Debtor and Creditor Rights

Once a judgment is obtained, most people just assume the debtor will willingly pay.  For a variety of reasons, this may not occur.

For both a creditor and debtor, in determining how best to proceed, a determination must be made as to what kind of debt the creditor has with the debtor.  Two general varieties of debt exist: secured and unsecured.  The nature of the debt plays a role in determining what a debtor or creditor can do to try to avoid an obligation or collect on one.  If the debt is secured, the borrower (i.e., debtor), pledges a piece of property as collateral (e.g., home, car, money) to the creditor as security that the debtor will repay the loan.  In other words, the creditor has a lien against the property that the creditor can look to if the debtor fails to abide by his obligations.

With unsecured debt, there is no property (i.e., “collateral”) pledged to secure the loan. The most common type of unsecured loans are credit cards and revolving credit agreements between merchants.   With these types of debts, what usually happens is the debtor, for whatever reason, allegedly fails to abide by the terms of the agreement with the creditor and the creditor seeks to recover its alleged damages due to the default.

To collect on secured personal property debts (e.g., cars, boats, household goods), creditors often try to replevy the property and sue the defendant for any deficiency. Minn. Stat. § 548.01 et seq.  In other words, the creditor requests that the court allow the creditor to recover, for example, the car and return it to the creditor’s possession AND sue the debtor for any unpaid balances or deficiencies.  This situation often arises in cases involving leases.  Many people are surprised to learn that they may be liable for a deficiency even if they return the car.  In other words, the financing company sues the debtor for the amount of money the financing company would have earned had the debtor completed the lease according to its terms.  With secured real estate debts, one of the most common methods to collect is a foreclosure action.  Foreclosure, a method of collecting amounts owed on real property (e.g., a home), follows strict statutory procedures.  Minn. Stat. § 325N.01 et seq.

Unsecured debts are most commonly collected by creditors using statutory garnishment and levy methods of recovering a debt.

Garnishment in Minnesota is governed by Minn. Stat. § 571.71 and generally allows a creditor to take a certain portion of a debtor’s wages or nonwage income. Levy in Minnesota is governed by Minn. Stat. § 552.04 and generally allows a creditor to take a debtor’s assets to satisfy the debtor’s monetary obligation.

Both statutes have to be followed precisely or the debtor will have certain defenses available.

One of the initial steps you should take is to see if your opponent has any outstanding judgments or is involved in any litigation.  To do this, a good resource is the Minnesota Trial Court’s website:  http://pa.courts.state.mn.us/default.aspx

Then, give Kuhn a call or email so Kuhn can help: 612-860-8757.

cjkuhn@thekuhnlawfirm.com