If you are a financial institution that has engaged in a litigation strategy on its charged-off inventory, you likely have developed a significant pool of judgments. Chances are that pool is heavily weighted toward dormant judgments; cases in which there have been no contact with the consumer for months or years, and no plan of action to liquidate them.
Within this pool of judgments, it is possible that you have cases where the consumer has moved out of the original state in which the judgment was granted. A typical nationwide pool of judgments that are aged between 9 and 5 years has an out-of-state movement rate of 3.8%. If you have the consumer’s new address, you will need to domesticate the judgment in order to move forward with collection activity in the new state. Typically, actions such as wage garnishments and home liens must be executed in the same state in which the consumer resides.
HOW TO DOMESTICATE JUDGMENTS
Article 4, Section 1 of the United States Constitution states:
“…full faith and credit shall be given in each State of the public acts, records and judicial proceedings of every other State. And the Congress may by general laws prescribe that manner in which such acts, records and proceedings shall be proved, and the effect therof.”
According to the Commercial Collection Agency Association, judgments across state lines can be enforced in two ways:
- A new law suit may be filed based on judgment
- Alternatively, in those states that have adopted the Uniform Enforcement of Foreign Judgments Act, a “foreign” judgment (defined as a judgment of any state or federal court), may be registered by filing an exemplified copy of the foreign judgment with the appropriate office of the Court and notifying the debtor of the filing.
After the correct papers have been filed with the clerk of court, the clerk will send a notice to the debtor. The debtor will have a certain number of days (specified by the jurisdiction) to respond. If the debtor does not respond in a timely manner, the judgment will be entered and will be the same as any other judgment.
EXPEDITING THE PROCESS
In order to have a judgment domesticated as soon as possible, it is important to determine the exact filing requirements in the new state. Some jurisdictions require the judgment to be certified and exemplified by a judge in the original court, or to have a triple seal judgment. Several other factors related to the process:
- Understand the judgment renewal periods in each state. If the state in which you’re trying to domesticate has a shorter judgment renewal period than the original state, it’s possible that your judgment has already expired in that state.
- In a recent newsletter, Fullerton & Knowles suggest that you find as much information about the debtor as possible. Clearly, having the debtor’s new address will help make the document filing process more efficient. Also, it helps to have any information about the debtor’s assets to make enforcement of the judgment more fruitful; copies of checks, perhaps.
If you are sitting on a pool of dormant judgments, it’s possible that a percentage of them are with consumers who have moved out of the state in which the original judgment was filed. Don’t give up on these judgments! By domesticating the judgments, you stand a chance of collecting on some portion of that dormant judgment.