A key to collection procedure is a relatively unknown Florida statute called the Proceedings Supplementary statute. This statute give judgment creditors broadly defined equitable tools to collect unpaid civil judgments. The statute is the procedural basis of creditor actions for fraudulent transfers, injunctions and piercing the corporate veil.
The statute gives a court the authority to enter “any orders required” to go after debtor assets in order to satisfy a civil judgment. Here’s how it works. If a creditor finds that the debtor owns non-exempt property the creditor can obtain the property by having the sheriff levy on the property in the debtor’s possession and control. If the creditor cannot satisfy a judgment from property the debtor owns, then the creditor can initial proceeding supplementary to go after property held by third parties. The third parties may include, for example, a recipient of a fraudulent transfer or the individual owner of a debtor corporation.
Once the creditor opens a proceeding supplementary he may “implead” the third party suspected of holding the debtor’s assets. The impleaded party may raise defenses. Typically, a court may order an impleaded third party to give back property to the debtor where it thereafter becomes subject to leave, but some courts have allowed creditors to obtain money judgments against the impleaded third parties for the value of property received from the debtor.
In addition, proceedings supplementary gives the court to order a judgment debtor to appear in court and be examined by a judge or magistrate about his assets. Debtors who are evasive and untruthful may be held in contempt of court during the debtor exam. The court examination is a powerful creditor collection tool.
Debtors facing a significant judgment should understand as much as they can about Florida’s Proceeding Supplementary statute and the creditor collection tools provided therein. The recent Florida Bar Journal has an excellent article discussing proceedings supplementary, and it offers suggestions to fix due process deficiencies and procedural ambiguities inherent in the Statute.