Monitoring a Judgment Debtor

Monitoring a Judgment Debtor

On Behalf of | May 26, 2015 | Business

California is one of the few states that allows for renewal of a money judgment every ten years without any deadline on the number of renewals. One may say that as a California collection attorney, we actually grow old with the judgment debtors. Most lawyers fail to advise their judgment creditor clients that in the 1st 10 years period after the judgment was entered, they should renew the judgment after 5 years. This is a one time opportunity to effectively “compound the interest.

Here’s how it works: Lawful (10% presently) interest is being calculated annualy, and at the end of 10 years the $100,000 judgment will have increased $10,000 per year to $200,000. When renewed interest will be calculated going forward on the $200,000. BUT if you renew the judgment after 5 years it will be $150,000 and thereafter interest will be calculated at 10% of $150,000 which will increase at $15,000 per year until the next renewal. That’s lots of money-A BIG DIFFERENCE.

It is incredibly important that your attorney has the ability to monitor the judgment debtor over the long term and to check over time whether the judgment debtor is deceased. Why? California has a very short window of opportunity to complete collection efforts once a judgment debtor is deceased. Furthermore, unlike other situations where lack of notice is not prejudicial to the creditor, such as a bankruptcy filing, the California probate system is designed to facilitate a quick resolution of the probate estate often to the detriment of a judgment creditor.

The statute of limitations for filing a claim against an estate is a strict one year from the date of the debtor’s death (pursuant to California Code of Civil Procedure Section 366.2). This specific statute of limitations essentially trumps any other statute of limitations that could apply. For example, if you have a claim against the judgment debtor for fraudulent transfer, you must assert it against the now deceased debtor’s personal representative within one year of their death regardless of whether the statute of limitations would otherwise be four years on a fraudulent transfer claim.

The interesting aspect of this limitation period is that it applies regardless of whether the judgment creditor knew the judgment debtor had died! The only exception to this absolute bar is when equitable estoppel (or a specific statute) applies. See, e.g., Battuello v. Battuello (1998) 64 Cal.App.4th 842.

The second important deadline is the filing of the creditor’s claim. A creditor only has four (4) months from the date an executor or personal representative is officially appointed, to file a claim in probate. Keep in mind that the personal representative only has to give notice to reasonable ascertainable creditors. Frequently, the personal representative is unaware of your client’s judgment and neglects to provide notice of the time to file a probate claim.

A creditor’s claim may be rejected by the executor or personal administrator. If this occurs, the creditor has three months following the rejection before losing all rights to sue. The general rule is that a creditor’s claim is barred if it is not filed by the later of 4 months after the issuance of the “letters” appointing the personal representative or 60 days after the date that specific notice is given to that creditor. Creditors must file their claims with the Court and serve a copy on the personal representative.

If the creditor was unaware of the judgment debtor’s death, the creditor can petition the probate court for leave to file a creditor’s claim per California Probate Code Section 9103. The relief available however, is somewhat circumscribed. A creditor with actual notice of the pendency of the estate cannot meet the requirements under 9103 even if they failed to receive formal notice.

Further, a creditor seeking relief must not have known of the facts giving rise to the claim more than 30 days prior to the expiration of the time limits to file a claim under California Probate Code Section 9100. After that, the creditor’s claim is gone (with the exception of a secured creditor’s lien rights under an abstract of judgment). Thus, it is incumbent upon a creditor that does receive notice to file a timely creditor’s claim.

The court will not allow a petition for a late claim when the delay is due to the creditor’s mistake or negligence, which is why working with a collection attorney who has a regular process in place for monitoring the judgment debtor over time is absolutely crucial to preserve a judgment creditor’s rights against an estate.

To discuss collecting and/or monitoring a debt you are owed, contact Los Angeles commercial collections attorney Ronald P. Slates today.