Collect Debt by Selling the Debtor’s Vehicles

If you have a judgment in California, you can record a judgment lien by filing a Notice of Judgment Lien with the California Secretary of State, or by serving the debtor with a debtor examination order. These liens attach to much of the debtor’s personal property. This means that the debtor’s personal property cannot be transferred “free and clear” without first satisfying your judgment. However, judgment liens against personal property are often ineffective as a means of collection. This is because, unlike real property, most personal property is difficult to locate and no public records exist as with real property. This allows the debtor to sell your collateral without your knowledge. In our experience, this happens often when collecting debt in Southern California (Orange County, Los Angeles County, Riverside County).

With respect to vehicles (e.g., cars), California Code of Civil Procedure 697.530 exempts vehicles from the list of personal property encumbered by a judgment lien. In other words, filing a Notice of Judgment Lien with the California Secretary of State will ordinarily not serve to give you a lien against the debtor’s vehicles.

Fortunately, California law provides an effective way to force the sale of vehicles to collect judgments.

To force the sale of the debtor’s vehicle, first obtain issuance of a writ of execution. Then deliver the writ of execution to the sheriff and instruct the sheriff to conduct an execution sale of the vehicle. In debt collection matters in Orange County, the sheriff’s department is quite helpful in moving this process forward.

Upon receipt of proper instructions, the sheriff will attempt to obtain possession of the vehicle. If the sheriff obtains possession, it will sell the vehicle at auction. Under California Code of Civil Procedure 704.010(a)(2), the debtor is entitled to the first $2,300 of sale proceeds. This means that an execution sale will only be effective if the vehicle is worth more than $2,300 + any liens against the vehicle. In Orange County and Los Angeles County, many vehicles are leased rather than owned. But owned vehicles are very likely to be worth substantially more than $2,300.

In addition, simply initiating the sale process may cause the debtor to contact you to resolve the judgment.

The Wallin Firm welcomes the opportunity to assist you in determining whether it is economical to pursue the sale of a debtor’s vehicle or other personal property. We have extensive experience throughout California, particularly in Orange County, Los Angeles County, San Diego County, Riverside County and San Bernardino County.  Please feel free to contact us to speak with an attorney.

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