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A classic problem for many insurance companies that become creditors is collection of their judgments. Although creditors may also include finance companies, utilities, landlords, banks and more, this post primarily focuses on insurance companies that wish to pursue recoupment of certain benefits from insureds.

A common occurrence is when an insurance company seeks to recoup an overpayment of Personal Injury Protection (PIP) insurance benefits. For example, an insurance company may wish to recoup wage loss benefits after learning an insured was also collecting social security disability benefits – a classic double-dip scenario. In these instances, the most important aspect of collection is having information regarding the insured’s assets, which can form the basis of recovery.

The second most important factor is to pursue collection matters in a timely fashion. A creditor must collect on the judgment before it expires. If you don’t collect your judgment before it expires, you lose the legal right to collect it. So, it is pertinent to confirm the date the judgment is entered with the court before having your attorney begin collection proceedings.

Also note that the clock on the expiration date is stopped while the judgment debtor is paying a judgment in installment payments (i.e., when a debtor begins a payment plan, the judgment expiration date is tolled until the debtor stops making payments towards the judgment). Most judgments in Michigan expire 10 years after they are issued. However, your attorney can renew a judgment before it expires by filing a motion to renew a judgment.

If the debtor doesn’t pay your judgment according to the order, you can use garnishment or seizure of property to collect it. More information about these will be discussed below. But in a general sense, you need to know the following information to utilize either of these techniques:

• Where the debtor lives
• What assets the debtor has
• Where the assets are located
• The debtor’s Social Security number

If you don’t have the above information, you can ask the judge to order the debtor to come to court to answer questions. You can start the process by having your attorney file a discovery subpoena. Of note, you can’t obtain a discovery subpoena until 21 days after the judgment is signed. At that point, the court can set a hearing for a judgment creditor’s examination. This is generally taken under oath with a court reporter, much like a deposition.

During this creditor’s examination, information about the debtor’s employment, assets, etc. can be obtained. This information can be used in your post-judgment collection efforts.

The following outlines some post-judgment collection techniques a creditor can use to collect a judgment:

Garnishing the Debtor

Garnishment is a court process that lets a creditor collect their judgment by obtaining it from someone who controls the debtor’s money or assets, or who pays the debtor. These people or entities are known as the “garnishee,” which can be a bank, employer, tenant, or the State of Michigan (to garnish tax returns).  Like the discovery subpoena previously discussed, you can’t obtain a garnishment until 21 days after the judgment is signed.

Michigan allows for two types of garnishments: (1) periodic and (2) non-periodic. A creditor can ask a judge for a periodic garnishment up to 25% of the debtor’s take-home pay (i.e., after taxes have been deducted). This continues until the entire debt has been paid. It is important to note that some types of income, including social security disability payments, Social Security income, veteran’s benefits and even some pensions are exempt from garnishment and are not collectible.

A non-periodic garnishment gives a creditor access to bank accounts or personal property like an automobile, a motorcycle or snowmobile that the debtor owns free and clear. The creditor has one shot, and if nothing is collected, or the total amount owed isn’t available, the creditor will have to go back to the judge to get more money.

One way to deal with a garnishment order is to establish a payment plan with the debtor directly or file a motion to create a payment plan (i.e., a motion for installment payments) through the court, which would allow monthly payments instead of garnishing the debtor’s wages. Please note, you cannot garnish a debtor’s wages while they are current on a payment plan.

Seizing Property

Seizing property is a process that orders a court officer to seize some property belonging to the debtor. However, this cannot be done until 21 days after the judgment is signed. The court issues the order, which is carried out by a sheriff or court officer who seizes the property and sells it. The sheriff or court officer deducts fees from the sale of the property. Any remaining funds are given to you, up to the amount of the judgment.

The sheriff or court officer can seize any of the debtor’s non-exempt property. Exempt property includes up to $1,000 in value of:

• All household goods
• Furniture
• Utensils
• Books
• Appliances
• Tools
• Vehicles
• Things the debtor uses to carry out a profession, trade, occupation, or business.

When the Judgment is Paid

Finally, when your judgment is fully paid, your attorney should file a Certificate of Satisfied Judgment with the court clerk. Law firms like ours have extensive experience in debt collection and can help insurance professionals navigate this tedious process.