Examining the Debtor About Assets

Most judgments go unpaid because the creditor cannot find anything to take. The debtor's employer, bank, business interests and recent transfers are private facts, and no public index records them. The examination closes that gap by compelling the debtor into a room, under oath, to answer questions that would otherwise go unanswered. It is the least glamorous step in enforcement and usually the most productive one.

How the order issues

The proceeding starts with an order, not a notice. A creditor applies to the court that entered the judgment, or in some states to a court where the debtor resides, and the court orders the debtor to appear at a stated time and place to furnish information that aids enforcement. California grants the order on an ex parte application where the debtor has not been examined in the preceding 120 days, and requires a showing of good cause once that interval has been used. Ohio entitles the creditor to an order on the same basic footing.

Service matters more than it usually does. California requires personal service of the order on the debtor not less than 30 days before the examination date, and treats that service as creating a lien on the debtor's personal property that runs for a year unless the court extends or ends it earlier. A creditor who serves by mail has no valid order, no lien and no basis for the sanction that follows non-appearance, so the service step is not a formality to be handled loosely.

What may be asked

The scope is broad because the subject is broad. New York's rule permits disclosure of all matter relevant to the satisfaction of the judgment, and the federal rule allows discovery in aid of execution using either the federal rules or the procedure of the state where the court sits. Questions properly reach wages and their source, every account and who else signs on it, vehicles, receivables, interests in partnerships and limited liability companies, safe deposit boxes, and property held in another person's name for the debtor's benefit.

Transfers are the other half of the inquiry. A debtor is routinely asked what property has been sold, given away or moved since the debt arose, to whom, and for what consideration. Those answers are the raw material for a later claim about property the debtor gave away, and they are also the reason an examination is scheduled early rather than after the obvious assets have already moved.

Two limits apply. The questions must bear on satisfying this judgment, so an examination cannot be used to investigate an unrelated dispute or to build a case against a third party who happens to be present. And the debtor answers about property, not about opinions: what an asset is worth, what a business might sell for, and whether a creditor is being reasonable are not the subject, though a debtor's own valuation is often asked for and recorded.

The privilege problem

A debtor at an examination retains the privilege against self-incrimination, and it can be asserted question by question where a truthful answer would expose the debtor to criminal liability. The privilege is not a blanket refusal to be examined, and a debtor who invokes it as to everything will generally be ordered to answer the questions that carry no criminal exposure. Courts hearing these disputes take them one question at a time rather than excusing the appearance.

Marital, accountant and attorney privileges appear as well, with results that vary by state. What is not privileged is embarrassment. The financial detail an examination produces is unwelcome, but discomfort is not a ground for refusing to answer, and the record of the examination is ordinarily open unless the court seals it for a specific reason.

A debtor represented by counsel is examined with counsel present, and counsel may object, but the objections available are narrow. There is no relevance objection of the ordinary kind, because relevance in this proceeding means relevance to finding assets, and almost any question about money satisfies that test. Objections that succeed tend to be about form, about privilege, or about a question that reaches a period long before the debt existed.

What follows a non-appearance

Non-appearance is the point at which the proceeding acquires teeth. California authorizes the court to punish the person as for contempt and to issue a warrant for arrest, with the warrant used to bring the debtor before the court rather than to imprison for the debt itself. Other states reach the same place through civil contempt, sometimes conditioning release on appearance and production. The distinction matters: the sanction is for disobeying a court order, not for owing money.

A debtor who does appear and answers falsely faces a different exposure, since the testimony is under oath. In practice the examination tends to produce one of three outcomes: identifiable property that supports a levy, an employer that supports a wage garnishment, or a documented absence of reachable assets that tells the creditor to wait and renew rather than spend more.

Turning answers into collection

The examination is a means, and its value is in what is filed afterward. An identified bank becomes a garnishment; an identified vehicle or equipment becomes a levy; an identified interest in a closely held company becomes an application for a charging order. Some states allow the court to make a turnover order at the examination itself, directing the debtor to hand over a specific item then and there.

Timing works against delay. Accounts are emptied, jobs change and vehicles are sold, so information gathered and left unused for months is often worthless. The usual sequence is an examination first, then an immediate writ against whatever was identified, with a recorded lien already in place so that the priority date does not depend on how quickly the investigation finished. Where the answers point to property in another state, the creditor must first establish the judgment there before any of these steps is available.