Levying Tangible Personal Property

Blog on 18 Nov , 2014

Levying Tangible Personal Property

Levies against tangible personal property-physical objects having value. This includes stock certificates, bonds, cameras, stamps, coins, computers, stereos, jewelry, tools, recreational equipment, weapons, luxury clothing (such as a mink coat), art, precious metals and the like. The property must be owned by the debtor and be in his possession.

Seizing personal property should usually be a last resort. Prying personal property loose from a debtor is difficult and often not worthwhile. The main impediments are:

•The amount realized from a forced sale of personal property is usually not worth the effort and expense, except for items which have a ready market value, such as securities, precious metals and pianos.

• California law allows the debtor to keep many types of property. These are called “exemptions.”

• The property may belong to someone else, or someone may have priority over you to collect from the property.

• A levying officer may not enter a debtor’s residence without the debtor’s consent or a court order-often difficult to get.

A. How to levy on tangible personal property.

1. Find assets to pursue.

  • To start a levy, you must know whether to debtor has tangible personal property that is really worth this cumbersome procedure. You can use some of the techniques discussed elsewhere in this post:
  • Debtor’s examination and Subpena Duces Tecum. To prevent the debtor from concealing property, ask questions about property in a routine manner, not as though you are planning a levy.
  • Judgment Debtor’s Statement of Assets.
  • Court records
  • Use a pretext. Make modifications to obtain the information you needed.
  • Data search firms, asset tracing firms, investigators.

Once you know what the debtor owns, you must decide if it’s worth going after. Make your decision based on these factors:

Value at forced sale. At a sale held by a levying officer, most personal property brings in a small fraction of the its fair market value. For example, a dining room table that might bring $1,000 in an antique store might sell for $250-$300 in a forced sale. Common exceptions to this diminished value rule are gold, gemstones, coin collections, pianos and securities (stock, bonds, etc.).

Cost of storage and sale. The levying officer must store seized assets for a while to give the judgment debtor a chance to file a claim of exemption and to give notice of the sale. If a sale does occur, the cost of conducting it is substantial. In short, there are significant costs associated with levies on personal property. When these costs are deducted from the proceeds ( which already are artificially low ), often there is little or nothing left over to pay the judgment. So, let us emphasize: Before you send the sheriff out to levy on personal property, make sure you have identified at least one really valuable asset which you think has a reasonable chance of producing significant proceeds.

2. Determine if property is off-limits.

Property you believe belongs to the debtor may be unreachable because it is exempt, belongs to someone else or is subject to another party’s lien. Let’s examine those possibilities.

Exempt property.

Debtors are allowed to keep some basic items of property, referred to as exempt property. Debtor protection laws are an attempt to strike a balance between the judgment creditor’s right to collect and a human being’s right to avoid sinking to the level of the many homeless people who haunt American cities.

Before we list the most important exemptions, you should understand how exemptions work. There are really two types of exemptions:

  • Those that return to the debtor a specific monetary allowance if the exempt property is sold.
  • Those that protect certain property against sell.

Exemptions apply to individuals only, not business. The exemptions discussed in this post come into operation only if the judgment debtor comes forward and claims them ( by filing a claim of exemption ). However, as discussed in other post, some exemptions operate automatically.

If a debtor has to claim an exemption to qualify for it, why not grab the exempt property and hope for the best? In many instances this makes sense, especially since few judgment debtors actually file claims of exemption. If, However, you have exempt property levied on, and it must later be returned to the judgment debtor because of a successful claim of exemption, you will lose temporarily, and maybe permanently, the costs and fees of the levy. While you are legally authorized to collect these from the judgment debtor, you may collect nothing at all. In short, by going after exempt property, you may throw good money after bad.

Here are the main exemptions applicable to the debtor’s tangible personal property items that are not covered in other post in this book.

Household furnishings and personal effects: The judgment debtors is entitled to exempt all household furnishings and personal effects that are “personally used,” “located at his principal residence” and “ordinarily and reasonably necessary.” There is no particular dollar limitation . However , a court could determine that a particular item is too valuable or unusual to be “ordinarily and reasonably necessary.” The court may let the item be sold if the debtor gets back part of the proceeds for a replacement item. For instance, if a judgment debtor has a $5,000 antique dining room table, the court might allow the table to be sold but allow the debtor the first $1,000 from the sale. Pianos and expensive electronic equipment are often treated in this way. Most other types of household furnishings are not; that is, the blanket exemption is upheld if the judgment debtor claims it.

Jewelry, heirlooms and works of art: The debtor’ s jewelry, heirlooms and works of art can be seized and sold; however, the debtor gets the first $2,500. It makes little sense to go after these types of assets unless they will bring in considerably in excess of $2,500. Also, the judgment debtor may claim that some items of jewelry or heirlooms are personal effects, which are exempt without regard to value if they are ” ordinarily and reasonably necessary.”

Health aids: The debtor is allowed to keep health aids necessary to help him work or live comfortably, such as a wheelchair.

Building materials: The debtor can keep up to $1,000 in building supplies if they were purchased to repair her home.

Tools of the trade: If tools or the debtor’s trade are sold, the debtor gets the first $2,500 of the proceeds. A tools of the trade is anything use by the judgment debtor-or a spouse- in carrying out an actual business activity, such as:

  • tools, business-related equipment, musical instruments, cooping implements
  • materials such as paper, cloth, wood and hardware
  • uniforms
  • office furnishings
  • books and manuals
  • one commercial motor vehicle and
  • one fishing bout or other vessel used in the business.

Computer equipment needed to do desktop publishing, work processing or information searching also probably fits within the tools of the trade exemption. If the debtor and her spouse are in the same trade, business or profession which is also their livelihood, they are each entitled to a $2,500 tools of the exemption, for a total exemption of $5,000.

Property securing a third-party debt

you can’t, as a practical matter, reach property that is subject to liens that have priority over yours.

Generally, we recommend that you check to see whether property is subject to a security interest before you instruct the sheriff to seize and sell it. You can find out by checking with the secretary of State, who keeps a record of all perfected security interests. Or, you can pay a data search firm to do it for you.

What happens if you try to levy on property in which a security interest is owned by a third party? Basically, if the third party learns of the proposed property sale in time, he can file a claim to get what the debtor owes him from the proceeds of the sale. if you you’ve already spent the proceeds, he can sue you for the value of the property or even move directly against the property itself (which would lead to the sale purchaser coming back against you). You could be liable for any losses or damages suffered by the third party in his efforts to collect.

Property subject to an examination Lien.

If another creditor has served the debtor with notice of a debtor’s examination, all his personal property is automatically subject to a one-year examination lien. If you attempt to levy on property subject to suck a lien, the fruits of your effort may end up in the lien holder’s basket.

If you believe other judgment creditors exist, check the court records for each county where a debtor’s examination may have taken place. If you find a case against the judgment debtor, examine the file to see if a proof of service was been filed for an application and order for appearance and examination. If so, and the date of service is within the past year, all of the judgment debtor’s personal property is subject to the other judgment creditor’s lien for the amount reflected in the judgment and any memoranda of costs in the case file. If you are faced with this situations you can either:

  • Proceed with your levy in the hope that the lien holder has given up and won’t find out about your levy or
  • Wait until the lien expires and then go after the assets.

Considerations for married judgment debtor.

In general, you can go after a married debtor’s separate property and community property, but usually not the separate property of a no-debtor spouse.

Without a complete history of a married couple’s property acquisition history, it is virtually impossible to tell how property is owned. So how should you proceed? As we mentioned earlier in regard to exemptions, one sensible approach is to go after valuable property and let the chips fall where they may. If the property is worth enough, it may justify your time and the risk of ending up with a bag full of costs and no proceeds.

3. Obtain seizure order for assets in debtor’s home.

If the property is located in the judgment debtor’s house or other private location, you’ll need a court order permitting the levying officer to enter. To obtain such a seizure order, you must tell the judge what you expect to find there. The judge will not allow the levying officer to go on a fishing expedition. Obtain certified copies from the court.

4. Obtain a writ of execution.

Obtain a writ of execution for each county where the property is located.

5. Prepare instructions.

To find the levying officer for a county, call the sheriff’s office in that county and ask if it makes levies on civil money judgments. If not, find out who does (marshal or constable). Then call the levying officer and ask:

  • The amount of the deposit you must put down for making the levy.

6. Send instructions to levying officer.

Make the number of photocopies of you documents required by the levying officer, plus one set for your file. Send your documents and feels to the levying officer for the county where the debtor’s property is located.

They levying officer fills out a Notice of Levy, which she serves personally on the judgment debtor. The notice of levy names the person being served, the property to be levied upon and the amount necessary to satisfy the judgment.

7. If debtor files claim of exemption.

When the debtor receives a notice of levy, she has ten days to respond from the date the notice was served on her. To object, the debtor must file a claim of exemption describing the property claim of exemption describing the property claimed to be exempt and the reasons for this claim, citing the section of the code of civil procedure permitting the exemption.

If the debtor files a claim of exemption, the levying officer will serve you with a copy of it and a notice of claim of exemption. This document officially states that unless you take proper steps to oppose the claim of exemption, the debtor’s property will be released to her.

8. Sale by levying officer.

They levying officer posts a notice of sale and serves the notice on the debtor either personally or by mail. The notices states the date, time and place of the sale and describes the property to be sold, It is also posted in three public places in the city of judicial district where the property is to be sold.

The property is sold under auction rules to the highest bidder. If you want the property yourself, you can use the judgment as a credit against your bid, but you’ll need cash or a certified check to pay for a bid higher than the judgment. Call the levying officer and find out about the auction and your options as a judgment creditor.

They levying officer distributes the sale and proceeds as required by law. Your share of these proceeds depends on the total fees due on the levying officer applicable exemptions, the existence of third-party owners who must be paid and the priorities of any other creditors with claims.

9. Get proceeds from levy.

Assuming you did not attend the sale and the levying officer has collected the proceeds of the levy, she will disburse them to you. There is often a significant delay between the collection of proceeds by the levying officer and its disbursement to you. While you should make reasonable attempts to make sure your case hasn’t fallen through the cracks, be patient. Some levying officers require that any requests for information about your levy are made in writing; others will give you information over the telephone or in person.

Make sure that you keep track of all funds collected toward satisfaction of your judgment, as well as any costs incurred by you.

B. If third party claims property.

A third party who hears about the levy may claim to own some of the property by claiming that the debtor:

  • Is storing it for him as bailee
  • is keeping the property in consignment
  • borrowed the property from the third party
  • has already sold or signed over the property to the third party, but not yet delivered it or
  • pledged the property as security, either in the course of purchasing it ( a purcahse-money secured in interest), or for a loan unrelated to that particular property (a non-purchase-money secured interest.

If you encounter a third-party claim, the procedure for opposing it is similar to that described for claims made by the debtor, which some procedural differences. If the amount of your judgment justifies bringing in legal help at this point, then by all means do so. However, usually, you are better off not contesting a third- party claim.

C. How to oppose a claim of exemption.

To oppose a claim of exemption, you must act first. You must respond, in writing, within ten days from the date the notice of claim of exemption was personally served on you, or 15 days from the date the notice of claim of exemption was mailed to you, if notice was sent by mail to an address in California.

You must fill out and file with the court two forms, which are available from the court clerk or law library:

  • Notice of opposition to claim of exemption and
  • Notice of hearing for order determining the claim of exemption.

 


This information is not intended to be legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area, nor should it be used to replace the advice of your own counsel.