It is common to hear that a debtor does not have the money to pay a creditor. They may go to court and say it. They may tell the creditor or anyone else, claiming that business is slow or that they are overextended. Of course, this is not what the creditor wants to hear. But during that conversation, the debtor may say they are also owed money and understand why the creditor is frustrated.
The savvy creditor should note that any money owed to a business or individual is considered an account receivable, which is an asset. Unless exempt, all assets are available to the creditor to satisfy the judgment. The creditor can use judgment enforcement tools against a third party to satisfy the debt owed. While the debtor wasn’t good at collecting a debt, which may be why they are in financial trouble, the creditor need not be similarly ineffective.
Third-party levy is effective
A third-party levy requires a third party who owes the debtor to deliver assets (up to the amount owed) to the creditor. Satisfying the debt can involve paying cash or providing assets to the creditor.
There is a process
To execute the third-party levy, the creditor must do the following:
- Obtain a writ of execution in the county where the levy will take place.
- Deliver the original writ of execution to the sheriff’s department, along with instructions on how, when and where the levy should be served.
- Arrange for service of the levy-related documents.
- The third party must complete the Notice of Levy and Memorandum of Garnishee, including information on the amount it will turn over or explain why it will not turn over assets.
- The funds are paid to the sheriff’s office, which turns them over to the creditor.
It is useful for the creditor to understand the nature of the third party’s business and serve the levy when it has the money in hand (such as a due date for large payments to the third party).
Tenacity and detail are key
There are a lot of details involved in creating and using a third-party levy, but the creditor must also be tenacious in its goal of collecting the debt. It takes a certain kind of attorney to handle these matters.