Florida Debt Collection Laws

What Are Florida Debt Collection Laws?

Florida debt collection laws give creditors legal tools to collect money damages awarded in a final judgment. In Florida, final judgments are entered against the losing party (judgment debtor) in favor of the prevailing party (judgment creditor).

Debt collection laws allow a creditor in Florida to begin the collection process once a final judgment is entered. The statute of limitations for debt collection is five years. After five years from the last payment, a creditor cannot sue to collect on a debt.

How Debt Collection Works in Florida

Debt collection in Florida does not start immediately after the issuance of the final judgment. There is a 10-day period after the date of the judgment during which either party can request a rehearing. Rehearing requests are usually denied, but if a request is approved, it stays the enforcement of the judgment until the court rules on the rehearing motion.

A court’s final judgment does not provide the prevailing judgment creditor any money. Nor does the final judgment, by itself, take any of the debtor’s property. If the debtor is unwilling or unable to pay the judgment voluntarily, the creditor must use legal tools to collect the judgment from the debtor’s assets. Debt collection laws provide legal tools by which a judgment creditor finds and takes the debtor’s property to satisfy a money judgment.

Effective asset protection planning requires understanding the tools judgment creditors may use to discover and take non-exempt assets.

What Happens If You Have a Judgment Against You in Florida?

After a judgment is entered against you, the judgment creditor can garnish your bank account and wages, require you to reveal all assets belonging to you, and place a lien on any non-homestead property. However, Florida law cannot impose criminal liability for not paying a civil money judgment. A creditor cannot have you arrested for non-payment of a debt or for your inability to pay a court judgment.

People who pay their debts on time have little experience dealing with debt collection or money judgments entered against them. In the event of an economic downturn or personal financial catastrophe, the same people become concerned about what will happen if they cannot pay their debt obligations. They imagine what would happen if a creditor sues them and gets a judgment against them for non-payment. They will ask for advice about what they should do if a court enters a money judgment against them in favor of a creditor.

In some cases, a creditor may obtain a judgment and not actively try to collect money thereafter. This is common when the creditor has reason to believe that you do not have financial ability to pay, or if the creditor does not want to do anything to force you into bankruptcy where the debt would be discharged. Creditors do not want to spend “good money” in futile attempts to collect “bad debt.”

Most money judgments against individuals or small businesses are settled for amounts significantly less than the face amount of the judgment. Asset protection that maximizes your exempt assets puts you in the best position to leverage a successful debt settlement.

How to Collect a Judgment in Florida

To collect a judgment in Florida, creditors can use any of the many legal tools provided by the state’s debt collection laws. In Florida, there are six primary ways to collect a judgment:

1. Judgment liens
2. Execution and levy
3. Vehicle seizure
4. Levy on business interests
5. Bank account garnishments
6. Wage garnishments

Judgment Liens

Florida judgment collection laws allow a judgment creditor to obtain a lien of all the debtor’s personal property located in Florida by filing a judgment lien certificate with the Florida Secretary of State. Recording a certified copy of the judgment in any county creates a judgment lien on the debtor’s real property located in the same county, other than homestead property. The recorded lien will prevent the debtor from making an insured transfer of real property title to a mortgagee or buyer.

The judgment lien encumbers subsequent sales or other conveyance of the debtor’s personal property. The purchaser or transferee takes possession of the property subject to the judgment lien.

Execution and Levy

Execution and levy is a collection remedy used to force the sale of a debtor’s tangible personal and real property. Execution and levy are used to seize real estate, stock in corporations, and the debtor’s personal property. Assets frequently subject to execution include the debtor’s automobiles, stock in private companies, and valuable home possessions. The creditor can execute against the debtor’s property in possession of a third party.

A creditor must identify in advance the debtor’s property subject to execution and levy. The county sheriff executes the levy by physically seizing the debtor’s property. The sheriff sells the debtor’s property at a public auction. The sheriff applies the sales proceeds, minus expenses, to satisfy the judgment. Any preexisting liens on the property must be paid before any money is available to pay the judgment creditor. The debtor can bid for their own property at the auction.

Seizure of Vehicles

In Florida, a judgment creditor can seize a vehicle through a sheriff levy and execution. Creditors frequently direct the sheriff to levy upon automobiles that a debtor owns free and clear.  The sheriff can tow the car from a public parking lot or a public street. The sheriff will sell the debtor’s car at a public auction. The judgment creditor will be entitled to the proceeds of the sale minus sheriff fees, storage costs, and auction fees. Taking the debtor’s car deprives the debtor of transportation and exerts pressure on the debtor to pay the judgment.

Creditors typically do not levy upon automobiles subject to significant car loans and liens because few people will pay significant money to buy a car subject to a lien at an auction. In addition, the lender on the vehicle must be paid first from the proceeds of any sheriff sale. A car with significant debt is not a good collection target.

Some debtors lease their motor vehicles instead of owning them. Leased vehicles are not assets owned by the debtor. For this reason, a leased vehicle cannot be subject to levy and execution for a judgment.

Levy on Privately Held Businesses Interests

Creditors can use execution and levy against debtor’s shares of common stock of their own business. The sheriff will sell the stock at auction. The creditor can bid at the auction the amount of its judgment for the stock. The party that purchases the stock at auction steps into the debtor’s shoes as a stockholder. If the debtor owned one hundred percent of issued stock the successful bidder at auction gains control of the company and all company assets including, for example, company bank accounts.

Suppose the debtor states that their privately held corporation has not issued stock, or that the debtor has misplaced the stock certificates. In that case, the creditor can obtain a court order directing the corporation to reissue stock certificates. The court can hold the debtor in contempt if they does not comply with the order to issue stock. The court may order the debtor to retrieve already issued stock certificates located outside of the court’s geographical jurisdiction.

Contrarily, the creditor may not execute and levy upon the debtor’s membership interest in a partnership or multi-member LLC. The creditor may not levy assets owned by the LLC. The creditor’s sole remedy is a charging lien on partnership or LLC profit distributions payable to the debtor. A debtor’s membership interest in a partnership or multi-member LLC with a properly drafted partnership agreement or LLC operating agreement in Florida provides asset protection.

Garnishment of Money

Garnishment is the judgment collection tool a creditor uses to seize any property owed to the debtor by a third party. For example, money the debtor holds in a financial account constitutes a debt owed to the debtor from the financial firm. Wages and salary are debts owed to the debtor from their employer.

A writ of garnishment authorizes the judgment creditor to collect judgments from either the debtor’s bank accounts, future wages and commissions, financial accounts holding publicly traded securities, or any debts or rights to money payable to the debtor.

Garnishment actions begin with the clerk of court’s issuance of a garnishment writ. The creditor serves the writ upon the debtor’s employer, bank, financial institution, or other person obligated to the debtor. A garnishment writ notifies the third party that they must retain an asset or money owed to the debtor and thereafter pay the money as directed by the court.

The creditor is not required to provide advance notice to the debtor prior to serving a writ of garnishment. Money subject to garnishment must be in the actual possession and control of the garnished third party. The money must be owed to the debtor without condition, and the amount owed must be liquidated (fixed) in amount. In most instances, a writ of garnishment pertains to current debts and obligations owed to the debtor. Only debts owed to the debtor at the time the writ is served are frozen and subject to garnishment. The writ of garnishment does not attach to money owed to the debtor in the future, except for wages and salary, as discussed below.

Wage Garnishment

The debtor’s salary and wages may be subject to a continuing writ of garnishment. A single writ of garnishment served upon the debtor’s employer garnishes all future non-exempt wages, salary, and commissions payable to the debtor. The garnishment continues in effect until the judgment is paid, the debtor leaves employment, or the debtor files bankruptcy.

A creditor cannot get a continuing writ of garnishment against payments other than wages. For example, money payable by a company to a debtor working as an independent contractor, or rents owed to a landlord, are not subject to continuing writs.

Florida debt collection law exempts some types of debts from garnishment. For example, wages payable to a head of household are exempt without limitation from continuing wage garnishments. Periodic payments due to the debtor from social security, annuities, and retirement plans also cannot be garnished in Florida. Garnishment procedures are complicated and are strictly construed and enforced in Florida courts. Some debtors defeat garnishments by finding procedural flaws in the garnishment writ and application.

Florida Debt Collection Laws

Florida debt collection laws are governed by the Florida Consumer Collection Practices Act (CCPA) which prohibits both debt collectors and creditors from using certain types of abusive, deceptive, and misleading debt collection tactics. The CCPA supplements the protections provided by the federal Fair Debt Collection Practices Act (FDCPA). The CCPA does not apply to all debts.

Some examples of abusive debt collection tactics include lying about who they are, the amount owed, or potential outcomes; using abusive practices or harassing the debtor; threatening to hurt the person; using obscene or profane language; repeatedly calling or texting the person; treating the person unfairly; telling anyone else about the money owed other than the debtor’s spouse; and contacting a debtor before 8 AM and after 9 PM unless the individual agrees.

If a debt collector violates Florida debt collection laws, consumers have several options. They can sue the debt collector in state court, report the action to a government agency, report the action to the state attorney general, or use the violation as leverage in debt settlement negotiations. If you lost wages or had medical bills because of things that a debt collector did, you can sue for those damages. If you can’t prove damages, a judge can still award you up to $1,000 plus reimburse you for attorney’s fees and court costs.

How Do Creditors Find Your Assets?

Florida debt collection laws provide judgment creditors numerous means to find information about a debtor’s income and assets. Discovery in aid of execution in Florida refers to the legal process by which a judgment creditor finds (discovers) debtor assets that may be subject to collection of a money judgment.

The principal discovery tools include requests to produce documents, written answers to interrogatories, and depositions under oath. A judgment creditor can use the same discovery tools available to parties in general litigation to discover financial information about a judgment debtor. After a creditor locates a debtor’s assets, the creditor applies collection tools to seize and liquidate the assets. Discovery of assets previously owned by the debtor provides clues about fraudulent transfers or conversions of assets to avoid collection.

After a court issues a money judgment, the judgment creditor is permitted to ask the judgment debtor detailed and extensive questions about the debtor’s financial affairs. The creditor can demand that the debtor disclose all assets in which the debtor has any legal or equitable interest, including assets owned jointly with a spouse, family members, or business associates. The creditor can ask broad questions about the debtor’s past sales or transfers of assets. The debtor must answer questions under oath and under penalty of perjury. The creditor can also seek information from third parties, such as an examination under oath of the debtor’s spouse and other family members.

A creditor can find out about a debtor’s financial assets by using:

• Depositions
• Document requests
• Financial statements
• Real estate records
• Public business records
• Other creditors
• Private investigators
• Social media

Deposition in Aid of Execution

An effective discovery tool used for discovery in aid of execution is an oral deposition of the debtor under oath. A creditor can require a debtor to sit before a court reporter while the creditor asks questions about the debtor’s financial affairs and assets. The creditor can inquire about almost any aspect of the debtor’s finances, including the debtor’s tax returns and all other personal matters.

Almost any question that could lead to the creditor’s discovery of assets subject to execution is permitted. In most cases, the debtor’s deposition must take place in the county where the debtor resides. A creditor may not force the debtor to travel outside their residential county to the creditor’s place of business or to the creditor’s attorney’s law firm in another county. A creditor may take several depositions during the life of a judgment so long as the frequency of inquiry does not amount to unreasonable harassment.

Request for Production of Documents

The debtor must furnish documents the creditor reasonably requests related to the debtor’s financial affairs. Florida’s laws for discovery in aid of execution allow creditors to request copies of a debtor’s bank statements, check registers, canceled checks, credit card statements, insurance policies, and tax returns. A creditor can request documents up to at least four years old. The debtor is required, upon request, to produce all documents that possibly could lead the creditor to the discovery of the debtor’s assets available to satisfy the judgment.

The debtor is required to supply documents requested which are in the debtor’s custody or control. The debtor does not have to provide documents that the debtor does not have in their possession or cannot easily obtain.

Debtor’s Financial Statements

When an individual borrows money to start a business or personally guarantees a commercial loan to an existing business, the bank typically requires the individual business owner to submit personal financial information and personal tax returns. In addition, lenders typically require individual borrowers or guarantors to periodically update their financial statements during the life of the loan and submit copies of annual tax returns.

A judgment creditor will often request copies of a debtor’s loan applications and updated financial statements previously submitted to the debtor’s lenders. Some borrowers exaggerate their assets when they apply for a loan. A judgment creditor may use a debtor’s inflated valuations and asset descriptions on lending documents to contradict the debtor’s attempt to minimize the value of their assets during a deposition.

Real Estate Ownership

Real estate, or real property, deeds are filed in the county where the real estate is situated. Each Florida county maintains an index of real estate ownership. Florida counties have digitized their legal records so that property ownership information is available by online search. Online property records are centrally linked to state and national databases.

Instead of guessing where a debtor might own real property, for a small fee a creditor can search real estate records throughout Florida. Computer searches quickly provide the debtor’s property ownership and other information such as date of purchase, mortgages, and property value. The same property search can identify whether the debtor holds any mortgages on someone else’s real estate to secure a promissory note payable to the debtor. The judgment creditor can garnish the underlying note and payment stream if it finds that a debtor is a mortgagee from seller financing.

Business Interests

Florida debt collection laws also allow creditors to use public records to discover a debtor’s business interests. Florida public records do not include or reveal a debtor’s ownership interest in any particular entity. Still, they do disclose if the debtor is an officer or director of a corporation, manager of an LLC or limited liability company, or a registered agent.

Most owners list themselves in at least one of those capacities when filing annual reports with the Florida Division of Corporations. Once a creditor discovers a debtor is involved in a business in some capacity, the creditor will focus on the debtor’s ownership interests. The extent and nature of a debtor’s ownership of a business entity is usually revealed through the debtor’s tax returns or the use of other discovery tools.

Cooperation Among Creditors

Collection agents who work for institutional lenders and large collection agencies develop personal contacts working in banks and other financial institutions.

The creditor’s personal contacts are an excellent source of financial information about judgment debtors. Any contact person with access to a company’s computer records can quickly tell a collection agent whether the debtor has a financial account at its institution. The judgment creditor can then serve a writ of garnishment on any institution which reports an account of significant balance.

Professional Investigators

Private investigators may perform asset searches as a service to judgment creditors. Some private investigation firms specialize in searching for bank accounts, while other firms provide broader searches. Access to information over the internet and social media has made investigator’s asset searches easier and more accurate.

Private investigators have at their disposal several sophisticated methods of asset discovery. For example, a private investigator can access your phone records. The investigator can use reverse lookup tools to see whether the debtor has received toll-free calls from financial institutions where the debtor may have assets. Some creditors employ private investigators to verify if a debtor actually resides at the property the debtor claims as their exempt homestead.

Technology and Social Media

Social media has made it easier than ever for creditors to discover the nature and location of assets. People often refer to their assets and income in social media discussions. Social media is a revealing source of information about a debtor’s finances and things the debtor may have done to evade judgment collection.

Hiding Assets from Creditors

Asset protection does not involve hiding assets from judgment collection. People facing the collection of a judgment should resist the urge to hide or misrepresent their assets during the creditor’s asset discovery procedures. Most of the information a debtor provides a judgment creditor during discovery in aid of execution must be certified as true under oath.

Hiding assets, misrepresenting asset values, and lying about prior transfers of assets amounts to perjury. Perjury is not only a crime, but once discovered, it severely diminishes the debtor’s credibility before the judge. Judges tend to rule against any party who has previously lied to the court or the adverse party.

The better option is to engage in asset protection planning to make any assets you are concerned about more difficult to collect.

What is a Writ of Execution?

In Florida, a writ of execution is a court order that allows the judgment creditor to collect on the judgment. The writ of execution lets the creditor request the sheriff levy on any property owned by the judgment debtor. Chapter 55 of the Florida statutes governs writs of execution in Florida.

A creditor does not need a writ of execution issued before using debt collection laws to find out about debtor assets or attach a judgment to the debtor’s real estate.

Proceedings Supplementary

Florida statutes provide for “proceedings supplementary” which allow a judgment creditor to collect property in the hand of third parties. This includes property in which the debtor has a present or a prior interest but which property is presently held by a third party. The proceedings are governed by Florida Statute 56.29. Proceedings supplementary is the most comprehensive creditor remedy available under Florida law. It assists judgment creditors’ satisfaction of their judgments by using equitable remedies against various types of debtor rights and property that are not subject to garnishment, attachment, or execution and levy.

Under Florida law, proceedings supplementary allow the creditor the following options:

1. Avoiding fraudulent transfers: Creditors may sue third party recipients of alleged fraudulent transfers to reverse the transfer or obtain a judgment against the recipient for the value of property transferred. The court may enter an order to apply transferred real property to satisfy a judgment or have the sheriff seize fraudulently transferred personal property.
2. Reversing fraudulent conversion: Creditors may obtain a court order reversing the debtor’s use of non-exempt assets to purchase or obtain an exempt asset if the purchase was intended to protect the non-exempt assets from creditors. An example of a fraudulent conversion is using non-exempt cash to buy an exempt annuity contract.
3. Piercing corporate veil: Creditors may sue individuals to enforce judgment against a corporation where the corporation has been established to defraud creditors, or where the company is the alter-ego and continuation of a prior business.
4. Reverse piercing: Creditor sues a corporation to satisfy judgment against an individual who conveyed personal assets to an alter-ego corporation to avoid collection.
5. Charging liens: A judgment creditor can apply for a charging lien against the debtor’s ownership of limited partnerships and limited liability companies.
6. Injunctive relief: Creditors may seek injunctions against the debtor preventing subsequent transfer of the debtor’s property. The creditor must demonstrate that fraudulent transfers are imminent. The injunction is essentially an asset freeze.
7. Receivership: In extraordinary circumstances, a creditor may convince a court to appoint a receiver to take possession of the debtor’s property. The receiver manages the debtor’s property and preserves its value during collection procedures.
8. Equitable liens. A creditor may have a court declare an equitable lien against the debtor’s real property including, when applicable, the debtor’s homestead.

Examination of the Debtor in Court

The proceedings supplementary statute enables a judgment creditor to compel the debtor to appear in court and testify before a judge or magistrate about the debtor’s assets. The creditor may require the debtor to bring to the court hearing specific documents or property. The examination of the debtor must be set in the county in which the debtor currently resides.

The creditor has broad authority to examine the debtor on all matters and things pertaining to the debtor’s personal or business interest, and the creditor and the judge may ask any question that, directly or indirectly, may aid in satisfying the judgment. The creditor may also examine third parties who may be the debtor’s “alter-ego” or who may be transferees of the debtor’s property.

Turnover of Property

A judgment creditor may use proceedings supplementary to gain control of a debtor’s non-exempt property by ordering the debtor or third parties to turn over assets. The court is authorized to hold the debtor, or others in possession of the debtor’s property, in contempt for failing to obey a property turnover order. The court may order the debtor to retrieve property that is not currently in the debtor’s possession.

Initiation of Proceedings Supplementary

A creditor initiates proceedings supplementary by filing a motion with the court that issued the final judgment. The statute requires the creditor to include certain allegations in the motion. Proceedings may be commenced at any time during the 20-year life of a final judgment.

Small Business Administration (SBA) Debt Collection

Many business owners finance their business with federal SBA loans. Almost all SBA loans are personally guaranteed by the business owner and their spouse (if married.) If a business cannot repay the loans, the SBA will sue and obtain a money judgment against the business and the owner.

The SBA has enhanced collection remedies regardless of state property exemptions. The SBA can intercede to take a debtor’s tax refunds and social security payments. The SBA can garnish wages notwithstanding the debtor’s Florida head of household exemption. The process is an SBA “administrative wage garnishment and is authorized by 31 USC 3720D.

Collection by Other Federal Agencies

United States federal agencies, such as the Federal Trade Commission (FTC), sometimes sue individuals in federal court for money damages and fines for violation of federal rules and regulations. Frequent examples are Federal Trade Commission suits against telemarketer firms or violators of anti-trust laws, or suits by the Securities and Exchange Commission (SEC) for violation of investment regulations. The federal government’s collection of judgments is different, in some respects, from a private creditor’s collection of a judgment for damages.

The Federal Debt Collection Procedures Act (Chapter 176 of Title 28 of the United States Code) (FDCPA or the Act) provides the federal government tools to collect debts owed to government agencies. The Act has separate subchapters dealing with pre-judgment remedies, post-judgment remedies, and the reversal of fraudulent transfers. The U.S. government’s post-judgment collection tools are comparable to state law collection remedies and include judgment liens on real property, garnishment of accounts and debts, and levy on personal property.

In addition, some federal agencies, such as the IRS or the SEC, have statutes that provide enhanced collection procedures for debts owed to their agency.

A Florida resident may use Florida asset exemptions against a federal agency collection. A defendant debtor may assert property exemptions available under applicable state law in the jurisdiction where the debtor has resided for the most recent 180-day period. The defendant must have resided in Florida for 180 days to assert Florida exemptions under the federal collection statute. In contrast, there is no minimum residency time period in state court collection proceedings where Florida exemptions apply immediately upon Florida residency.

The Florida residency time requirement in federal collection does not apply to a tenants by entireties property. Tenants by entireties is a property description, not a statutory “exemption,” and the federal statute does not impose a 180 day Florida residency requirement for individual married debtors to protect tenants by entireties property.

The federal collection laws require the debtor to assert an exemption claim in a court filing. The debtor’s filing of an exemption statement stays further government actions to dispose or take possession of the property until the court considers the exemption claim. Moreover, the government may not seize or interfere with property the government has reason to know is exempt even if the debtor has not yet filed an exemption application.

U.S. agencies may pursue a defendant’s property even before the government agency’s claims are fully adjudicated in court and before the court enters a final judgment against the defendant debtor. The FDCPA provides pre-judgment remedies including attachment, garnishments, or appointment of a receiver. The government may apply for attachment at any time after it files its initial complaint. The Act requires that the government allege in a sworn statement a statutory justification to attack a defendant’s assets before judgment. These justifications include, for example, the allegation that the defendant is about to leave the jurisdiction of the court, or that the defendant is about to fraudulently transfer or fraudulently convert assets with the effect of hindering or delaying the United States’ collection.

Pre-judgment remedies are also available in most states, including Florida. What makes the U.S. government’s pre-judgment remedies so powerful is the absence of a bond requirement. Section 28 U.S C. 3101(C)(3) states that no bond is required by the United States as a condition of pre-judgment actions against a defendant’s assets. For this reason, federal agencies often seek an immediate freeze of a defendant’s assets upon filing a civil action.

Under Florida law, a creditor that seeks to freeze a defendant’s assets before a judgment must post a bond to compensate the debtor in the event the debtor prevails in the litigation, or the assets are found to be exempt. The cost of a pre-judgment collection bond is significant. The costs plus liability risks deter most state court civil creditors from seeking a pre-judgment asset freeze against civil litigation defendants.

Enforcement of Out-of-State Foreign Judgments

A creditor’s judgment against a Florida resident obtained from a court in another state or another country is a foreign judgment. A creditor may enforce a foreign judgment in Florida and through Florida courts by following procedures set forth in Florida Statute § 55.501. The process is referred to as the domestication of a foreign judgment.

There are statutory procedures to domesticate a foreign judgment in Florida. The foreign creditor first records a certified copy of the foreign judgment in Florida courts. After recording, the clerk of court is required to notify the debtor. The debtor then has 30 days to contest the validity of the judgment. There are limited reasons to contest the recording of a foreign judgment (for example, lack of jurisdiction or fraud). The debtor cannot retry the foreign judgment on its legal or evidentiary merits.

A domesticated foreign judgment is enforced as a Florida judgment pursuant to Florida’s judgment collection laws and rules. The creditor can enforce the domesticated Florida judgment for up to twenty years. The twenty-year time limit runs from the date the foreign state’s court issued the judgment, not from the date of Florida domestication.

Credit Card Judgments

If a credit card company gets a judgment against you for unpaid credit card debt, you need to prepare for the creditor’s attempts to collect the judgment. Know that a credit card judgment is not a criminal matter. It is not “illegal” for you not to pay a credit card company, and the courts cannot put you in jail if you do not pay the judgment. The court’s credit card judgment also does not automatically take your money or your future earnings. It is up to the creditor to use legal tools to collect money from you to satisfy its judgment.

Often, a creditor will not make any attempt to collect a small judgment because the legal costs of collection are greater than the creditor’s probable recovery. Also, most court judgments do not reimburse the creditor for its own legal fees incurred in trying to collect the judgment.

Some people faced with a credit card judgment immediately think they will have to file bankruptcy. This is a mistake. The judgment creditor has more leverage in bankruptcy court, and bankruptcy law strips some of a debtor’s asset exemptions. Bankruptcy should be the debtor’s last resort.

FAQs about Florida Debt Collection Laws

The following are answers to some frequently asked questions about Florida debt collection laws.