Execution Sales

Posted Wednesday, September 21, 2016 by Chris Thayer

Execution Sale Process:

Execution sales allow creditors to lawfully sell the property of debtors in order to collect on debts. There are exceptions as to what types of property may be reached. This can be a costly process because of the involvement of the sheriff and having to pay fees associated with seizure and storage of assets. Sheriff sales also tend to earn below value prices for the assets sold at them. However, debtors may be more encouraged to pay their debts if faced with the possibility of losing personal and real property. This method of collection allows creditors to possibly receive full compensation on the debt in a shorter amount of time as opposed to wage garnishment which may take longer, depending on the amount of debt involved.

The first step is to obtain a judgment against the debtor declaring that the creditor is entitled to repayment of the debt. However, even after judgment, the debtor may not make any payments. If after 30 days the judgment is still not satisfied, all post-judgment remedies are available to the creditor.

In order to start the process of an execution sale, a writ of execution must be obtained. A writ of execution is a court order to the sheriff of a county directing him to seize and sell any property of the judgment debtor that is not exempt from execution. RCW 6.17.020, 6.17.110. This includes both real and personal property. The responsibility to locate any real or personal property to be sold is up to the judgment creditor. Furthermore, a sheriff performing a sale, charges fees varying dependent on which county you are in. Fees can range from $300 to $700 plus mileage fees for travelling to the site (standard mileage rate is $.575 per mile). RCW 36.18.040.

Upon receiving the writ, the sheriff will set a sale date and serve the writ on the debtor. RCW 6.17.130. Once a proper sale has been executed, the judgment creditor will need to get an order directing the clerk to disburse the funds to the creditor. All excess funds over the judgment amount will go to the judgment debtor. RCW 6.21.110(5).

Personal Property: Once a writ of execution has been obtained, there is an automatic stay before any sale may take place. The stay ranges from 10 – 30 days depending on which court the writ was obtained in.

The personal property of the debtor that is subject to execution sale are (1) claims and accounts owing to the judgment debtor; (2) Unliquidated causes of action against the plaintiff where suit has commenced; (3) claim against the judgment creditor by judgment debtor; (4) claims for relief against third parties; (5) books and records; (6) stock and investment securities; (6) property set aside to the surviving spouse in lieu of homestead for a debt subsequently incurred by that spouse as a separate debt; (7) equitable interest in a promissory note pledged as security; (8) a transferable option to purchase; (9) a structure on land, if not intended to be permanently affixed; (10) a former spouse’s lien on the family home; (11) funds in court; (12) franchises; (13) vendor’s interest in a real estate contract; (14) and other intangibles.

Partnership property may also be reached and partners can be ordered to pay the judgment debtor’s distributions to the clerk or may order the judgment debtor’s interest to be sold. RCW 6.32.085.

Personal property that is not subject to execution includes (1) active trusts held for the benefit of the judgment debtor; (2) money or other property taken from a prisoner; (3) stock options or stock appreciation rights; (4) personal service contracts; (5) tuition units purchased more than two years prior to the date of bankruptcy or court judgments; (6) any funds from the sale of Indian trust land; (7) apparel and jewelry under $3,500 of value; (8) family keepsakes; (9) household goods, no item to exceed $750; (10) $1,500 cash on hand; (11) a motor vehicle used for personal transportation, not to exceed a value of $3,250; (12) child support; (13) the right to proceeds of a payment not to exceed $20,000 on account of bodily injury to the debtor; (14) a professional’s tools of trade are exempt up to a value of $10,000; (15) certain state pensions; (16) certain federal benefits; (17) and burial plots.

Additionally, creditors should make sure that any property seized is not registered as a UCC secured interest. A quick search online will reveal any secured interests on property.

Real Property Before a writ of execution can be obtained for the sale of real property, the creditor must file an affidavit stating (1) the creditor exercised due diligence to ascertain whether the judgment debtor has sufficient nonexempt personal property to satisfy the judgment with interest. The personal property must be listed and designated as exempt; (2) the creditor has exercised due diligence in knowing whether the property is occupied or claimed as a homestead; (3) whether or not the judgment debtor is currently occupying the property as permanent residence; and (4) if the judgment debtor is not occupying the property and there is no declaration of non-abandonment of record, the affidavit must state that the judgment debtor has been absent for a period of at least six months and judgment debtor’s current address if known. Real property owned by the judgment debtor or any interest in property is subject to an execution sale. For jointly or commonly owned property with another, only the judgement debtor’s interest is subject to execution.

Homestead exemptionThis exemption automatically applies when the real property or mobile home is occupied as a principal residence by the owner. This exemption exempts from execution the net value of the real property protected up to a maximum of $125,000. For homestead properties, there must be value in excess of the owner’s homestead exemption and senior liens and encumbrances. RCW 6.13.010.

Tax Lien It is important to get a tax lien update on your title commitment. The IRS is entitled to special notice of a sale under 26 U.S.C. 7425(b). If the special notice is not given, then any execution sale may be subject to federal tax liens that may exist against the property.

Redemption Real property sold may be subject to redemption by the judgment debtor or a creditor having a lien by judgment, decree, deed of trust, or mortgage on any portion of the property. RCW 6.23.010. Unless redemption rights have been precluded, the judgment debtor or any redemptioner may redeem the property from the purchaser at any time within 8 months after the date of sale. RCW 6.23.020. The redemptioner must pay the amount of the bid with interest and any other payments the purchaser paid for the property.

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Supplemental Proceedings

Posted Wednesday, September 14, 2016 by Chris Thayer

Once a creditor has successfully obtained an order of judgment against the debtor for the determination of the amount owed, the creditor may not have knowledge of the debtor’s assets. A supplemental proceeding allows a creditor to get post-judgment discovery in order to locate the debtor’s assets that can be used to satisfy the debt. This can be done anytime within ten years after entry of a judgment that is $25 or more. The first step is to apply for an order for the debtor to appear before the court for an examination under oath. RCW 6.32.010. The proceeding must take place in the county of the debtor’s residence or if the debtor is a business, then the place of business. RCW 6.32.190. If the debtor is properly served and fails to attend, then the court can issue a warrant for contempt. At this proceeding, the debtor may be required to bring financial documents (tax returns, bank statements, loan applications, etc.) that will lead to the discovery of non-exempt assets that can be used to satisfy the debt. If the debtor is a corporation, an officer of the corporation must attend. The creditor will be given the opportunity to question the debtor about their finances and assets under oath. If the debtor has personal property of value on his person, the court may order immediate delivery of this to the sheriff or receiver. RCW 6.32.070. If the debtor refuses to cooperate with questioning or producing specified documents, then the court can get involved and order the debtor to comply. The creditor also has the option of providing the debtor with written interrogatories instead of or in addition to the examination. RCW 6.32.015. However, this may allow the debtor to provide incomplete or vague answers. Supplemental proceedings can also allow the creditor to examine third parties involved with the debtor. These third parties include persons who either have property of the debtor worth $25 or more, are indebted to the debtor for $25 or more, hold title to real estate for the debtor, or have knowledge concerning property interests of the debtor. RCW 6.32.030. To bring a third party into the supplemental proceeding, the creditor must first file proof (either by affidavit or otherwise) that the creditor previously attempted to garnish or execute and failed to fully satisfy the judgment through those processes. In cases in which the creditor has well founded belief that the debtor is a flight risk, the creditor can file an affidavit stating that fact and the court can order the sheriff to arrest the debtor and bring him to court. The debtor will then be forced to post a bond ensuring he will be present at the supplemental proceedings. The proceedings ends once the examination of the debtor is fully completed by the creditor.

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What are my chances of recovery on my commercial debt?

Posted Wednesday, April 16, 2014 by Chris Thayer

What is the likelihood of recovery on my claim turned over for commercial collections?

Unfortunately, the answer to this question is one of those “lawyer answers” which is probably quite unsatisfactory, but I will be as clear as possible. The short answer is “it depends”. What does it depend on? A huge variety of factors including the age and size of the receivable and what it is for, whether the debtor is still engaged in business, whether the debtor has unencumbered assets, whether or not the debtor is a defendant in other litigation, and whether there are prior unsatisfied judgments against the debtor. Also, one of the most important factors is whether you have a personal guaranty of the debt - especially where the company may have gone out of business. The quality and content of the underlying documentation, including any credit applications, contracts, invoices and other related documentation also comes into play. In addition, the more information you are able to provide regarding the debtor, such as where the debtor banks, or the debtor’s primary customers or clients, the better the chances of recovery.

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