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How to Deal with Judgment in a Different State

I own a property Ohio that is being foreclosed upon. I live in New Jersey, can the lender garnish my wages here?

I have 2 Ohio investment properties, one of which is being foreclosed on. They filed for judgment and the sale is soon. The other property is being handled by an investor. He manages it and makes all the payments on it. There will definitely be a deficiency balance left over after the sheriff sale. I live and work in NJ. Can the lender garnish my wages in NJ and will the Ohio wage garnishment law apply since the judgment was obtained in Ohio or will the NJ law apply since I live in NJ. Also, I believe in NJ the maximum garnishment % allowed is 10% of gross income. Is that the most they can take from my check and how like is it that they will? I have no other assets or retirement besides the other property. Can the lender go after my other Ohio property? There is not much equity in it.

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Consult with an attorney licensed in your state for specific advice on how to best address your current financial difficulties. Your county bar association should be able to refer you to an experienced attorney in your area. Find a list of attorney referral services in New Jersey at www.njsba.com.

A creditor who has obtained a judgment against a consumer in one state can request that the judgment be recognized in another state; this procedure is called “domesticating” a “sister-state” judgment. A sister-state judgment means a judgment issued by a court in another state of the United States; the term “sister-state” is used to distinguish between judgments issued by foreign countries (as foreign countries are also sometimes referred to as “states”). Article IV, Section I of the U.S. Constitution, commonly referred to as the Full Faith and Credit Clause, states “full faith and credit ought to be given in each state to the public acts, records, and judicial proceedings, of every other state…” In practice, this clause means, among other things, that all states must honor judgments issued by other states.

In your case, it is possible that the creditor that obtained a judgment against you in Ohio could file a complaint with your local county courts in NJ for domestication of the Ohio judgment in New Jersey. Once it is domesticated in NJ, the judgment would likely be enforceable in the same manner as any other judgment issued by a NJ court. Generally, a judgment debtor can challenge the validity of a judgment domesticated in his/her home state, but the procedure varies from state to state, so you should consult with your attorney if the creditor does attempt to have its OH judgment domesticated in NJ.

If the creditor is able to domesticate its OH judgment in NJ, it is possible that it will be able to garnish your wages and/or levy your bank accounts. You are correct that NJ generally allows for 10% of a judgment debtor’s gross earnings to be garnished to pay an outstanding judgment. Thankfully, I have only seen a creditor take steps to domesticate a judgment against a debtor on a few occasions, so it is very possible that the creditor will not attempt to domesticate its judgment in NJ, choosing to focus its collection activity against your assets in Ohio. To read more about the exemption laws in your state, you can visit the Bills.com Collection Laws page.

An Ohio judgment likely will result in a lien being placed on your other property in Ohio, if a lien is not already in place. In theory, the creditor could try to force the sale of the property in order to recover its judgment from the sales proceeds; however, this process is time consuming an expensive, making it an unattractive option for creditors. In order to force the sale of a judgment debtor’s property, the creditor is usually required to pay off any higher priority encumbrances (such as mortgages, tax liens, etc.) out of its own pocket before it can proceed with the sale. Since the sale prices brought by auction are often significantly lower than the actual value of the property, creditors can actually lose money by forcing the sale of a property, having received less at auction than the creditor was required to pay to clear the senior encumbrances. Because of these factors, it is unusual to see an unsecured judgment creditor try to force the sale property. However, it is possible that the creditor could pursue this line of attack; I recommend that you discuss the risks with your attorney to help you determine if you need to take any action to protect yourself at this time.

Consult with an attorney in your state as soon as possible to discuss the implications of the foreclosure and what steps you can take to mitigate the damage. To read more about foreclosure, you can visit the Bills.com foreclosure page.

I hope this information helps you Find. Learn & Save.

Best,

Bill

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6 Comments

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  • MC
    Aug, 2009
    Mark
    You need to live in a state where 1) wages may not be garnished, 2) your primary residence is exempt from a lien, and 3) your personal property may not be levied. See the Bills.com Collection Laws and Statute of Limitations to see how you fare in your state of residence. This does not apply to you, but for the benefit of others reading this, Social Security income is 100% exempt from garnishment, and in some states all pension benefits are exempt.
    0 Votes

  • 35x35
    Aug, 2009
    Mike
    How does one become judgment proof? Is it too late? I have a Full time-salaried job, I own a car and a condo (though both have little equity).
    0 Votes

  • MC
    Aug, 2009
    Mark
    The safest course of action is to assume the bank will pursue all legal means of collecting the debt, including pursuing all partners regardless of their state of residence. If you are judgment-proof, then you have little to fear except for the inconvenience posed by the collection efforts. However, it doesn't seem you are judgment-proof, so again, assume the bank will attempt to collect the deficiency balance from you.

    Statute of limitations questions are among the most vexing in civil procedure law, which is pretty darned complicated on its own. Generally speaking, if you are a State X resident being sued in a State X court, you are subject to State X's statute of limitations rules. However, if you are sued in a federal court, then statute of limitations rules become really complicated.
    0 Votes

  • 35x35
    Aug, 2009
    Mike
    My LLC partners and I are foreclosing on an investment property. The property is in another state. We all signed unlimited personal guarantees on the property. The lender is seeking an immediate money judgments on all of us for the full amount of the loan $500k. Once the auction happens in 6 months, the amount of the judgment will hopefully decrease. Anyway, I'm the only one of the partners that live in another state, everyone else lives in the state where the property is and the court proceedings are happening. I already submitted a Personal Financial statement to the bank, to show that I don't have any $$ or assets. Do you think that the bank is more likely to pursue the others (who live in the state where the judgment is happening) and forgo domesticating the judgment to my state and enforcing it to take the little assets that I have or garnish my wages? Garnishing my wages in my state would only give them about $900 per month at the most. Also, what statue of limitations for judgment collection do I go by...The SOL for the state that I live in or the SOL of Wisconsin where the property and judgment is located?
    0 Votes

  • MC
    Jun, 2009
    Mark
    I am not familiar with South Carolina's remedies laws, and "order of reference" is not a common legal term. Consult with a South Carolina attorney who specializes in civil litigation, and ask him or her to file the necessary order in the proper court. To learn more about "order of reference," see the South Carolina state Web site: http://www.scstatehouse.gov/CODE/t15c039.htm
    0 Votes

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