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Pre-Litigation Asset Search - What it Should Cover and How It Can Save You Time and Money

October 23rd, 2018

This article is meant for creditors who are considering litigation with regards to a debt. It provides them with resources they can use to help determine what property the debtor has, and the likelihood that they will pay the debt.

Investigate the debtor first

If you are considering filing a lawsuit to collect on a debt, in most cases, you should first thoroughly investigate the debtor. The reason is to locate the debtor’s assets and learn about their history to determine the likelihood that the debt will be re-payed.  

Most of the records you need can be obtained without a judgment or subpoena. However, before we get into what an asset search entails, and to explain why you should investigate the debtor before filing suit, here is a brief description of how the debt collection process normally works. 

Debt collection process

First, a creditor will send a payment request letter to the debtor. If there is no result, the creditor will file a lawsuit in circuit court or in small claims court (for small amounts of money). If the creditor is successful, they will receive a judgment against the debtor.  

After obtaining the judgment, the creditor can attempt to collect the judgment by filing a lien on the debtor’s house or a writ of execution with the court, which is a document that gives the sheriff instructions on what property to seize. The creditor can also file a writ of garnishment to collect a percentage of the debtor’s wages. However, just because the creditor won, does not mean that they will be able to collect on the judgment. 

how the debtor might try to stop enforcement of a judgment

The judgment debtor may claim exemptions, or file for bankruptcy.   
Note: Exemptions are not applicable if the judgment debtor is a corporation. 

The debtor can simply wait to receive the writ of execution from the sheriff before taking action. This writ will often come with paperwork that the judgment debtor can fill out and file at the courthouse to claim exemptions. The debtor usually has 30 days to file (laws vary by state) and can claim all of the items on the writ, and any other property, bank accounts etc. that they have. The debtor will have the opportunity to do this before the sheriff can take the possessions on the writ and before a lien against the debtor’s property can be finalized.

It is then up to the judge to decide if the property, wages, or other assets are necessary for the support of the debtor or his or her family. Also, the judgment debtor might file for bankruptcy, which in most cases will do away with the judgment and leave the creditor with nothing. Therefore, before taking legal action, it is often best to investigate the debtor to assess if the person will be likely to pay the debt. This is called an asset search. 

what information can an asset search produce, tips, & how it can help you

An asset search usually begins with an address search. This search will allow a person to find all of the counties where the debtor has lived. They will then be able to locate some of the records by contacting the courthouse or other government entity in that county. These public records can be often found by searching the website of the courthouse in that county.  

If the records are not online, some courthouses require that you make a physical visit or (if a trip isn’t practical) a written request. Still others, that do not have on-line access, will provide basic details of the records over the phone. Many clerks are very friendly and helpful in this regard.

Assets & Records That Can Be Found 
Note: This is not an all inclusive list, but covers most types of assets.

  • Motor vehicle, watercraft, & aircraft registration
  • Inheritance 
  • Trusts
  • Safe deposit boxes

Bankruptcies  
Visit pacer.gov to search for these. Bankruptcy is always a federal case, so you will find out if the debtor has one or has recently filed for one by using this website. However, you will need to register to use this service; registration takes about two weeks.  

Bank Accounts 
With a judgment, bank accounts can be located by an information broker. The search is not guaranteed to produce an account, but when successful, they are worth the cost. If the debtor’s bank account)s are found and you have a judgment, you can attach them to the writ of execution for collection. 

Mortgages 
Sometimes you can find the debtors current employer in this document.

Employer  
Finding the debtors current employer can allow a judgment creditor to file a writ of garnishment with the court to garnish wages. Intermittently, they can be found in public records. If you can’t find them this way, then there are data brokers who can help you locate them. If none of these options work, the employer might still be found by conducting surveillance on the debtor.

Real Estate and Deeds 
After locating them, and depending on the debtor’s financial status, you might be allowed to file a lien against the person's house or property. In addition, look for recently sold property and property sold to known associates. It is a common practice for a debtor to sell property to a trusted friend that they will get back after their financial troubles are over.

Judgments 
These public records show a history of lawsuits against the debtor, such as amounts, names of the parties involved, case status, what party (if any) won the judgment, and if it was released. (payment was made) All of which is useful information to creditors who want to know how much debt they have, and if the debtor has paid his or her debts in the past.

Uniform Commercial Code (UCC) Filings 
They are records of liens kept by the Secretary of State and can normally be looked up on their website for a fee. Basically, liens are a stake that an entity has in the debtor’s property until that property has been paid off. If creditors currently have liens on the debtor’s house, vehicle, or land etc., you can (if the judge allows it) place a lien. However, you will have to wait until all previous liens are satisfied before you have the chance to get paid.

Trash Swapping
This involves removing the debtors trash and replacing it with someone else's
trash. This can only be done if the trash is located on public property. Much of the assets
mentioned in this article can be found by this method. Be sure to know local laws that might
prohibit this activity.

Other records worth checking

Child Support Orders

Criminal Records 
Finding these can shed light on the character of the debtor.

Warrants 
If the debtor has an extensive criminal record, you might want to check for warrants, since the person may have difficulty paying a debt if they end up in jail. These can be found at the courthouse where the warrant was issued. They are normally in the county where the debtor lives or visits regularly. 

conclusion

After all of the searching is over, you will have a better idea of the person’s financial status and history. If you end up deciding that the debtor will probably not pay, or that seizing the debtor’s property will force them to file for bankruptcy, you can still try to get a judgment, and can perhaps use it to obtain a lien. 

Three ways that this can pay off are: 

  • The debtor is much less likely to file bankruptcy due to a lien, then if he or she was faced with losing property.
  • The person might pay the lien in the future if they decide to apply for a loan, credit card, or some other type of credit.
  • This could take many years to materialize, but at some point in the future, the debtor may sell the property and be required to pay the lien with the proceeds.
When it comes to the person's criminal history, a criminal record search can show you the debtors character. Someone with a criminal record is far less likely to repay a debt, then a person with a clean record who might want to make things right, but perhaps has fallen on bad times.

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