Articles Posted in Collections

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As a creditor, your objective is to pursue any legal means allowable to obtain payment on the debt owed to you. Sometimes, those involved in the entity that owes you a debt may engage in improper activities to try to hide money or avoid paying you. As a judgment creditor, you need skilled and determined Georgia debt collection counsel on your side fighting for what’s duly owed to you.

A recent example of a judgment creditor that had to take multiple steps came from a dispute over an insolvent company’s large transfer of LLC funds. The insolvent LLC was an Atlanta area-based real estate business. The LLC’s managing member was also the individual who handled the LLC’s daily operations. In 2012, the insolvent LLC faced foreclosure on all of its assets. According to the judgment creditor, despite the LLC’s problematic financial condition, the managing member nevertheless authorized the company to make a $239,000 preferential payment…to the managing member. That transfer was a repayment of an unsecured loan that the managing member had previously made to the LLC.

In 2013, the LLC stopped making lease payments to the plaintiff, although the lease was not yet complete. This led the plaintiff to obtain a judgment against the LLC. Unable to collect from the insolvent LLC, the plaintiff took this additional step and went after the managing member for the payment he made to himself in 2012. The plaintiff’s argument was that, by making the preferential payment to himself while the LLC was insolvent, the managing member breached its fiduciary duty to it.

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Recently, a federal court de­clared Georgia’s garnishment stat­ute unconstitutional leaving the short-term future of garnishments uncertain. While the decision tech­nically affects only the Clerk of Gwinnett County, other clerks in Georgia have already taken action to halt garnishments. Likewise, at­torneys and creditors have now lost the defense of complying in good faith with existing law after the publication of this decision. Finally, credit unions could also be liable for complying with garnishments.

THE CASE

The decision in Strickland v. Alexan­der held that Georgia’s garnishment statute is unconstitutional for three reasons: (1) it fails to require no­tice to debtors of certain state and federal exemptions to garnishment (like Social Security exemptions); (2) it fails to provide notice of a proce­dure to claim an exemption; and (3) it fails to require a timely hearing to decide exemption claims. The court enjoined Gwinnett County’s State Court Clerk from issuing summons of garnishment using current forms and procedures that were ruled uncon­stitutional. The facts of the case cre­ate a compelling story for the debtor.

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