The Mystery Of Post-sheriff's Sale Collection

This is the usual story: One of the owners in your Association stops paying maintenance fees. Once they wrack up a few thousand dollars in delinquencies, the Board inevitably decides to file a foreclosure against the owner(s). Usually one to two years later and after paying a substantial amount for court costs, title work, and attorneys fees, a sheriff’s sale is held and the bank buys the property back. And what kind of money does the Association get out of the sheriff’s sale? More often than not, some money for title work and court costs, and if you are very lucky, maybe some proceeds if there was some equity in the home.

Most Boards decide to foreclose on a property not to get money out of the deal, but to stop the bleeding. The idea is that if the Board chooses to foreclose on an owner, after a sheriff’s sale, a new, paying owner will move in and the Association is getting paid for that property once again.

So now there is a paying owner in the property, but what about Joe Schmoe who still owes the Association thousands of dollars in maintenance fees, how can you collect that money once you have gotten a judgment through the foreclosure action and have a personal judgment lien?

Wage Garnishments

If we can find out where a person works, we can file a garnishment for wages. This will require the employer to withhold 25% of a debtor’s post-tax earnings and turn over said earnings to the Court. The garnishments last six months and can be re-filed after they have expired. For this reason, it is a good idea for neighbors to keep their eyes and ears open—you are our best source of information for collection!

Bank Attachments

If we know where a person banks, we can attach their bank accounts. For this reason, it is a good idea to keep copies of checks when the Association receives them. The bank attachment action requires the bank to withdraw funds above $400.00. There are certain exceptions, such as non-applicability of attachment of social security funds. A separate action must be filed each time the Association wants to check the bank account to see if any funds may be expended.

Foreclosure of Other Property

Once the Association has a judgment lien, the lien attaches to any property in that county where the judgment lien is filed at the time of the lien filing.

For example, if an investment property condominium was foreclosed on, you may be able to transfer the judgment to the county where the debtor’s principal residence is. Of course, this remedy only makes sense if there is some type of equity in the other property.

Garnishments- Other Than Personal Earnings/Writ of Execution

In some cases, a debtor has some type of property that may be valuable that may be used in order to satify a judgment, such as a motor vehicle or boat. The Association can petition the Court to take possession of the property, however, there must be no money owed by other creditors that attaches to the property (such as a car loan). Usually, the cost to hire someone to repossess and tow the car outweighs the actual value to the Association.

Debtor’s Exam

Many municipal courts will allow the judgment creditor to apply to hold a debtor’s exam. This will allow the creditor’s attorney to sit down with the debtor at a time the Court mandates. The debtor is required to bring bank statements, records of property, etc. to the debtor’s exam. If the debtor fails to appear, he/she can be found to be in contempt of court. However, the contempt is upon the Court’s own motion and the Court will not always follow through with this.

Impediments to Post-Sheriff’s Sale Judgment Collection

The problem with post-sheriff’s sale collection is that usually, the debtor was not foreclosed on because he/she wanted to be. Usually, there is some type of circumstance that makes the debtor low on cash: a divorce, job loss, death of a spouse, and other miscellaneous reasons. In those cases, the Association may be throwing good money after bad when trying to collect post-sheriff’s sale, but it is not always the case. Each instance must be examined independently to determine if the Association should proceed or write off the “bad debt.” If a debtor files for bankruptcy, any of the previously mentioned actions will be stayed. After a discharge is granted, the lien will remain, but only with regard to real property. You can no longer attempt to garnish wages or attach bank accounts.

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