How to handle a debtor who is working under the table to avoid paying

How to handle a debtor who is working under the table to avoid paying

On Behalf of | Nov 8, 2023 | Firm News

Some people who owe money to others do anything they can to avoid paying what they owe. For example, some people quit their jobs. They know that creditors can take them to court to garnish their wages, so they look for a way to earn income that is safeguarded from a risk of collections.

In some cases, they may even place themselves in a position where they have no reported income whatsoever. Those who are trying to avoid judgments and wage garnishment often seek under-the-table payment arrangements in which employers pay them without reporting the income to the state and federal government. Companies sometimes agree to such arrangements because they eliminate taxes and other employer responsibilities.

When creditors have reason to believe that a debtor who refuses to pay has an unreported source of income, they can request a Debtor’s Examination.

What is a Debtor’s Examination?

Under California law, it is possible to request a thorough examination of someone’s financial records if they have refused to properly pay their debts. When requesting a Debtor’s Examination, creditors can also submit a request for a subpoena signed by the court clerk. The subpoena can give a creditor access to pay records and bank statements.

Creditors can then schedule a hearing in court where the person who owes money will have to provide crucial records and answer questions. If they lie during the Examination, they could face penalties if that fact comes to light. Generally, debtors will need to provide a statement of personal assets unless they pay the amount they owe in full before the scheduled court date.

Although it can be a lengthy process, a Debtor’s Examination does provide a creditor with an opportunity to hold someone accountable for seeking out under-the-table payments as a way to avoid their financial obligations. They could locate their employer or find assets that can help repay the outstanding debt. Financial records can help show that someone does have money coming into their household, and questioning can lead to information about where they acquire financial support.

Learning more about California’s laws about creditor rights and debt-related legal actions may benefit organizations dealing with someone who doesn’t want to fulfill their financial obligations. Seeking legal guidance accordingly can be helpful as well.