Creditors feel victorious when they finally win the big case and obtain a judgment against a debtor for money owed to the creditor. However, if a deficiency remains after any collateral for the debt has been sold and the proceeds applied to the debt, collecting the rest of the judgment may be the hardest part of the lawsuit.
Although procedures differ somewhat among the states, collecting the judgment in Indiana begins with filing a complaint in proceedings supplemental. In connection with the complaint, the court will order the debtor to appear to testify as to the location and extent of his assets from which he may be able to pay the judgment. When the debtor appears, he is placed under oath, and the creditor’s counsel is entitled to ask a wide range of questions with regard to income, assets, debts, liabilities, and other subjects which may bear on his ability to pay. If the debtor discloses bank accounts, the creditor may submit interrogatories and a court order compelling the financial institution to post a hold on the bank account, pending further order of the court. Upon a subsequent hearing, the judge may order some or all of the account to be paid to the creditor to satisfy its judgment.
If the creditor learns that the debtor is employed, the creditor may take steps to garnish his wages. Under current Indiana law, a creditor cannot garnish the first $217.50 per week of the debtor’s net income. For any net income greater than $217.50 per week, the bank can garnish up to 25% of the income.
Additionally, in Indiana, once a creditor obtains a judgment, the judgment automatically becomes a lien upon any real estate property owned by the debtor in the county in which the judgment was obtained. For example if the debtor owns real estate in Vanderburgh County, a Vanderburgh County judgment will automatically become a lien upon that property once the judgment is obtained. If, however, the debtor owns property in another Indiana county, then the judgment will need to be docketed in that county so that it will become a lien upon the real property. Some other states require the recording of the lis pendens notice before a judgment becomes a lien upon real property. Once the judgment becomes a lien, creditors can seek to have the property sold at sheriff’s sale or simply wait until the debtor sells the property on his own. The creditor’s lien will appear on the title work performed in connection the transaction, and most buyers will insist that the lien be satisfied before the sale is closed.
Author: Laura A. Scott (bio)
Phone: 812.452.3557
email: lscott@bamberger.com
Tags: garnishment of wages, Laura A. Scott, real estate lien