Taking a Debtor’s Exam After Losing a Lawsuit

One way to stay out of debt is to be careful in decisions and communications with others to prevent lawsuits.  In New York, when a person loses a lawsuit, the defendant may get into financial troubles and end up filing bankruptcy if the defendant cannot pay the judgment.  In a lawsuit, the losing party becomes liable for the judgment and becomes a debtor to the plaintiff.

Before the judgment, once a lawsuit is filed against a defendant, the defendant cannot do things to hide his/her assets.  The defendant is already a potential debtor.  For example, the defendant who owns a house should not try to change the name on the house to a relative.  This would be considered fraud on the plaintiff.  A defendant who tries to avoid paying cannot avoid for too long when there is a judgment because the plaintiff will require the defendant to undergo a debtor’s exam.

A debtor’s exam is usually done in court and requires the defendant to answer questions on his/her assets under oath.  At the hearing, the debtor and plaintiff’s attorney must sign in at the courtroom the case is assigned.  If the debtor does not show up, the plaintiff’s attorney may need to wait several minutes to give the debtor due process.  The debtor may be late because of traffic or other good reason.  If the debtor does not show up after a wait, the plaintiff may be able to request the court clerk to send out a warrant.  The plaintiff may need to provide a proof of service to make sure that the debtor was notified of the meeting.  A warrant allows for the debtor to be arrested if the debtor continues not to show up for a debtor’s exam.

In a debtor’s exam, the debtor must answer questions on assets under penalty of perjury.  If the debtor lies, the debtor may be subject to criminal liability.  At the debtor’s exam, it is likely the debtor does not have all the information with him/her, like specific account numbers and names of institutions for the plaintiff to trace the assets.  The questions asked of the debtor at a debtor’s exam are similar to a bankruptcy petition.

At a debtor’s exam, the plaintiff wants to find out where s/he can go to collect on the judgment, including bank accounts, income statements from a business, and cars.  The debtor may be married and say that the money is under the spouse’s name, to keep the plaintiff from getting the assets.  The plaintiff may ask the debtor of his/her children even when they are minor children to investigate if the debtor is hiding assets under other people’s names.

Hardworking people who are conscious savers may lose it all in a lawsuit.  A lawsuit injures someone financially and emotionally, and can put a person into bankruptcy.  Once hit with a lawsuit, a person may also be marked as a bad person, with his/her reputation ruined.  Even if the amount of the judgment can be paid off, the individual may never make it up if because of the poor reputation stemming from a lawsuit, the person loses a job.

For questions on bankruptcy, contact an experienced New York bankruptcy attorney.