PACA trust protection
Creditors who have preserved their rights under the Perishable Agricultural Commodities Act (PACA), however, have a far better chance of collecting. “One of the benefits to produce sellers preserving their rights under PACA is that debts under the PACA trust cannot be discharged if the debtor declares bankruptcy,” remarks Amendola. Trust protection also enables a creditor to get a temporary restraining order freezing all assets if they are being liquidated.
“With respect to a foreclosure,” notes DeFalco, “we make the argument that the lien property is subject to the PACA trust.” This issue comes up if the debtor used any PACA-protected proceeds for a down payment or mortgage payments.
Other options
Two other collection options involve seizure of property and going after monies owed to the debtor. Each can be complicated and may not be worth the time and effort required.
To seize and sell a debtor’s property, the creditor must obtain a writ of execution issued by the court and wait for the sei-zure to be handled by a sheriff or U.S. Marshal, who will take possession of the property, sell it, and pay the proceeds to the creditor. In some cases, this may not be worth the trouble, as the “cost for a writ of execution can be excessive,” notes DeFalco.
Another option is to go after those who owe money to the debtor. “If the debt owed to the debtor is paid to [the judgment creditor], it’s akin to a writ of garnishment,” explains DeFalco. This may be difficult to accomplish, as those who owe the debtor money must be identified, located, and persuaded to pay the creditor instead of the debtor.
Final Thoughts
When filing a lawsuit to recover money owed, creditors need to understand that a judgment does not guarantee payment. It may be only the first step—one of many—needed to recover payment.
A judgment merely provides the foundation to pursue supplemental legal actions to improve a creditor’s chances of recovering money through various collection methods including wage garnishment, liens, or seizure of property. What’s more, creditors should remember that enforcement procedures can vary by state, so seeking legal counsel can help determine the best course of action and ensure every avenue is pursued.
