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
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.