probably the most important function served by civil law. Without understanding how to obtain the money which your judgment represents, the previous small claim legal proceedings would be meaningless.

Most enforcement proceedings are relatively easy to commence. All they require you to do is to obtain and fill out several forms and make a couple of phone calls to the New York City Marshal’s office.

However, for more complicated enforcement proceedings when larger amounts are owed, or when the judgment debtor (the one who owes you the money) is hiding his or her assets, it’s best to get an attorney involved. In fact, all of the following steps could be more easily accomplished by engaging your own legal counsel.

Often times I have to hire a “skip tracer” or private investigator to locate a judgment debtor’s assets.

Additionally, legal research software often contains various databases which permit attorneys to locate assets.

One of the best means to collect on a judgment is to restrain a judgment debtor’s bank account. This is done by serving – using certified mail – a restraining notice on the judgment debtor’s bank. A restraining notice is a simple legal form which can be obtained from any stationery store which carries Blumberg legal forms. There are also several legal supply stores in the city which specialize in Blumberg legal supplies.

A judgment debtor’s bank account number, of course, may be obtained from any check received from your debtor which you may have cashed. It may even be the check which was returned to you marked “insufficient funds for collection.”

If you do not know where your employer’s bank account is located, you can serve the restraining notice on any major local bank, like Chase or Citibank. (A restraint for any major bank would be applicable for any branch that bank may have.)

Chances are if your employer is still in business, he or she will have a checking account somewhere. It may, however, entail a little gumshoe work on your own to find it.

The effect of the restraining notice is to prevent judgment debtors from accessing money from their bank account – for up to one year – in the amount of up to one and a half times the judgment’s amount.

Chances are, once the restraint is registered, the judgment debtor will be on the phone with you to try to “work things out.” (The money is already there waiting for you, so you have nothing to lose by talking to your debtor.)

Further, the nonpayment issue may be an isolated problem, such as an incompetent bookkeeper or poor record keeping. It may pay for you to resolve things so that you don’t burn your bridges with an employer who may have more gigs for you.

If you can’t work out a settlement, then the next step is for you to issue an execution to the bank. The restraining notice alone doesn’t get you the money you are owed – it just freezes it in the account so you can collect it. The execution is another Blumberg form which should be prepared once the restraint has “hit” an active account.

Once the execution is prepared, you need to send it to a city sheriff or marshal, who are civil law enforcement officers. One of them will then serve the execution and levy on the account.

There are numerous sheriffs and marshals who operate within the city. Contact several and find out what their fees are. Even though they are civil servants, these law enforcement officers are permitted to charge a fee for their services. This is known as poundage. The fee, however, is paid from the judgment debtor’s assets.

Once the levy is completed, the money will be remitted by the bank to the marshal or sheriff who will deduct his or her poundage and send you a check for the total judgment owed and interest, assuming there was enough in the account to fully satisfy this amount.

There are other judgment enforcement devices such as income or property executions (these executions go after personal assets such as cars, which are sold at a public auction). There are complicated procedures involved in processing these devices, but not beyond the capabilities of most laypeople.

Finally, you may not have been paid because your employer has gone out of business or filed for relief under the bankruptcy laws. You still may be able to collect. If your employer was a sole proprietor or partner with limited exceptions, he or she might be individually liable for the debts of the company.

Even if your employer is a corporation or limited liability company, you still may be able to collect against the owners on an individual basis. While this involves a technical legal analysis in some instances, you may be able to “pierce the corporate veil.” This is a point of law which states that a corporate officer is not shielded from liability when the corporation is actually a sham or where the corporate formalities are ignored.

For instance, most corporations have a certificate of incorporation filed with the Secretary of State. If your employer claims to be a corporation but doesn’t have one, or if the certificate was revoked because corporate franchise taxes have not been paid, you may proceed with your claim directly against the corporate officers.

Another example is where the corporation has no board of directors or no board meetings.

Raise your claim that individual liability should be imposed at the arbitration or trial so that you can get a judgment which can seize the personal assets of the corporate owner.

If you are lucky, you will never need to concern yourself with anything in this article – or anything in the last article, either. And remember, the best protection against deadbeat employers is a union contract. Never forget this when you take a job.

Neither this nor last month’s Legal Corner article should be construed as formal legal advice given in the context of an attorney-client relationship.