Have you ever found yourself driving past a building with a public auction sign out front? The chances are pretty good that the building was seized to pay off some sort of debt, hence the public auction. Property seizure and auction is a fairly common way of settling sizable debts.
In the debt collection game, property is seized through something known as a writ of execution. But before a creditor can obtain such a writ, there must be a civil court case in which a judgment was rendered against the debtor. Although it might sound complicated, it is really not.
Going to Civil Court
Putting the previously mentioned building up for auction probably started as a civil court case. Maybe the bank took the property owner to court to recover an outstanding mortgage. Perhaps a bank wasn’t involved at all. Anyone could have taken the property owner to court and won a money judgment.
Civil courts do not render verdicts. They render judgments. When a judgment involves the payment of a monetary award, it is considered a money judgment. Enforcing the judgment is a matter of collecting the award.
Different Means of Collection
It turns out that judgment creditors have access to several different means of collection. The easiest and most straightforward option is to set up a voluntary payment plan whereby the debtor makes monthly payments until the debt is paid. A similar option is for the debtor to offer an immediate, lump sum payment in exchange for the creditor accepting a lesser amount.
If a payment plan is not possible, wages and bank accounts can be garnished. Judgment liens can be placed on debtor property. As a last resort, certain types of non-exempt property can be seized and sold at public auction.
Obtaining a Writ of Execution
According to Judgment Collectors, a specialist collection agency in Salt Lake City, Utah, a creditor must obtain a writ of execution before seizing and selling property. A writ of execution is a court order authorizing any such actions.
The states can be very restrictive and how they approach writs of execution. For example, a creditor may have to specify the property to be seized and sold. Also note the creditors do not actually handle seizure and sale directly. That is usually the domain of the local sheriff’s department.
The sheriff or a private process server will serve the writ according to state law. Once served, the debtor must be prepared to give up their property. Should the property need to be taken forcibly, the sheriff’s department manages it.
Selling at Public Auction
Seized property is sold at public auction to the highest cash bidder. This is both good and bad for judgment creditors. It is good in the sense that they are guaranteed at least some sort of cash payment and auction close. It is bad in the sense that there is no guarantee a public auction will fetch a sizable amount of money.
Some states allow creditors to ‘credit bid’ at public auction. That means they can bid on the property without having to produce cash up front. It makes sense, given the fact that winning the auction would give them possession of the very asset they are utilizing to collect the judgment.
Personal property can be seized and sold to pay certain kinds of debt. But first, creditors need to obtain judgments and writs of execution. Doing so can be a lengthy and frustrating process. Nonetheless, it can be done when few options remain for collecting outstanding debts. Remember that next time you see a public auction sign.