Before attending, or failing to attend, an “examination of judgment debtor,” first see a debtors’ rights/bankruptcy attorney.
What Gives a Creditor the Right to “Examine” Me about My Assets?
If you are sued by a creditor, and either fight the lawsuit and lose, or, as more often happens, you simply don’t respond to the lawsuit, a judgment in favor of the creditor will be entered against you by the court. The judgment is essentially a court determination that you owe the money at issue. The entry of that judgment gives the creditor a number of new rights and remedies against you. One of those remedies is to require you to appear before the court to be examined by the creditor for the purpose of finding out how it could get you to pay the judgment.
The procedure is for the creditor’s attorney first to send you a demand for payment of the judgment and then, if you don’t pay it, to present a motion asking the judge to require you to personally appear to be examined. The creditor only has to show that it has a valid judgment against you and that it has made a demand on you to pay the judgment and you have not paid it.
What’s an “Order for Examination of Judgment Debtor”?
The motion is submitted to the court with an “Order for Examination of Judgment Debtor” for the judge to review and sign. That order requires you to appear at the court at a set time to “answer under oath questions concerning any property or interest in property” that you may have.
You are also ordered to bring with you a set of documents and papers related to your assets. Usually these would include tax returns, checking and savings account statements, documentation about any real estate and vehicles plus the mortgages and security interests against them, as well as any paperwork on any other investments or assets.
The “Order for Examination of Judgment Debtor” usually also “restrains” you from selling, transferring, or disposing any of your property and possessions in the meantime.
Should You Go to the Examination?
It’s both potentially dangerous to go, but also not to go.
You may have absolutely nothing that a creditor could legally want from you with which to pay the judgment. Every single thing you own or have any right to may be legally exempt, protected from the reach of creditors. But you may look at a list of exemptions and think everything you own is protected, but there is more to this than checking off a list. Almost certainly you could not be assured that all of your assets are protected without carefully reviewing your situation with an attorney experienced in this area of law.
What Happens If I Don’t Go?
If you don’t comply with an “Order for Examination of Judgment Debtor” by going to court when it says so, you would be violating a court order. The creditor would then have the right to send you an “Order to Show Cause,” requiring you to appear at the court to explain to the judge why you shouldn’t be held in contempt for disobeying the initial order. If you don’t appear at this second opportunity, the creditor can ask the court to issue a bench warrant for your arrest, and set the amount of bail you would have to pay to get out of jail.
Different counties and their sheriffs differ in their policies and procedures for how they handle such bench warrants. Many don’t have the resources to enforce these strenuously. But at the very least you would run a serious risk that any simple police traffic stop could turn into a very time-consuming, embarrassing, and likely expensive detour to the county jail.
Preventing the Entry of an “Order for Examination of Judgment Debtor”
If you file a bankruptcy case, a lawsuit against you by a creditor or collection agency will be stopped lawsuit at any stage in the process. It’s better to file your case to stop it before a judgment is entered. But if a judgment has already been entered and you are served with any of the documents that come after that—a garnishment, a judgment lien, or an “Order for Examination of Judgment Debtor”—a bankruptcy filing at that point would still stop the lawsuit from proceeding any further.
Specifically as to the “Order for Examination of Judgment Debtor,” when you receive it you will likely have at least a few days before the date you are being required to appear in court. The filing of a bankruptcy before that appearance date will cancel your obligation to appear. The creditor would not be able to file an “Order to Show Cause” or request a bench warrant for your arrest when you don’t appear. Indeed, if the creditor or its attorney took such steps trying to keep collecting on the judgment after being informed about your bankruptcy filing, THEY would be the ones subject to being fined for violating federal bankruptcy law.
The creditor could only attempt to collect on its judgment if it received the bankruptcy court’s permission to do so. Except in rare circumstances (generally with judgments determining fraud), the court will not give that permission. So no further collection on the judgment is allowed, and the debt that was the basis for the judgment is discharged (legally written off) through the bankruptcy case, thereby resolving the whole problem.
So, by filing bankruptcy you usually don’t need to pay any, or at least most of, the underlying debt. You avoid having to attend the judgment debtor examination, and avoid the serious potential consequences of failing to attend it.
If you ever receive an “Order for Examination of Judgment Debtor,” immediately go see an experienced debtors’ rights/bankruptcy attorney to find out your options. Better yet, see that attorney before the judgment is entered to avoid all this anxiety and risk.