What Is a Debtor’s Examination and How Do I Arrange One?

    Your company won a civil lawsuit against a deadbeat customer more than six months ago. Since then, the accounts receivables department has been trying to collect whatever they can. Unfortunately, the customer is not cooperating. One of your staff members has recommended asking the court for a debtor’s examination. What is it, and how can you arrange one?

    According to Utah judgment collection agency Judgment Collectors, a debtor’s examination is a discovery tool that creditors utilize to learn about a debtor’s financial situation. Judgment Collectors says that the rules regarding debtors’ examinations vary by state. However, there are some general principles that tend to apply across the board.

    More About the Debtor’s Examination

    The first thing to note is that the debtor’s examination is a court hearing. The debtor is summoned to court where they will answer financial questions. This is the main difference between a debtor’s examination and a deposition.

    Depositions do not take place in front of judges. Instead, attorneys conduct depositions on their own. The advantage of a debtor’s examination over a deposition boils down to appearing in court. Debtors swear an oath to tell the truth. Violating that oath could mean perjury charges.

    Where Examinations Take Place

    Civil litigation is normally a local matter. There are cases when civil lawsuits are filed in either state or federal court, but most are filed in county or city court. Regardless, examinations take place at a courthouse within the same jurisdiction as the original judgment. This is true even if creditors are hoping to discover information about assets held in other jurisdictions.

    Many county and municipal courts set aside small meeting rooms for these types of proceedings, rather than tying up larger courtrooms. Examinations can even take place in a judge’s chambers.

    Questions Asked During a Debtor’s Examination

    This next part is particularly important, according to Judgment Collectors. Under the law in nearly every state, attorneys are limited in the questions they can ask. Only questions pertaining to the debtor’s financials are allowed. Attorneys can ask about:

    • Income – Income from regular employment and other sources is up for grabs.
    • Debts – Attorneys often want to know about debts to get a better idea of the debtor’s financial situation.
    • Assets – Attorneys also want to know about assets. Some of a debtor’s assets might be usable for debt repayment.
    • Employment – Debtors are often asked about their current employment status. The information is necessary when a creditor intends to garnish wages.

    Any attempt to ask inappropriate questions will be shot down by the court. A debtor’s examination is not a free-for-all. It is also not supposed to be anything like a criminal interrogation. The point of the examination is merely to compel the debtor to reveal financial information.

    It Shouldn’t Take Too Long

    Creditors and debtors do not have to take a full day off from work to attend a debtor’s examination. If everyone cooperates fully, a typical examination doesn’t last more than 15-30 minutes. It is really just a simple exchange of information. That being said, there are things that can delay debtor’s examinations.

    A debtor might not be willing to answer questions in a straightforward manner. They might fail to bring requested documentation to court. And of course, a judge can be delayed as well. The two parties and their attorneys just need to roll with it when judges aren’t on time.

    That’s basically all there is to it. A debtor examination is a pretty straightforward procedure that doesn’t require a lot as long as everyone involved cooperates. Arranging one is as simple as petitioning the court.