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A Creditor Can’t Easily Get to a Deadbeat Debtor’s Real Estate

by | Feb 17, 2017 | Uncategorized


M.O. owns a home in a homeowner’s association community (Community). The Community got a $6,907 judgment against him on February 21, 2013, “because he failed to pay association maintenance fees and other charges under its governing documents.” In attempt to collect, Community served M.O. with a copy of the judgment and an information subpoena. Although the certified mail copy was returned with a signed receipt, M.O. never completed the Information Subpoena.

Community hired a private investigator, who discovered that M.O. was running a business from his home. Also, two bank accounts were identified. One contained $40 and another could not be touched. In July 2013, Community filed and got a writ of execution against M.O.’s personal property, including the bank account. But the judgment was not satisfied.

In June 2015, Community filed an application with the Court to execute against M.O.’s real estate, meaning his unit in the homeowner’s association, claiming that he had insufficient verifiable assets (other assets) to satisfy the judgment. This application was denied because Community “had not provided information establishing the value of the property, whether there was a mortgage or lien on the property, or whether any foreclosure proceedings or open tax liens were pending.” Community responded by providing the court with proof of a $469,000 mortgage on M.O.’s property, a $427,000 estimated value, and the fact that there was no foreclosure ongoing. Also, they showed that there were additional liens of $20,183.50 and $3,391.87.

The lower court again denied the application because Community failed to give M.O. notice “and an opportunity to be heard regarding the request for sale of the property.” Community said that it should have been allowed to sell M.O’s property to satisfy the judgment, and then to rent it, even though M.O. still lived there.

Community then appealed and said that the lower court judge erroneously did not consider that it met the requirements of the law because it made a good faith effort to “locate and execute upon defendant.”

According to New Jersey law, a creditor must deliver a writ of execution to the county sheriff with instructions for levying A sheriff must first levy on “goods and chattel” (personal property, like accounts, furniture, vehicles, etc.) before going after real estate. Finally, the creditor must make a “reasonable efforts to determine” whether a defendant has any personal assets before pursuing a sale of real estate.

The lower judge failed to consider when determining whether – to allow the sale of real estate – the creditor first made reasonable efforts to find M.O.’s personal property, including the utilization of supplementary proceedings (investigation of assets) available…” In fact, that judge made no findings on these efforts. The Appeals Court felt that Community did not show “compliance sufficient for the trial court to enter an order permitting sale of defendant’s real property” and upheld the lower court’s decision. Community has to start all over again and do it the right way. Evan Xavier Bakhet is a J.D. Candidate at Rutgers School of Law-Newark with a scheduled graduation date in 2017. He collaborated with me on this blog.

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