You were successful in court, and the jury or judge awarded you the money that you were requesting. You have a judgment in your favor and the deadline to appeal has passed. So, now what should you do? Unfortunately, the judgment is just a piece of paper. The person or entity that you obtained a judgment against may not even have the money to pay the judgment.
In North Carolina, there are several mechanisms that can be used in order for you to collect the money that you are owed, and the procedure is going to vary depending on whether your judgment is against an individual or a business entity.
1. Judgment Debtor Entitled to Claim Exemptions
Judgment execution is the process by which you are able to enforce a judgment against the person or entity that owes you money (the “judgment debtor”). If the judgment debtor is an individual who resides in North Carolina, you are required to send the judgment a debtor a notice which provides the judgment debtor the opportunity to claim certain statutory exemptions. “Statutory exemptions” are provided for under North Carolina law and, essentially, allow the judgment debtor to claim certain property as exempt from the judgment, meaning that you won’t be able to reach that property to satisfy the judgment. For example, if the individual judgment debtor has saved funds in a college savings plan,, up to $25,000.00 of that college savings fund is exempted from being used to satisfy a judgment.
Until the judgment debtor has at least been given the opportunity to claim the statutory exemptions, no further action can be taken by you to execute the judgment. Once the debtor is served with the "notice to claim exemptions," they have 20 days to respond or else they are deemed to have waived those exemptions.
If the individual judgment debtor does not reside in North Carolina, or if the judgment debtor is an entity, the debtor is not entitled to claim any statutory exemptions.
2. Writ of Execution
Once the judgment debtor has claimed the statutory exemptions, or waived the right to do so, you must request a writ of execution from the Clerk of Court in the county in which the lawsuit took place. The Writ will be issued to the county Sheriff’s office, which will then search for assets owned by the judgment debtor which can be used to satisfy the judgment.
If the Sheriff’s office finds property that has not been claimed as an exemption, they can take the property (like repossession) and sell it to make proceeds to satisfy your judgment.
3. Supplemental Proceedings
If, after issuing a writ of execution, the Sheriff’s office search for assets belonging to the judgment debtor comes up empty, then you may undertake “supplemental proceedings” which allow you to further investigate the judgment debtor’s assets in an attempt to satisfy your judgment. For example, you have the option of asking the judgment debtor, in person and under oath, about the extent and location of the judgment debtor’s assets. If the judgment debtor refuses to answer the questions, the judgment debtor could be held in contempt of court, meaning that the judgment debtor may be fined or placed in jail.
4. Lien on Real Property
A lien on real property will prevent the judgment debtor from selling, or even refinancing, any real property owned by the judgment debtor without first satisfying the lien against that property (i.e. paying you the money that you are owed). A judgment automatically becomes a lien against real property, In North Carolina, a judgment is valid for 10 years, and it can be renewed for another 10 years if your judgment has not been satisfied.
Obtaining a judgment is often just the first step in obtaining the money that has been awarded to you by the Court. At Jesson & Rains, we are experienced in counseling our clients in the easiest and most cost effective way to secure payment of any judgment that is owed to you.
We have a lot of clients who contact us to assist in estate administration whose loved one actually passed away years ago. The reason they call after years have passed? Real estate.
In North Carolina, when you die, real property passes to your heirs automatically unless you have contrary instructions in your will. A lot of North Carolinians pass away without a will, and their real property just naturally passes to their spouse or to their children. There is nothing improper about this transfer. However, for purposes of selling the property later or getting a mortgage on the property, most sellers and lenders want the property to go through probate first. To explain the reason why, a few basics of probate administration should be explained first.
Unfortunately, when you die, your debts do not die with you! Your creditors can recover monies owed to them from your estate assets. Guess what type of asset is the largest and most valuable? You guessed it! Real estate. In some instances, real property has to be sold in order to pay the deceased’s creditors. The remaining assets are then divvied up to the deceased’s beneficiaries. After notice is given to creditors of the deceased’s passing, the creditors only have 90 days to make a claim. If they miss the 90-day window, they cannot collect (with few exceptions).
When an estate is not probated, creditors are bypassed. They do not have an opportunity to collect monies owed to them through the sale of real property. This is somewhat of a hanging cloud over the title to the property because creditors have the right to do so at any point. Where notice of estate administration has not been given, the 90-day clock has not started. In fact, a creditor has the ability to come forward and qualify as personal representative of the deceased’s estate to ensure they get paid! A mortgage lender or buyer of real property does not want to buy the real estate if there is a chance that a creditor could come along later and force the sell of the property to satisfy the deceased’s debts.
Also, probating the estate ensures that the new owners of the real property are correctly identified. How does the mortgage lender or buyer of the real property know that the person seeking the loan/seeking to sell the property is the true owner? Sure, they may have their father’s deed and death certificate, for example, but how do they know that the deceased father only had one kid? Maybe he had four, which means they own the property equally (each has a 25% interest in the real estate). One kid cannot sell or mortgage the property without the others agreeing, because only one kid owns only 25% of the property. Since property passes naturally at death, kids may inherit property and not even know it! This happens more often when there are grandchildren who inherit, or maybe someone who owns inherited property dies themselves without a will, and it passes outside of probate once again. A mortgage lender or seller wants to see a piece of paper identifying the deceased property owner’s heirs, and they get that through probate.
Thus, the long and short of it is, if real estate is involved, you should probate the estate. It may not be necessary now, but in a few years, when repairs need to be made on the property, or if you retire and want to downsize, you’ll end up having to probate the estate anyway. It is a lot easier to do upon the death of the decedent than years later.
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Kelly Rains Jesson