You become a judgment debtor when you owe a debt and a court orders that you pay the judgment. You can work out an arrangement with the creditor and pay the judgment in court-ordered installments, you can have your wages garnished or your assets can be seized. All non-voluntary payments you make must first be ordered by a court. Simply having a judgment against you is not sufficient for a creditor to seize your assets.
Discovery of Assets
Before a creditor can seize your assets, he goes to court and files a discovery of assets. This discovery asks you to list your assets, including those held jointly with another person or those held for you by someone else. When the judge approves the discovery, you are sent a copy of the form and you must complete it within the time prescribed or you can be charged with contempt of court. You will also receive a court date. Always go to court, or you may lose by default judgment.
Financial Assets
Financial assets are not just the cash in your pocket or the money in your bank account, but be aware that a judge can issue a turnover order and require you to turn over all the cash you have in your pocket in court. The order includes your credit union account, stocks, bonds, certificates of deposit, treasury bills and any other investment instrument that is not retirement-related, such as in an IRA or 401(k) plan. Certain pensions are exempt income, such as Social Security, Railroad Retirement and military pensions. Many federal benefits are considered exempt income, such as student aid and Supplemental Security Income, though these benefits can be garnished if you owe certain federal departments money, such as the IRS.
Property
Your property is also considered an asset. This includes real estate, such as your house, but also cars, trucks, boats, motorcycles and any other type of property that can be sold to pay your debt. Also included is anything of value that you own except furniture, home furnishings, clothing and appliances. You also must declare if you have transferred assets within the last 60 days.
Miscellaneous Provisions
If your primary residence is ordered to be sold, there must be a hearing to determine if you have enough equity in your home, less the costs of the sale, mortgage and the amount of equity you are allowed to keep in your home as guaranteed by law. If your equity won't satisfy the judgment, it won't be sold. Each state has its own laws regarding types of income that can be seized or garnished and also what can't. As examples, until 2009, public assistance payments in Oregon could be garnished to pay a debt; further, if you have an exempt pension, and that is the only source of deposits into your bank account, your bank account cannot be frozen. It's important, therefore, to research the laws in your state.
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