Debt collectors must follow a process before garnishment is permitted. After obtaining a judgment and docketing the judgment, a creditor will need to find out your ability to pay the judgment, or the creditor’s ability to collect on the judgment. The creditor will want to know bank accounts, earnings, or other assets you have.
Is Bankruptcy Right for You?
Maybe you have no assets. Maybe you are considering filing for bankruptcy. You should talk to an attorney about your particular circumstances, assets, and liabilities, to determine whether bankruptcy is the most beneficial course of action for you.
Is Negotiation of Debt Right for You?
You may also want to talk to the attorney about negotiating the debt with the creditor. When a creditor learns that bankruptcy may be the only option for you unless another agreed is made, the creditor may be willing to work something out with you. Most creditors understand that money in hand is always better than the hope of more money in the future.
Many, though not all, types of debt are dischargeable in bankruptcy, and it may be in the creditor’s best interest to work out a way for you to repay some of the debt so that the creditor is not faced with an inability to attempt to collect any of the debt.
The Process of the Debt Collection When a Debtor Has Not Filed Bankruptcy
In order to learn the financial status of a debtor and a debtor’s particular assets, a creditor may file a Request for Order of Disclosure motion with the court. The creditor will need to first have obtained a judgment against the debtor, and also docketed that judgment.
The creditor files a Request for Order of Disclosure with the same court that docketed the judgment, with the same case number. The creditor will need to fill out the information about the debtor and the debtor’s address.
A creditor may only submit this form when the creditor can truthfully state the following::
- the creditor won a judgment in the lawsuit against the debtor,
- the case began in district court and the court administrator docketed the judgment more than 30 days prior to the creditor filing this form, or the case began in conciliation court and the court administrator docketed the judgment,
- the debtor has not paid the creditor all money owed to the creditor,
- the debtor and the creditor have not agreed to some other way to settle the debt.
If the court grants the creditor’s request, the debtor will be sent a standard, court-approved, Financial Disclosure Form, asking questions about the assets and liabilities of the debtor.
After an order from the court for the debtor to complete and provide to the creditor the Financial Disclosure Form, the debtor must comply with the court’s order or there will be consequences.
A Debtor’s Failure to Comply with Court Orders
A debtor who fails to complete the form and return it to the debtor may be held in civil contempt of court. The penalty for contempt may be jail, a fine, or both.
However, a debtor cannot be held in contempt for violating an order about which the debtor had no knowledge. Therefore, if the creditor cannot provide the court with the address at which to notify the debtor of the order, the debtor cannot be penalized for not complying with the order.