Winning a lawsuit doesn’t mean you collect the cash

I received an e-mail the other day — yet one more unsolicited piece of junk mail among the many pieces of junk mail which assault us on a daily basis in this age of the computer. I spent a moment or two skimming the contents with my finger poised over the delete key, ready to zap this irritating invasion of privacy into the land of oblivion.

Part way through the ad — which has now piqued my interest — it says: “With our course you can own your own successful business. A business which earns you substantial income now and one which could be sold in three to five years, paying you enough to retire on and travel the world.”

I am now completely hooked, and although I am very irritated with myself, having a dozen or more project deadlines to tend to, I am powerless to do anything but read on. The piece of junk continues: “A business which is extremely interesting to be in. A business in which every day is new and exciting…”

Who is not ready at this moment to offer up their first- or second-born, maybe both, to get a piece of this action? Come on, admit it. Your own business? Interesting and exciting? Retirement in three to five years? Travel the world? This one’s a no-brainer.

So what is this business all about? It is about collecting money judgments for other people. What does that mean?

We hear all the time about lawsuits — endless lawsuits. The computer age is also a litigious age. But the filing of a lawsuit is but one step, and a fairly early step, along the way from being wronged to being vindicated

You have been injured, abused, harmed, cannibalized. You visit the lawyer to discuss your claim. The lawyer must evaluate not only the merits of the claim itself, but also whether the claim is collectible.

In the typical motor vehicle accident case each party is covered by insurance. If you are injured in a car wreck which is not your fault, and if you sue the other party and obtain a judgment, you will be paid by the defendant’s insurance company.

In Wyoming, car insurance is mandatory, but the law only requires a minimum of $35,000 insurance coverage (how’s that for a crime?). Many of us carry much higher liability insurance limits, and it is typically persons who do not have many assets who insure at the minimum rates.

If you are seriously injured in a car accident which was caused by a person with minimal insurance coverage, it is very likely that your recovery against that party will be limited to the extent of the insurance coverage. You may have $50,000 in medical damages from the accident, but if there is only $25,000 in available insurance coverage there my not be any point in suing for additional dollars. Even if you obtained judgment against the other party, there would be no way to collect on the judgment beyond the $25,000 in insurance if the other party has very limited assets.

In the multitude of potential lawsuits not involving automobiles, it is far more common for there to be no insurance coverage. In those situations it is very important to assess whether the defendant has assets to pay a judgment before you begin the long and expensive process of a lawsuit, although this may be very difficult to accomplish.

In many cases, getting the judgment is the easy part. Collecting on the judgment may prove far more difficult. Getting a $50,000 judgment against John Jones does not necessarily mean that Mr. Jones instantly writes you a check for that amount, or for any amount. It simply means that you have the right to collect that amount from Jones. And good luck in getting paid.

You may have to “execute” on the judgment, that is, enforce the judgment by one or more available means. If Jones has a bank account, you may attempt to seize the funds in the account by serving papers on the bank. Or, if Jones is an employee, you may attempt to “garnish” a portion of his wages, i.e., require his employer to withhold a percentage of Jones’ paycheck. Or you may attempt to have the sheriff seize his personal property. Or, if Jones owns real estate, you may attempt to foreclose against the property, although this is typically difficult and cumbersome, especially is there is a hefty mortgage on the property which has to be paid before you can get your piece of Mr. Jones’ hide.

It may be particularly painful if you have a judgment against a business which has been incorporated and has limited assets. Let’s say Mr. Jones owns a clothing company, which has been incorporated under the name ABC Clothing Company, Inc. You are a clothing designer. You send Jones $20,000 worth of merchandise, which you have personally designed and manufactured at your own expense. Your beautiful garments are hung on the clothing racks of Jones’ boutique in Jackson Hole and they sell like hotcakes. The business pockets the money and you get stiffed.

What happens? If you cannot sweet talk or shame Jones into paying you what you are owed, your only viable options are either to hire Vinny the hit man or to file a lawsuit. If you opt for the latter, it is likely that you can only sue the corporate entity, ABC Clothing Company, Inc., because all of the paperwork has been under corporate letterhead and signed by John Jones as president of the company.

You have the same rights collecting against a corporate entity as you do against an individual, and it may well be that the corporation has sufficient assets for you to collect on the $20,000 judgment. But maybe not. If the corporation has limited assets it may be “judgment proof,” that is, the judgment may be uncollectible, and you cannot proceed to enforce the judgment against John Jones personally if the company has followed all of the corporate formalities. No one ever told you life was fair, right?

So what about the junk mail advertisement I mentioned earlier? I have been too busy meeting deadliness lately to pursue making my personal fortune. I gather that this company educates you on the ins and outs of collecting money judgments which other people have obtained, but which they have not been able to collect, and then sharing the proceeds which you squeeze out of the deadbeat judgment debtors. If you have the good sense to follow-up and make your fortune, just remember you owe me big time.