If you were to win a money judgment against another party, you would need to learn all you can about the losing party’s finances before you could properly formulate a collection strategy. You would have multiple tools at your disposal. One of those tools is something known as the debtor examination.

A debtor examination is a court-ordered examination of the debtor under oath. For all intents and purposes, you and the debtor would meet in court along with your respective attorneys. You and your attorney would ask specific questions relating to the debtor’s finances and assets. Under oath, the debtor would be expected to answer truthfully.

Any information gleaned during a debtor’s examination offers insight into the debtor’s financial position. From there, you could determine the best course of action for collection. If you are like many other judgment creditors, you would bring in an agency like Judgment Collectors to help with collection.

The Basic Process

The basic process behind a debtor examination is pretty straightforward. The creditor would first attempt to secure a voluntary payment from the debtor. If that failed, he would then ask the court for an order compelling the debtor to appear for examination. Judgment Collectors, or any other collection agency, could handle that court filing for him.

The court’s order is served to the debtor with a notice detailing the time and place. Debtor examinations usually occur in a courtroom or an attorney’s office, often with a court reporter standing by to record all proceedings. The questions and answers are entered into the court record.

How Questioning Is Conducted

Once the examination begins, the creditor or his representative (an attorney or collection agency investigator) begins asking direct and detailed questions about the debtor’s finances. The scope of the creditor’s questions is intentionally limited. In other words, questions not directly related to income and assets are not allowed.

The debtor’s attorney is allowed to object to questions that are deemed overly broad, too vague, or not within the scope of financial disclosure. If the two parties cannot settle the objection between themselves, the court will usually intervene.

In many cases, the debtor is required to bring certain documents with him to the examination. Those documents are reviewed by the creditor. If there are any relevant questions relating to them, the creditor is free to ask.

Information Creditors Are Looking For

The value of the information revealed during a debtor examination is commensurate with the detail and scope of the questions. A debtor examination can reveal all sorts of information. It is up to the creditor to know what information to dig for. Typically, here is what’s on the table:

• Income – Creditors want to know about all sources of income including wages, hobby income, etc.
• Liquid Assets – Information on liquid assets, like cash in a bank account, is important.
• Personal Property – Creditors want to know about all personal property including real estate, vehicles, etc.
• Business Assets – If the debtor is a business owner, the creditor wants to know all about his business assets.

Information is invaluable to judgment collection. By asking the right questions and paying close attention to the answers, a creditor can build a full picture of a debtor’s finances. The fullest picture facilitates determining the most feasible collection strategies.

A debtor examination can go a long way toward helping a creditor understand what he is up against in terms of collection. But a smart creditor will not stop there. Even after the debtor examination, he will leverage other resources in search of assets the debtor may have not disclosed during his examination.