How Do Creditors Find Your Assets?

Florida law provides judgment creditors numerous means to find information about a debtor’s income and assets. Discovery in aid of execution in Florida refers to the legal process by which a judgment creditor finds (discovers) debtor assets that may be subject to collection of a money judgment.

The principal discovery tools include requests to produce documents, written answers to interrogatories, and depositions under oath. A judgment creditor can use the same discovery tools available to parties in general litigation to discover financial information about a judgment debtor. After a creditor locates a debtor’s assets, the creditor applies collection tools to seize and liquidate the assets. Discovery of assets previously owned by the debtor provides clues about fraudulent transfers or conversions of assets to avoid collection.

After a court issues a money judgment, the judgment creditor is permitted to ask the judgment debtor detailed and extensive questions about the debtor’s financial affairs. The creditor can demand that the debtor disclose all assets in which the debtor has any legal or equitable interest, including assets owned jointly with a spouse, family members, or business associates. The creditor can ask broad questions about the debtor’s past sales or transfers of assets. The debtor must answer questions under oath and under penalty of perjury. The creditor can also seek information from third parties, such as an examination under oath of the debtor’s spouse and other family members.

A creditor can find out about a debtor’s financial assets by using:

• Depositions
• Document requests
• Financial statements
• Real estate records
• Public business records
• Other creditors
• Private investigators
• Social media

Deposition in Aid of Execution

An effective discovery tool used for discovery in aid of execution is an oral deposition of the debtor under oath. A creditor can require a debtor to sit before a court reporter while the creditor asks questions about the debtor’s financial affairs and assets. The creditor can inquire about almost any aspect of the debtor’s finances, including the debtor’s tax returns and all other personal matters.

Almost any question that could lead to the creditor’s discovery of assets subject to execution is permitted. In most cases, the debtor’s deposition must take place in the county where the debtor resides. A creditor may not force the debtor to travel outside their residential county to the creditor’s place of business or to the creditor’s attorney’s law firm in another county. A creditor may take several depositions during the life of a judgment so long as the frequency of inquiry does not amount to unreasonable harassment.

Request for Production of Documents

The debtor must furnish documents the creditor reasonably requests related to the debtor’s financial affairs. Florida’s laws for discovery in aid of execution allow creditors to request copies of a debtor’s bank statements, check registers, canceled checks, credit card statements, insurance policies, and tax returns. A creditor can request documents up to at least four years old. The debtor is required, upon request, to produce all documents that possibly could lead the creditor to the discovery of the debtor’s assets available to satisfy the judgment.

The debtor is required to supply documents requested which are in the debtor’s custody or control. The debtor does not have to provide documents that the debtor does not have in their possession or cannot easily obtain.

Debtor’s Financial Statements

When an individual borrows money to start a business or personally guarantees a commercial loan to an existing business, the bank typically requires the individual business owner to submit personal financial information and personal tax returns. In addition, lenders typically require individual borrowers or guarantors to periodically update their financial statements during the life of the loan and submit copies of annual tax returns.

A judgment creditor will often request copies of a debtor’s loan applications and updated financial statements previously submitted to the debtor’s lenders. Some borrowers exaggerate their assets when they apply for a loan. A judgment creditor may use a debtor’s inflated valuations and asset descriptions on lending documents to contradict the debtor’s attempt to minimize the value of their assets during a deposition.

Real Estate Ownership

Real estate, or real property, deeds are filed in the county where the real estate is situated. Each Florida county maintains an index of real estate ownership. Florida counties have digitized their legal records so that property ownership information is available by online search. Online property records are centrally linked to state and national databases.

Instead of guessing where a debtor might own real property, for a small fee a creditor can search real estate records throughout Florida. Computer searches quickly provide the debtor’s property ownership and other information such as date of purchase, mortgages, and property value. The same property search can identify whether the debtor holds any mortgages on someone else’s real estate to secure a promissory note payable to the debtor. The judgment creditor can garnish the underlying note and payment stream if it finds that a debtor is a mortgagee from seller financing.

Business Interests

Florida debt collection laws also allow creditors to use public records to discover a debtor’s business interests. Florida public records do not include or reveal a debtor’s ownership interest in any particular entity. Still, they do disclose if the debtor is an officer or director of a corporation, manager of an LLC or limited liability company, or a registered agent.

Most owners list themselves in at least one of those capacities when filing annual reports with the Florida Division of Corporations. Once a creditor discovers a debtor is involved in a business in some capacity, the creditor will focus on the debtor’s ownership interests. The extent and nature of a debtor’s ownership of a business entity is usually revealed through the debtor’s tax returns or the use of other discovery tools.

Cooperation Among Creditors

Collection agents who work for institutional lenders and large collection agencies develop personal contacts working in banks and other financial institutions.

The creditor’s personal contacts are an excellent source of financial information about judgment debtors. Any contact person with access to a company’s computer records can quickly tell a collection agent whether the debtor has a financial account at its institution. The judgment creditor can then serve a writ of garnishment on any institution which reports an account of significant balance.

Professional Investigators

Private investigators may perform asset searches as a service to judgment creditors. Some private investigation firms specialize in searching for bank accounts, while other firms provide broader searches. Access to information over the internet and social media has made investigator’s asset searches easier and more accurate.

Private investigators have at their disposal several sophisticated methods of asset discovery. For example, a private investigator can access your phone records. The investigator can use reverse lookup tools to see whether the debtor has received toll-free calls from financial institutions where the debtor may have assets. Some creditors employ private investigators to verify if a debtor actually resides at the property the debtor claims as their exempt homestead.

Technology and Social Media

Social media has made it easier than ever for creditors to discover the nature and location of assets. People often refer to their assets and income in social media discussions. Social media is a revealing source of information about a debtor’s finances and things the debtor may have done to evade judgment collection.

Hiding Assets from Creditors

Asset protection does not involve hiding assets from judgment collection. People facing the collection of a judgment should resist the urge to hide or misrepresent their assets during the creditor’s asset discovery procedures. Most of the information a debtor provides a judgment creditor during discovery in aid of execution must be certified as true under oath.

Hiding assets, misrepresenting asset values, and lying about prior transfers of assets amounts to perjury. Perjury is not only a crime, but once discovered, it severely diminishes the debtor’s credibility before the judge. Judges tend to rule against any party who has previously lied to the court or the adverse party.

The better option is to engage in asset protection planning to make any assets you are concerned about more difficult to collect.