Often during the debt collections process, the process of obtaining a judgment against a debtor is simple, but the actual collection of the debt is a challenge. Judgment debtors will sometimes transfer their real property, cash, and other assets to a third party before the judgment can be obtained. The judgment debtor may even close their doors and reopen a duplicate business with a new name and entirely new identity. Luckily, the State of Florida provides a recourse to creditors in this unfortunate situation called proceeding supplementary.
This Florida statute allows a creditor to seek collection against the third party who received the transfer in the same case as which the original judgment was entered. The statute additionally allows for the court to require that the third party recipient submits any and all of the judgment debtor’s assets to the creditor in order to satisfy the judgment. Proceedings supplementary applies to new business entities created by the debtor and provides an expedient solution by which creditors can seek to collect on the judgment
Proceedings supplementary is a “hidden gem” when it comes to post-judgment collection tools that creditors have at their disposal in the State of Florida. We are amazed at how little this statute is actually utilized by creditors (and their attorneys) to collect judgments in Florida. Governed by Florida Statute 56.29, the Florida proceedings supplementary statute provides a potent tool to reclaim fraudulent transfers of judgment debtors. In an overwhelming percentage of the cases our firm has litigated, judgment debtors have engages in fraudulent transfers of some kind, necessitating additional creditor action. The most obvious fraudulent transfers are those involving real estate.
Florida’s real estate records are available to the public and provide quick insight into a transfer of real property for less than adequate consideration. However, many times debtors engage in far more nuanced fraudulent transfers, such as “equity stripping,” transfers of money or stock holdings to relatives, removal as an officer of solvent businesses, and several others.
FLORIDA CREDITOR COLLECTION
The use of subpoena power is underused by many attorneys in the post-judgment collections context. An ideal collections strategy should almost always involve a subpoena to the records custodian of any financial institution where the judgment debtor banks, or has banked in the past. The same standard goes for brokerage houses, investment banks, etc. For institutional lenders such as banks, most judgment debtors would have provided a financial statement disclosing these assets (generally at the origination of the loan). While judgment debtors will be secretive and reticent to brag about any sort of wealth in the post-judgment discovery context, the loan origination file should be replete with useful financial information.
It is important to remember, when the debtor wanted to borrow the money at the loan’s origination, they were likely very forthright and quick to disclose as much wealth as possible. A subpoena should be issued to the records custodian of any financial institution where the judgment debtor disclosed accounts. The subpoena should ask for bank statements copies of both the front and backs of checks and evidence of any outgoing wire transfers. Many times these subpoenas produce evidence of a fraudulent transfer. For example, a $200,000 check from the judgment debtor to a relative just prior to the entry of a judgment would constitute solid grounds for invoking Florida’s proceedings supplementary statute. The judgment creditor’s attorney would then seek to implead the third party transferee into the original action (through a court order). This would allow the judgment creditor to hold the transferee accountable, and potentially obtain a new judgment against the new party.
Additionally, the court has the authority to unwind the transfer. In the context of a fraudulent transfer of real estate, this can be especially valuable, as the title to the real property would revert back to the judgment debtor’s name, and be available for levy and sale by the sheriff.
DEBT COLLECTION LAWYER
Here at the Law Offices of Paul A. Humber P.L., we have seen it all when it comes to fraudulent transfers by judgment debtors. We know how to aggressively pursue judgment debtors as well as transferees who seek to circumvent the law and defraud their creditors through the use of fraudulent transfers. Our firm has an extensive amount of experience with commercial post-judgment enforcement and collections proceedings. We have accomplished successful outcomes in many cases where a creditor has a commercial or retail judgment in Florida. We do so in large part through the use of the Florida court system’s generous proceedings supplementary statute.
It is to our clients’ benefit that our attorneys possess a thorough understanding of this area of commercial law. Proceedings supplementary provides an efficient and effective way to collect on your judgment in the event that the debtor has attempted to misplace their assets to a third party. In order to find out more about how our firm can be of assistance in this situation, contact one of our creditor rights attorneys for a consultation on your potential legal recourse.