"I Loaned Someone Money And They Signed A Note. Now They Refuse To Pay It..."

Practical insights from powerhouse attorney, author and speaker Bradley Bailyn.

There’s an old saying, “No good deed goes unpunished.” Perhaps a friend, a relative, or someone you know that has a small business asked you for a loan. You provided them with the money, and you took the precaution of getting them to sign a note, also called a “promissory note.”

Maybe you downloaded a form off of the internet, or bought a printed legal form promissory note from a stationery store. For the purposes of this post, we are going to assume that the note that the person who owes you the money signed, was in due and proper form.

Perhaps, pursuant to the note, the debtor was to pay regular monthly installments with interest. Perhaps it was an “on demand” note which required complete payment upon your demanding it. In any event, the debtor who gladly accepted your money is now not so happy about having to pay it back according to the note terms, and so he isn’t paying.

While a “regular” lawsuit can help you collect your debt, the normal procedure of suing someone can take years before you get a judgment. However, New York has a special law that allows for a rapid recovery of a judgment against someone who has defaulted on a promissory note.

It’s called a “Motion for Summary Judgment in Lieu of Complaint,” and was tailor made for situations like the one in which you find yourself.

There are a lot of technicalities about making this kind of motion, which is an accelerated method of bring suit against the debtor, and the reality is you are going to need an experienced debt collection lawyer, to avail yourself of this “quick and dirty” means of obtaining a judgment.

When using the Motion for Summary Judgment in Lieu of Complaint, as a substitute for a regular breach of contract lawsuit, you can have a judgment entered against your non-paying debtor in months, not years, provided of course, that it is properly drafted and properly served.

What Happens After the Judgment?

Nothing happens after the judgment, until and unless the proper steps are taken to enable that judgment to be enforced.

Many attorneys who will handle litigation and obtain a judgment for you are not familiar with how to collect that judgment, and will refer you to a debtor-creditor attorney with expertise at collection.

If your attorney who obtained the judgment doesn’t make a referral, you have found a judgment collection attorney here, by reading this post. I have significant experience in judgment collection, and stand ready to help you collect your judgment.

Whether you have obtained a judgment in small claims court without an attorney, or your attorney has had a judgment rendered in your favor by the Civil or Supreme Courts in New York City, or the District and Supreme Courts in Nassau or Suffolk counties, immediate steps must be taken even before the collection process begins.

Once you have hired your attorney experienced at judgment enforcement, he or she will first obtain what is known as a transcript of judgment from the court that rendered judgment, for filing in the office of the clerk of that county where the judgment was obtained.

Once the judgment is entered in the County Clerk’s office, collection efforts may begin.

There are types of property that are subject to collection of a judgment; in other words that may be seized, sold and the proceeds used to enforce the money judgment obtained, and there are certain types of property that are exempt from enforcement. They are not allowed to be touched.

Your judgment collection attorney will know what is allowed and what isn’t.

If you attempt to collect your own judgment without an attorney, there are risks to you, and making the wrong move against what is legally a debtor’s exempt property can find you being sued by the debtor, and him obtaining a judgment against you.

What are some of the types of property that can be used to enforce your judgment?

First of all, the mere filing of the judgment in a county with the office of the County Clerk creates a lien on any real estate the judgment debtor has in that county. If the debtor owns real property in another county, it is merely a matter of filing a transcript of judgment with that county, and then any property there will be subject to a judgment lien.

This often comes up when someone wishes to sell or refinance their real property. A title report is ordered, and it comes back with a listing of the liens against the property, including your judgment lien. Without satisfying those liens (including yours) first, the debtor will not be able to sell or refinance his property.

Something good to know: the interest rate on judgments in New York is 9% per annum; so the longer the judgment remains unsatisfied, the more interest in builds up, during the time that the judgment is valid; (twenty years in general, and ten years against real property).

What about other types of property besides real estate?

The laws found in article 52 of the Civil Practice Law and Rules of the State of New York detail what property can and what property cannot be seized. These are complicated laws, and have given rise to many contested cases in the court, so in reality, this is a job for an experienced attorney, not a lay person with a paper judgment.

Subject to law, cash accounts can be levied upon, stocks, cars exceeding a certain value, a certain percentage of the debtor’s salary, (if not already subject to garnishment by a previous judgment creditor) are targets.

Certain household appliances and furniture are exempt, clothes are exempt. Not really significant, because these types of items for the most part, have little value that would be realized in a public sale.

(Some of these are subject to dollar limitations on the exemption, and certain items like these if significantly valuable—perhaps collectibles or antiques—might be subject to seizure to enforce a judgment, with the dollar amount of the exemptions being paid to the debtor first, then the balance to the judgment creditor, minus any fees incurred in the seizure and sale—although the debtor may likewise be liable for these fees.)

The basic lesson of this posting is first, there is an accelerated method for collecting a judgment against someone who has signed a note for repayment and defaulted on that note. Second, there are different types of property that are and are not subject to the enforcement of a judgment, and you are going to need someone who knows the ins and outs of judgment collection to get yourself paid, and to avoid getting yourself sued.