A judgment creditor seizes your assets by executing on their judgment. The specific processes vary by state, but typically, for real property, the creditor files a summary of judgment in the county recorder where your real property is located. This ‘liens’ the property to the amount of the judgment. This lien is valid against any real property owned in your own name in that county at the time, as well as any future acquired real estate. You can’t sell or refinance liened property without satisfying the judgment. Thus, a lien effectively ties up your real estate until you pay the judgment and/or settle.
Personal property is seized through levy. The Sheriff or Marshall physically takes the property described in the levy, whether directly from you or from a third party. This includes money in bank accounts, items in your safe deposit box, automobiles, jewelry, antiques, collectibles, equipment, or any other unprotected physical assets. The sheriff converts property to cash through a sheriff’s public auction.
Wages are seized by a levy or garnishment. The creditor’s levy orders your employer to send your pay to the creditor (except for the legally protected exemption).
If a creditor is about to take your assets or garnish your wages, you must immediately take three steps to protect yourself. First, file a claim of exemption to protect your exempt assets. Each state lists assets a creditor cannot take. This includes tools of the trade, household items and specified personal property. Federal law provides further exemptions. You’ll need to file a claim of exemption to properly shield this exempt property. Their protection is not automatic. Second, pay the judgment or settle; perhaps you’ll pay over time. Negotiating settlement saves the creditor foreclosure hassles and you get to keep your property. Your third option, file Chapter 7, 11 or 13 bankruptcy before the auction. Bankruptcy has serious consequences, but it will stop a forced sale of your assets. If you plan bankruptcy, do it before seizure and sale to save your assets.
