I was recently retained to execute on a domesticated foreign judgment awarded in favor of my clients for defamation and damages. The defendant is basically uncollectible, however, my clients had me obtain a writ of execution and execute on all computers and communication devices in possession of the defendant in an effort to 'silence' her defamatory statements. Naturally, once that was completed, the defendant found access to new communication devices and has gone on a defamatory rampage against my clients.
New Rules for Fraudulent Transfers & Proceedings Supplementary
Fraudulent transfers beware! The Florida legislature has revamped the statute governing proceedings supplementary. The changes will go into effect July 1, 2016. The good news for creditors is that all the same avenues to attempt collection are still viable, including debtor examinations and actions for fraudulent transfers. In addition, the changes clarify that the statute of limitations for fraudulent transfers remains 20 years as opposed to 4 as set forth in the Uniform Fraudulent Transfer Act ("UFTA"). The revisions will streamline an often confusing process both with attorneys and the courts in Florida. There is also good news for debtors and third parties. Now, instead of blanket motions for proceedings supplementary followed by a fishing expedition for transfers and assets, the creditor must describe property being held by the third party before impleading that party. This will require that the creditor have a legitimate reason before dragging a potential third party recipient of a fraudulent transfer into court. The new rules also require that the third party be served with a notice to appear and directs the third party to file an affidavit explaining why the asset transferred should not be turned over to the creditor. This procedure provides the court with a process and a quick resolution of the issue. If the third party fails to comply presumably the court will enter an order requiring the asset be turned over.
Pre-Judgment Writs of Garnishment
Pre-judgment writs of garnishment against bank accounts and accounts payable can be very effective in collecting funds owed by a debtor. Florida Statutes §77.031 allows a creditor to obtain a writ of garnishment before serving the debtor with any notice. This collection tool is especially important if the creditor beleives the debtor will be quickly disposing of its assets.
Appellate Court Upholds Garnishment Exemption for Non-Resident
A few months ago I handled a claim of exemption hearing for a client seeking a head of household exemption for garnishment of his wages. My client resides in another state, but his employer is a Florida corporation and was served with a writ of garnishment in Florida. My client testified at his claim of exemption hearing that he earned a salary and provided more than one-half of the support for his minor children. The creditor's counsel argued that because my client resided out of Florida, he could not use the exemption because it is only applied to Florida residents. The Court rejected his argument and granted my client's exemption. The creditor appealed the ruling to the Fourth District Court of Appeals.
Florida Protects Marital Property
Florida provides excellent protection for collection against marital property by presuming that the property is held as tenancies by the entireties. Tenancies by the entireties means that property is held by husband and wife jointly with rights of survivorship of 100% of the property without the ability to sever the property. Therefore, a creditor cannot partition any part of the property. This allows a debtor to shield assets held jointly with a spouse. A creditor has the right to challenge the presumption but the burden is on the creditor to demonstrate that the property is not held as tenancies by the entireties to satisfy a debt due by one spouse.
Garnishment of Non-Resident's Salary/Wages: Claim of Exemptions
I recently had a non-resident client whose salary was garnished by a Florida court because his employer had an office in Florida and he had a judgment entered against him in Florida. We timely challenged the garnishment by filing a head of household claim of exemption. However, at the hearing on same, opposing counsel argued that the Florida head of household exemption does not apply to non-residents. The court disagreed reasoning that if a creditor can use Florida's garnishment statute against a non-resident, then a non-resident should be able to use the exemption set forth in the same statute as a defense and dissolved the writ of garnishment.
Collections
When handling collections of debts, what would make my job a lot easier is if the debt itself was evidenced by writing. This could be in the form of an invoice, purchase order, promissory note, personal guaranty or contract. However, any written memorandum signed by the debtor will work. I have sued on handwritten notes more than once and have always been successful in obtaining judgments thereon. I have also sued successfully on checks evidencing payment on a portion of the debt. Therefore, my advice to everyone is obtain written evidence of the debtIn addition, the writing should include as many terms as possible. For example, a contract, purchase order or invoice should include the specific terms of payment as well as provisions for interest. My clients often want me to include a claim for interest. Right now, the legal rate of interest in Florida is roughly 4.75% per annum which is rather low. By specifying the interest rate to be applied in writing, you may obtain interest up to 18% legally per annum in Florida.
Corporate Litigation: Derivative or Not?
A recent Third District Court of Appeal decision clarifies when a shareholder may bring an action on his or her own behalf against a third-party or must bring the action on behalf of the corporation as a derivative shareholder suit. A derivative action is one brought by a shareholder on behalf of a corporation for damages sustained by the corporation. An example would be when an action of a third-party causes the devaluation of the stock of the corporation. Only the corporation can bring suit for that and any collection must be shared between all shareholders. Obviously, a shareholder would prefer to bring such an action in his or her own right so that any judgment would then only be in favor of the shareholder and he or she would not have to share the award with the other shareholders.
Involuntary Bankruptcy: Effective Collection Tool
Involuntary bankruptcy can be a very useful collection technique, but definitely not one to use lightly. The bankruptcy code provides that a single creditor can put a debtor in bankruptcy who has less than 12 creditors (excluding insiders) and is owed at least $10,000.00. If the debtor has more than 12 creditors, then 3 creditors may join together to file the petition as long as the collaborative debt is also at least $10,000.00.
Collecting Against Assets of Alter Ego Corporation
Finding an alter ego corporation to an individual judgment debtor can be a very effective collection tactic. Consider the situation where the debtor owns his or her own business and draws no salary and deposits no funds in his or her personal bank account. Obviously the debtor has access to income because he or she is surviving, buying food, maintaining a home, etc. From a collection standpoint, you could garnish the debtor's salary but the business will answer no salary is being paid and you will be arguing the truth of that in court for months with no relief for your client. The debtor's bank account will also be empty because all personal expenses are being paid directly from the business to protect his or her assets from you. So what can you do?
