Creditor’s Rights

Q. Our company recently won a judgment in Virginia against a company located in Washington, D.C. However, that company refuses to pay the judgment. How can we collecting on the judgment?

A. There are various avenues for collection. An important initial step is to become a secured creditor by obtaining a lien on the debtor’s property by docketing your judgment in the county where the company owns any property. Thereafter, you may be able to force a judicial sale to satisfy the debt. If you discover that the company has depleted its assets to avoid paying your judgment, you may pursue an action to reverse the transfers or conveyances.

Q. Our company had a contract with another company who breached the contract and has since gone out of business. I think the people in that company formed a new company. Can I sue the new company for the contract breached by the company that went out of business?

A. Yes you could sue the new company if it is operating as a successor in interest to the defunct company.

Q. Someone owes me a significant amount of money. When I asked him for payment, he told me that he transferred some of the money to a family trust, and the rest to his wife. He told me that since the trust and his wife never had any obligation to me, the money is now gone and I can’t collect. Is that true? What can I do to get my money now?

A. A debtor cannot ordinarily conceal assets away from a creditor by transferring it somewhere else and getting off the hook. Most states have statutory provisions making it clear that if a person owing money to another tries to shift his or her assets away to avert the debt, such transfer can be reversed if certain legal steps are taken by the creditor. Many states would consider such a transfer to possibly constitute a preferential transfer or fraudulent conveyance, which are prohibited. The creditor should obtain counsel to implement the steps to reverse such transfers and get his money.

Q. I obtained a judgment against a company in a Virginia state court, and that company moved to Maryland. The person who runs the business changed the name of the company and its location, but is still doing the same type of business with the same staff. I get the feeling he has other judgments that he may be trying to avoid. Can a company skip out of liability by changing its location, and how can I enforce a judgment from one state in an entirely different state?

A. This is not uncommon. Some companies try to avert paying their debts by switching office locations and names. If the “new” company is not really new at all but is still essentially doing similar work with similar staff, and is owned by most of the prior owners, it may be subject to “successor liability.” Creditors counsel may be retained to attack the company and perhaps its owner as well to prevent it from skipping out on payment obligations.