What Assets Can Be Reached to Collect Judgments in California? – Part 2

Before developing a judgment enforcement plan, creditors should understand what assets of the debtor can be reached to collect the judgment. This entry further discusses which assets can, and cannot, be reached to collect judgments in California.

Transfers: First, debtors often transfer assets to avoid enforcement of judgments. When this happens, the general rules is that, after property has been levied upon or subjected to other judgment lien, it usually remains subject to enforcement of the judgment even if the property is transferred by the judgment debtor to a third party.  In other words, the judgment can usually be enforced against the property in the hands of the transferee in the same way as if the property was still owned by the judgment debtor.  See CCP §§ 695.070, 697.390, 697.610.

In addition (or in the alternative), when the debtor fraudulently transfers property, creditors can seek to have the fraudulent transfer voided, or may disregard the transfer and cause execution to be levied upon the property in the hands of the transferee.  See Civ.C. § 3439.

Jointly Held Property:  If the debtor owns real property in joint tenancy or as tenants in common, the debtor’s interest in the real property can be reached to collect the judgment.  In addition, the sheriff can levy on personal property found in possession of the judgment debtor, even though third parties may also have an interest in such personal property.  CCP § 695.010.

With respect to real property jointly owned by the debtor and a third party (e.g., the debtor’s relative), the third party’s rights are protected by the third-party claim procedures (discussed elsewhere) and by the fact that the sheriff’s sale conveys only the interest of the judgment debtor in the real property.  In other words, the sheriff can sell the judgment debtor’s interest in the property, which may be less than the entirety of the property.

In such a situation, the sale of the real property does not cause automatic partition of the real property because the purchaser only obtains the right, title and interest of the judgment debtor.  See CCP § 701.640).  However, if a sheriff’s sale occurs on real property held in joint tenancy, the sale terminates the joint tenancy such that the purchaser at the sheriff’s sale becomes a tenant in common with the co-owners of the property.  See Schoenfeld v. Norberg (1970) 11 Cal.App.3d 755, 760.