What happens when a debtor moves assets out of state?

What happens when a debtor moves assets out of state?

On Behalf of | Sep 20, 2021 | Collections

When an individual or business owes your company money, you may need to compel them to pay by engaging in collection activity. Sending letters and calling can help but may not result in the complete repayment of the debt.

When standard collection tactics don’t work, you may need to take the debtor to court. If you can show that the debt is valid, the courts can help you collect on the debt.

Court orders are helpful but have limitations

If you have gone too long without receiving any payment or if the other party has blatantly told you they don’t intend to repay their obligations, you may need to take special steps to collect on that debt. Going through the California civil courts could result in a successful claim against the debtor.

With a judgment, you may then be able to garnish their income or place a lien on major assets to compel the repayment of those debts. Unfortunately, there are certain loopholes in debt collection law that some people or businesses will happily use to their own advantage.

A California judgment will only apply to assets in California. What can you do if someone moves their biggest possession out of the state?

The Constitution and widely-adopted laws protect your rights

Every state in the country has to recognize the authority of the courts in their sister states under the Constitution. Almost all of the states have already enacted a law that makes it easier for businesses to engage in collection activity across state lines.

The Uniform Enforcement of Foreign Judgments Act (UEFJA) is a law that makes it quicker for someone with a judgment in one state to have the courts uphold it in another state. California is the last real hold out as far as ratifying the UEFJA goes, which means that you will have a streamlined process for enforcing a California judgment in any other state in the country.

Once you locate the assets, you can then take action

When an individual or business moves assets out of California to avoid collection activity, they may not leave an obvious paper trail for you to pursue.

However, once you do successfully locate their assets, you can then begin the process of enforcing your collection rights in that new jurisdiction. You will need to file paperwork regarding the judgment in the new state, which will hopefully result in the domestication of the judgment that makes it enforceable in the state that now houses those major assets.

Learning more about the complex process of enforcing a debt-related judgment can help your company collect what it is due.