As part of running a small business, you may need to provide credit to your clients on occasion. If a customer or client fails to pay his invoice on time, legal action may be necessary to recover the money owing. Once you’ve won a small claims lawsuit against the debtor, you can use wage garnishment or a bank account levy to execute the judgment.
Finding assets
You’ll need to know who someone’s bank account is with in order to levy it. In most civil lawsuits, the losing party is required to submit the plaintiff with a list of his assets within a specific length of time after the decision. If the debtor fails to disclose this information to the court, you may request that the judge issue an order for examination.
This necessitates the debtor’s appearance in court so that you can examine him about his assets. If the debtor fails to appear, you might attempt serving subpoenas on local banks to locate his account.
You need a Writ of Execution
You’ll need a Writ of Execution from the court that issued the judgment before you may seize a debtor’s bank account. When filling out the writ, you’ll need to provide the debtor’s name or the name of his firm, as well as the debtor’s address, the bank’s name and address, and the judgment amount.
A copy of the writ must then be served on both the debtor and his bank. You can either hire a process server or have a member of the local sheriff’s office serve the debtor and the bank, depending on where your business is located.
Exemption requests
When you serve the writ of execution on the debtor’s bank, the bank is compelled to freeze the debtor’s account up to the amount of the judgment. After the account has been frozen, the debtor has a certain length of time to submit an exemption claim, which varies by state law.
Certain deposits, such as Social Security benefits, disability benefits, veterans’ benefits, military survivors’ benefits, federal student aid, and federal retirement benefits, are excluded from levy under federal law. The debtor may be eligible to exclude unemployment compensation, workers’ compensation, government aid, and domestic support payments depending on which state the judgment was issued in.
Considerations
A bank account levy can be stopped by filing for bankruptcy, so think about all of your options for collecting the judgment. Placing a lien on a debtor’s company or real estate, for example, may be a more effective way to persuade him to pay. You’ll have to submit a fresh writ of execution to collect the remaining amount owing if the debtor’s bank account doesn’t contain enough money to pay the judgment.
