After a creditor receives a judgment from a court against a debtor, it may schedule a debtor examination. This is a process in which the creditor asks the debtor questions about their financial situation in court or at the office of the creditor’s attorney. In theory, this can help a creditor evaluate its options for collecting the judgment. These might include garnishing the wages of the debtor or collecting from their bank account. However, creditors may abuse the examination process as a tactic to give a debtor an incentive to pay a debt.
Common Questions in Debtor Examinations
Since wage garnishment is a common method for collecting a debt, the creditor may ask the debtor about their income and employment status. To determine whether it can place a lien on any assets, the creditor also may ask whether the debtor owns real estate. Sometimes the creditor will want to know whether the debtor owes debts to any other parties. If someone is judgment proof, this is often the stage at which the creditor finds that out. It can then decide whether to continue pursuing the full value of the debt, reach a settlement with the debtor, or abandon its collection efforts. The merits of the creditor’s claim already have been decided in the lawsuit, so a debtor cannot challenge the basis for the debt or the judgment at this stage.
You must participate in a debtor examination if the creditor requests it. This is different from the collections lawsuit, in which the debtor does not need to participate if they do not want to defend the lawsuit. Since participation is mandatory, a debtor can face severe penalties if they do not cooperate with it.
Penalties for Failing to Cooperate
Failing to appear for a debtor examination can result in a finding of contempt because the examination was ordered by the court. While this would be civil contempt rather than criminal contempt, a debtor still might ultimately face fines and jail time for failing to appear, even though they would not face jail time for failing to pay the underlying debt. If the examination is scheduled at an inconvenient time, you should contact the creditor’s attorney to ask if you can reschedule it. As a last resort, you can ask the court for a continuance. The main ways to legally avoid appearing at a debtor examination are to pay off the debt or reach a settlement with the creditor that provides a way for paying back the debt. You also may be able to avoid the examination by filing for bankruptcy, which will trigger an automatic stay of collection efforts.
A debtor answers the creditor’s questions under penalty of perjury. Thus, they could face jail time for failing to answer questions honestly to the best of their ability. Since this is not a criminal proceeding, a debtor does not have a Fifth Amendment right to refuse to answer questions. Refusing to answer could lead to being found in contempt of court, similar to failing to appear.