By Law Office of Bryan M. Grundon of Law Office of Bryan M. Grundon on Friday, May 2, 2014.

Collecting on the "Uncollectable"

Donald Sterling's wife is suing his alleged mistress to recover community property, claiming that Sterling gave the woman expensive gifts ranging from a Ferrari to a $1.8 million duplex without her permission. See the article in the  LA Times.

So what's wrong with that? He's not allowed to buy someone gifts?

California, along with eight other states, is governed by the community property system, meaning each spouse shares equally in the profits and income earned, regardless of who actually acquired the property. Therefore, those pricey purchases from the disgraced Clippers owner were allegedly acquired with community property funds also owned by Rochelle Sterling without her knowledge.

Marriage sounds like quite the win-win in California. But that community property also extends to something a little less desirable - debt. Spouses share in the profits and are also both responsible for debts incurred by either party incurred during the marriage. And for anyone looking to collect on a judgment, the community property coffers are often overlooked.

Out-of-Work, Out-of-Luck?

Our office has a matter where our judgment is against a married man and not his wife. He's unemployed, doesn't own any property and, allegedly, doesn't have a bank account.

Many collection firms and attorneys may declare this debtor "judgment proof," claiming there are no assets available. But this debtor may be far from insolvent. As discussed, spouses are fair game in California. If a spouse is employed or is banking in California, those funds can be tapped to satisfy the judgment.

Spousal garnishments and spousal bank levies are just a few of the options for collecting. In addition, there are instruments available to collect from individuals earning income through contract work.

In the case of our out-of-work, non-banking debtor, we discovered that his wife was working as a teacher and banks in California and were able to begin collecting on the judgment.

Another benefit of gleaning this information is that often it will inspire the debtor to contact us and enter into a voluntary payment agreement.

For Donald Sterling, California's community property system may not be working out in his favor, but for those of us looking to collect on a judgment, it's yet another way to collect on the allegedly uncollectable.

Do you have a judgment that was deemed "judgment proof"? Please contact Bryan Grundon today to discuss how we can help you.