Cecily Zamora
Winning a lawsuit does not always guarantee compensation. If the defendant is unable to pay, you may need to force them to pay by locating and seizing their assets, which can be complicated, expensive, and time-consuming. It is important to consult with an experienced attorney to understand your rights and legal options, especially regarding the recovery of legal fees, which may be possible depending on the jurisdiction and the language in your contract. Before pursuing a lawsuit, it may be wise to evaluate whether you can collect a judgment to avoid incurring litigation costs without a tangible reward.
| Characteristics | Values |
|---|---|
| If the defendant can't pay | You may need to force them to pay by locating and seizing their assets. |
| Collecting compensation | You may need to consult an attorney for guidance on the feasibility of collection efforts. |
| Recovering legal fees | In many countries, you can generally expect to recover some legal fees. However, in the United States, there is no absolute right to recover legal fees from the other side. |
| Defendant's financial situation | The defendant is legally obligated to compensate you, regardless of their financial situation. |
| Encouraging payment | You can motivate the defendant to pay by informing them that an unpaid judgment will show up on their credit report. |
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What You'll Learn
Defendant can't pay
If the defendant is unable to pay the legal debt, there are several strategies that can be employed to collect the awarded compensation. Here are some options to consider:
Payment Plans
The court may help facilitate a payment plan, allowing the defendant to pay off the debt in instalments over time. This can be a viable option if the defendant has a steady income but lacks the means to pay the full amount immediately.
Asset Seizure
The court may grant permission to seize and sell some of the defendant's assets to recover the awarded amount. This could include real estate, investment accounts, bank accounts, business income, and other personal assets such as vehicles, jewellery, or valuable possessions. However, it's important to note that certain assets may be protected if they are considered necessary for the defendant's work or livelihood.
Wage Garnishment
Wage garnishment allows the creditor to collect a portion of the defendant's wages directly from their employer to repay the debt. This is typically a certain percentage of their gross income, and there may be minimum thresholds to ensure the defendant's basic needs are met.
Bank Account Levy
Funds can be withdrawn directly from the defendant's bank accounts to satisfy the judgment. However, similar to wage garnishment, there may be protections in place to ensure the defendant's essential income is not affected.
Property Levy
Placing a levy on the defendant's property involves getting permission from the court to sell the property and use the proceeds to repay the debt. This could include real estate, cars, stocks, or bonds.
Understanding Legal Protections and Exemptions
Defendants may invoke legal protections that shield their essential income and assets from seizure. It is important to be aware of these protections and exemptions to ensure that any collection efforts are in accordance with the law.
It is important to consult with an attorney to understand your specific options and the feasibility of different collection strategies. The legal process can be complex, and an experienced lawyer can guide you in navigating the challenges of collecting from a financially strapped defendant.
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Recovering legal fees
There are some exceptions to this. For example, lenders can usually get reimbursed for legal fees expended to recover a loan, as long as the loan documents provide for it. Additionally, in certain jurisdictions like British Columbia, arbitration statutes allow for the recovery of legal fees.
The conduct of the litigants during the litigation process can also impact the recovery of legal fees. If a litigant's behaviour is seen as reprehensible by the Court, such as purposely lengthening the litigation and increasing costs for the other side, a Judge may allow the innocent litigant to recover their legal fees as a sanction against the offending party.
The type of litigant can also be a factor. For instance, in the case of a condominium corporation taking legal action against a unit owner to enforce bylaws, it has been established that the condominium corporation should receive reimbursement for its legal fees.
The recovery of legal fees is a complex issue, and various factors can influence the court's decision on who pays, who recovers costs, and the amount that should be recovered. It is essential to consider the specific circumstances and seek legal advice to understand the potential for recovering legal fees in a given situation.
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Collecting compensation
Firstly, it may be as simple as asking nicely. A surprising number of people will pay the final judgement if you simply ask politely. You can also suggest ways the debtor can easily raise the funds, such as taking a cash advance on a credit card, dipping into retirement accounts, or taking a loan against the equity in their home.
If the defendant still cannot pay, you may need to identify their assets, such as money, bank accounts, investments, inheritances, real estate, motor vehicles, artwork, jewellery, and business interests. This can be a complicated, expensive, and time-consuming process. Once you have identified the assets, you may need to force the sale of the debtor's assets to receive your compensation.
In a lawsuit involving multiple defendants, any defendant that is liable may be responsible for paying the entire award if other defendants cannot pay their share. If you are pursuing a personal injury lawsuit, it is important to note that you cannot recover damages for the same injuries twice. For example, if you are collecting workers' compensation benefits, you cannot recover damages from the same injury in a personal injury lawsuit.
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Defendant's assets
When a defendant loses a civil case, they are known as a "judgment debtor". If the defendant has stable finances, they will likely pay the judgment without issue. However, if the defendant is facing financial difficulties, the plaintiff may need to force them to pay. This can be done by locating and seizing or garnishing any non-exempt assets.
Assets that can be seized include money, bank accounts, investments, inheritances, real estate, motor vehicles, artwork, jewellery, and business interests. If the defendant owns a business, the plaintiff can potentially collect by forcing them to sell business-related equipment. Wages can also be garnished, and a portion of these can be turned over to the plaintiff until the amount owed is recouped. Other expected (future) assets that can be seized include commissions, royalties, tax refunds, insurance payouts, stock dividends, stock options, and certain types of trust income.
Retirement assets may be protected if they are in a retirement or pension plan governed by the Employee Retirement Income Security Act (ERISA). These include 401(k)s and pension plans. Individual retirement accounts and other non-ERISA plans have varying levels of protection under state law. Federal benefits paid via direct deposit, such as Social Security and Veterans Administration benefits, are generally protected from debt collection lawsuits.
To protect assets in case of a lawsuit, some people choose to establish an offshore trust, which benefits from more favourable laws and courts outside of the U.S. However, it is best to establish these ahead of any potential liability. Another option is to establish a limited partnership, which allows you to enjoy the rewards of being an entrepreneur without taking on all the risks. Corporations also offer protection, as only in cases of fraud would a person's personal assets be vulnerable to seizure.
It is important to note that hiding assets can quickly turn a civil case respondent into a criminal defendant, and failure to disclose assets when ordered to do so by a court can result in a prison sentence.
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Settling before court
However, there are also potential drawbacks to settling before court. One key consideration is that plaintiffs may receive a lower settlement amount than they would if they proceeded to court, as defendants may offer a lower amount to see if the plaintiff will accept it rather than wait for a court case. Additionally, in some cases, settling before court may be used as a negotiation tactic by the other party. Furthermore, the confidentiality of settlements has been a matter of controversy, as it can allow damaging actions to remain secret. While some states have passed laws to limit confidentiality, such as Florida's 'Sunshine in Litigation' law, it is still a factor to consider.
The process of settling before court typically involves one side making a settlement offer early in the litigation process. The parties may then hold a settlement conference, either voluntarily or as required by the court, to attempt to reach an agreement. It is important to note that settlement agreements are usually based on compromise, and neither party may get everything they want. Before attempting to reach an agreement, it is advisable to gather important records, documents, and notes related to the case. Additionally, mediation or arbitration may be suggested by either party to facilitate the settlement process. Mediation involves a trained professional, such as a social worker or lawyer, helping the parties resolve their dispute, while arbitration is typically recommended for cases involving legal and monetary issues.
In civil matters, individuals have the option to make a formal settlement offer using a specific form at least 10 days before the trial or hearing. This offer cannot be withdrawn except with the permission of the court. It is crucial to carefully consider the potential costs and outcomes of a court case before initiating legal action.
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Frequently asked questions
If the defendant is going through financial difficulties, you may need to force them to pay you. You can do this by locating their assets and seizing or garnishing any non-exempt assets. This could include the sale of the debtor's vehicle, vacation home, or personal property.
In many countries, you can generally expect to recover some of the legal fees you incurred. However, in the United States, there is no absolute right to recover your legal fees from the other side. An exception to this is if your contract specifies the circumstances in which you may be able to recover legal fees.
You can motivate them to pay the judgment by filing it with the state licensing board for their profession. They could lose their license if they fail to pay, unless they file for bankruptcy.
