Collecting from a Dissolved Corporation in California

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A common frustration for judgment creditors is learning—often after spending significant time and money litigating—that the defendant corporation has “shut down.” Checks stop coming, phones go unanswered, and the California Secretary of State lists the entity as dissolved or inactive.

The assumption is usually the same: the money is gone and the case is over.

That assumption is often wrong.

Under California law, dissolution does not wipe out corporate debts. In many cases, dissolution actually opens the door to additional judgment-enforcement remedies, particularly where corporate assets were distributed to shareholders or insiders without first paying creditors.

Dissolution Does Not End Corporate Existence or Liability

Under California law, dissolution does not immediately terminate a corporation’s existence or extinguish its liabilities. Instead, dissolution triggers a statutory wind-up period during which the corporation continues to exist for limited purposes, including paying debts, resolving claims, and distributing assets. (Corp. Code, § 2010.)

California courts have long recognized that dissolution is not a defense to liability. Actions against a dissolved corporation do not abate simply because dissolution paperwork has been filed, and creditors may continue to pursue claims during the wind-up process.

From an enforcement standpoint, dissolution changes the mechanics of collection—not the obligation to pay. In many cases, creditors shift from traditional collection tools to more advanced remedies described in our overview of judgment enforcement in California.

Creditors Have Priority Over Shareholders During Dissolution

California’s statutory scheme is explicit: creditors come first.

A corporation may not distribute assets to shareholders unless and until all known debts and liabilities have been paid or adequately provided for. (Corp. Code, § 2004.) As part of dissolution, the corporation must certify that this requirement has been satisfied. (Corp. Code, § 1905.)

Courts enforce this priority strictly. Corporate assets distributed during dissolution remain subject to an equitable charge in favor of creditors, and shareholders take those assets subject to outstanding corporate debts. Dissolution does not convert corporate property into shareholder property free and clear of creditor claims. (Zinn v. Bright (1970) 9 Cal.App.3d 188.)

Shareholders May Be Personally Liable for Improper Distributions

California Corporations Code section 2011 provides a direct statutory remedy when shareholders receive corporate assets during dissolution while debts remain unpaid. In that circumstance, a creditor may enforce its claim directly against the shareholder, up to the amount of assets received.

This liability is capped—but it is real and enforceable. (Corp. Code, § 2011.)

Section 2009 supplies the enforcement mechanism. When assets are distributed during wind-up without first paying or providing for debts, those distributions may be recovered in an action brought in the name of the corporation by one or more creditors. These claims frequently overlap with the remedies discussed in our article on asset recovery and fraudulent transfer.

No Fraud or Alter Ego Showing Is Required

A common misconception is that creditors must prove fraud or alter ego to pursue shareholders after dissolution. That is not the case.

Liability under sections 2009 and 2011 does not require proof of fraud, bad intent, or abuse of the corporate form. Liability flows from a simpler fact: the shareholder received corporate assets while known claims remained unpaid.

The California Supreme Court has confirmed that distributing corporate assets with knowledge of unpaid claims creates liability even in the absence of fraudulent intent. (Hoover v. Galbraith (1972) 7 Cal.3d 519.)

During dissolution, corporate assets function as a trust fund for creditors, and shareholders who receive those assets prematurely may be required to return them.

Successor Liability When the Business Continues Under a New Name

Dissolution issues frequently overlap with successor liability, particularly where the business continues operating through a new corporate shell.

California courts recognize exceptions to the general rule of non-liability where the successor entity is a mere continuation of the prior business or where the transaction constitutes a de facto merger. (Ray v. Alad Corp. (1977) 19 Cal.3d 22.)

Courts focus on substance over form, examining continuity of ownership or management, continuation of the same operations or customer base, use of the same sales channels or payment infrastructure, and the absence of adequate consideration for transferred assets. (Quemetco Inc. v. Pacific Automobile Ins. Co. (1994) 24 Cal.App.4th 494; Rubio v. CIA Wheel Group (2021) 63 Cal.App.5th 82.)

Where the same enterprise continues while creditors remain unpaid, courts will impose successor liability to prevent injustice—particularly where restructuring occurs during litigation or after judgment. (Cleveland v. Johnson (2012) 209 Cal.App.4th 1315.)

In these cases, successor liability is often pursued alongside tools such as assignment orders against business income and judgment liens on pending lawsuits.

Strategic Note: Alter Ego Is Not the Default Remedy

In dissolution cases, statutory shareholder liability and successor liability often provide cleaner and more direct paths to recovery than alter ego claims.

Alter ego may still be appropriate in certain cases, particularly where assets were never formally distributed or where commingling obscures ownership. But it should not be treated as the default approach. Effective enforcement starts with the remedies the law makes easiest to prove.

Conclusion

A dissolved corporation is not necessarily a dead end. In many cases, it is the beginning of a different—and often more effective—phase of collection.

If assets were distributed without paying creditors, shareholders may be required to return them. If the business continues under a new name, liability may follow. Dissolution does not erase obligations—it simply changes the path a creditor takes to enforce them.

How to Garnish Wages in California After a Judgment(2026)

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Wage garnishment is one of the most direct ways to turn a paper judgment into real money. With the proper paperwork, a Sheriff or Marshal can order your debtor’s employer to withhold a portion of wages and pay them over to you until the judgment is satisfied. But California wage garnishment law is technical, and recent updates in 2025 have added new hurdles. If you don’t follow each requirement precisely, your garnishment may be rejected or void.

Wage garnishment in California is a post-judgment enforcement procedure that allows a judgment creditor to collect a debt by requiring a debtor’s employer to withhold a portion of the debtor’s wages. The employer must send those withheld funds to the levying officer until the judgment is paid. In California, wage garnishments are implemented through an Earnings Withholding Order (EWO) issued under a writ of execution.

This updated guide explains how to garnish wages in California—from judgment to paycheck.

Step 1: Start with a Valid Judgment

Before you can initiate wage garnishment, you must have a valid, enforceable judgment. In California, judgments are enforceable for 10 years and may be renewed for another 10. Post-judgment interest accrues at 10% annually, and you may recover certain enforcement costs.

To ensure those amounts are added to the balance, file a Memorandum of Costs (MOC). Without this filing, your writ of execution may not reflect the full amount you are owed.

Step 2: Identify the Employer and Obtain the Right Writ of Execution

The foundation of wage garnishment is confirming that your debtor is a W-2 employee. Garnishments only apply to wages. If the debtor is paid on a 1099, you’ll need to use an assignment order or other remedies.

Once you know the employer, you must determine who can accept service of the Earnings Withholding Order (EWO). For corporations and LLCs, that is usually the registered agent listed with the California Secretary of State. For small businesses, it may be the owner or payroll manager.

This information is essential because your writ of execution must be directed to the county where the employer is located. For example, a judgment entered in Los Angeles but enforced against an employer in San Diego requires a writ issued in Los Angeles but directed to the San Diego Sheriff. Without the correct county writ, the levying officer cannot act.

Step 3: Prepare the Garnishment Packet and Submit It to the Sheriff

With a valid writ of execution, prepare the packet for the levying officer. This typically includes:

  • Application for Earnings Withholding Order (WG-001)
  • The Earnings Withholding Order itself (WG-002)
  • Employer’s Return (WG-005)

In many counties, the Sheriff’s office provides its own instructions and will accept the original writ plus WG-001.

As of 2025, creditors enforcing consumer debts must also include an Address Verification Declaration confirming the debtor’s last known address. This document is not filed with the court. Instead, it must be submitted to the levying officer within 10 court days of delivering your packet. If omitted, the levy is invalid.

Once complete, deliver the package to the Sheriff or Marshal in the county where the employer is located. The officer will then serve the employer with the order and instructions.

Step 4: Employer Compliance and Possible Exemptions

Once served, the employer must:

  • Withhold up to 25% of the debtor’s disposable wages and forward those amounts to the Sheriff.
  • Complete and return the Employer’s Return (WG-005) confirming compliance.

At this stage, the debtor can attempt to claim hardship by filing a Claim of Exemption (WG-006) and Financial Statement (WG-007). If this happens, you must respond quickly with a Notice of Opposition (WG-009) or risk losing your garnishment.

For a detailed guide on this process, see our related post:
Defending Your Claim: A Technical Guide to Opposing Claims of Exemption in California Wage Garnishment and Bank Levies.

Common Mistakes That Invalidate Wage Garnishments

Many garnishments fail not because the debtor lacks wages, but due to procedural errors:

  • Obtaining a writ of execution for the wrong county.
  • Serving the debtor instead of the employer or registered agent.
  • Allowing the writ to expire after 180 days.
  • Forgetting the Address Verification Declaration in consumer debt cases.

These mistakes can delay recovery for months.

Quick Checklist for California Wage Garnishment

✅ Confirm you have a valid judgment and file a Memorandum of Costs.

✅ Verify that the debtor is a W-2 employee.

✅ Obtain a writ of execution directed to the county where the employer is located.

✅ Assemble the packet: writ, EWO forms, Employer’s Return, and (for consumer debts) the Address Verification Declaration.

✅ Deliver the packet to the Sheriff/Marshal in the proper county.

✅ Monitor compliance and be ready to oppose a Claim of Exemption.

Final Thoughts

Wage garnishment in California is one of the most reliable ways to enforce a judgment, but the process is highly technical. Recent 2025 updates add new requirements, and even small mistakes can make your levy ineffective. Working with an experienced California judgment enforcement attorney can ensure compliance, speed recovery, and prevent wasted time and expense.

Commercial Debt Collection in California: A Legal Guide for Business Owners

Business owner receiving legal advice on debt collection in California.

Commercial debt collection in California requires strategic planning, legal expertise, and a clear understanding of state regulations. If your business is dealing with unpaid invoices, defaulted contracts, or overdue commercial accounts, it’s critical to know your rights and available remedies. This guide from The Grundon Law Firm outlines how to collect business debt in California while remaining compliant with evolving legal standards.

Understanding Commercial vs. Consumer Debt

Consumer debt includes personal, family, or household obligations, while commercial debt arises from business-to-business transactions. Consumer collections are regulated by the Fair Debt Collection Practices Act (FDCPA) and the Rosenthal Fair Debt Collection Practices Act (RFDCPA). Commercial collections, by contrast, typically rely on contract law, guaranty enforcement, and the California Commercial Code.

If litigation becomes necessary, creditors can pursue a breach of contract claim and obtain a judgment against the debtor. Once a judgment is entered, the focus shifts to enforcement tools such as bank levies, wage garnishments, and assignment orders that allow creditors to recover funds directly from the debtor’s assets or income streams.

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The Rosenthal Act’s Commercial Debt Expansion Begins July 2025

Historically, California’s Rosenthal Fair Debt Collection Practices Act (RFDCPA) only applied to consumer debts—those incurred for personal, family, or household purposes. However, effective July 1, 2025, the RFDCPA will expand its protections to include certain types of small business debt under Senate Bill 1286.

This expansion applies to “covered commercial debts” valued at $500,000 or less, including loans, lines of credit, and vendor accounts tied to individuals such as sole proprietors, independent contractors, or personal guarantors. These debts will be subject to many of the same rules and restrictions governing consumer debt, including prohibitions on harassment, misrepresentation, and improper contact with third parties.

Importantly, the law only applies to debts that are originated, renewed, assigned, or sold on or after July 1, 2025. Businesses and lenders must begin reviewing their internal policies and collection procedures now to ensure compliance when the new rules take effect.

At The Grundon Law Firm, we help our clients prepare for the Rosenthal expansion with updated collection strategies and practical legal support tailored to California’s evolving regulatory landscape.

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Common Sources of Commercial Debt

Commercial debt may include unpaid invoices, defaulted service agreements, breach of contract claims, overdue credit lines, and personal guarantor defaults.

In many commercial disputes, the personal guaranty becomes a critical tool because it allows creditors to pursue the individual behind the business entity. When structured properly, a guaranty can dramatically increase the chances of recovering the debt.

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A Plan For Managing Past Due Accounts

Step 1: Strengthen Internal Credit and Collection Policies

Preventing delinquency starts with a proactive credit strategy. Always require a written credit application that clearly identifies the responsible party. Is your customer an LLC, a corporation, or simply doing business under a fictitious name? Confirm the legal entity before extending credit.

Perform credit checks and request trade references. Consider requiring personal guarantees, especially if the business is new or has limited assets. Spell out payment terms, late fees, and recovery of attorney’s fees in writing.

Document everything. Maintain signed contracts, emails, and payment records in an organized file. If litigation becomes necessary, a well-documented file can make the difference between winning and losing.

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Step 2: Act Early and Consistently

Delinquent accounts rarely improve with time. Review aging reports weekly and flag anything more than 15 days overdue. Send a polite reminder first, then escalate if payment is not received.

Every business should maintain a written collections protocol. While the timeline may vary depending on the industry, consistency is key.

For example:

Day 15 — Friendly email reminder
Day 30 — Second notice with late fee
Day 45 — Phone call or mailed letter
Day 60 — Final notice
Day 75–90 — Referral to outside counsel

The longer you wait, the more leverage the debtor gains. Consider setting internal policy thresholds for when services will stop or when legal action will begin.

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Step 3: Know the Legal Framework in California

Lawsuits are powerful tools, but they must be filed properly. The statute of limitations for most written contracts in California is four years. Venue also matters: the lawsuit must generally be filed where the defendant resides or where the contract was performed.

It is also critical that your agreements include a provision allowing recovery of attorney’s fees. Without it, a creditor may win the case but still lose money pursuing the claim.

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Step 4: Litigation and Judgment Enforcement

Obtaining a judgment is often only the beginning of the collection process. Effective recovery requires identifying assets and using the enforcement tools available under California law.

Common post-judgment remedies include bank levies, wage garnishments, keeper levies, real property liens, and judgment debtor examinations.

Each enforcement tool serves a different purpose. For example, a keeper levy can disrupt a business’s ability to process revenue, while real property liens attach to real estate owned by the debtor and can force payment when the property is sold or refinanced.

Strategic use of these tools is often what separates successful collections from uncollectible judgments.

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Work With a California Commercial Collections Attorney

Collecting business debt in California requires both litigation experience and practical enforcement strategy. At The Grundon Law Firm, we represent businesses and creditors throughout California in commercial collections, breach of contract litigation, and judgment enforcement.

If your business is dealing with unpaid commercial accounts, contact us to discuss your options.

Protect your revenue and enforce your rights.

Schedule a consultation with an experienced California commercial collections attorney today.

How to Collect a Judgment in California – A Creditor’s Guide

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California judgment enforcement is highly technical. It is the endgame of litigation.

You file a lawsuit to get paid. The judgment is the mechanism. The money is the objective.

The name of the game is disruption — putting the judgment debtor in a position where they cannot continue doing business as usual without addressing your judgment.

Here’s how that works.

Step 1: Take Stock of What You Already Know

The first thing to do if you’re trying to figure out how to collect a judgment is take stock of what you know.

Start with the obvious:

Do they own California real property?

Where do they work?

Where do they bank?

Do they own or operate a business?

Does anyone owe them money?

California real property is often the most valuable target. A single piece of real estate can satisfy a judgment outright.

If you don’t know the answers, you use the court’s power to find out. That includes judgment debtor examinations, subpoenas, and third-party discovery. The enforcement statutes give creditors real tools to compel information. They should be used.

Enforcement starts with information.

Step 2: Lien the Debtor’s Property

A lien on California real property is one of the most powerful tools available to a judgment creditor.

Recording an Abstract of Judgment in any county where the debtor owns property creates a lien on any real property the debtor owns in that county, including after-acquired property. If they purchase property later in that county, the lien attaches.

In commercial matters, I also consider filing a JL-1 judgment lien with the Secretary of State to encumber business equipment and accounts receivable when appropriate.

Liens don’t always produce immediate payment. But they immediately change the leverage equation.

Step 3: Obtain the Correct Writ of Execution

If we have identified targets — a bank, an employer, a business — the next step is enforcement.

In most cases, that means obtaining a Writ of Execution.

Understanding what county you need your writ for is critical. The issuing court, the county for levy, and the statutory service requirements all matter. A bank levy is not served the same way as a wage garnishment. Service on an employer is not the same as service on a financial institution.

If the writ is wrong or issued for the wrong county, the sheriff won’t act — or worse, the levy gets challenged.

This is procedural work, and it has to be done correctly.

Step 4: Execute Against the Right Targets

Once the writ is in place and the targets are confirmed, you move.

Bank Levy

If we know where the debtor banks, a properly executed bank levy can freeze and seize available funds. It is often the fastest way to convert a judgment into cash.

Assignment Orders

When income doesn’t flow through payroll — commissions, rents, royalties, recurring payments — an assignment order under CCP § 708.510 can redirect that income to the creditor.

This is critical when dealing with self-employed or business-savvy debtors.

Wage Garnishment

If the debtor is employed, an Earnings Withholding Order (wage garnishment) allows interception of up to twenty-five percent of disposable earnings. It’s steady pressure. It works best when paired with other enforcement activity.

Keeper Levy / Till Tap

For operating businesses, a keeper levy under CCP § 700.070 places a sheriff’s officer at the business to collect proceeds. A till tap allows seizure of funds directly from the register at a designated time.

These tools are effective when the debtor relies on daily cash flow.

Each remedy is chosen based on how the debtor earns and holds money. Enforcement is not one-size-fits-all.

Step 5: When Debtors Try to Evade

Some debtors cooperate. Some don’t.

When enforcement reveals asset transfers, shell entities, or attempts to hide behind corporate formalities, additional litigation may be necessary.

That can include actions under California’s Uniform Voidable Transactions Act for fraudulent transfers, alter ego proceedings to add additional liable parties, or litigation tied to bankruptcy filings.

Those are escalation tools. They aren’t used in every case. But when they’re necessary, they’re used deliberately.

Final Word

Judgment enforcement in California is procedural, strategic, and timing-sensitive.

The objective is straightforward: get you paid as quickly and as efficiently as possible.

If you’re holding a California judgment and need it converted into money, we know how to do that.

 

Collecting a California Civil Judgment Utilizing a Lien on a Pending Lawsuit

Your debtor is a plaintiff in another lawsuit. Most creditors don’t think to look. The ones who do, win.

California Code of Civil Procedure §708.410 lets a judgment creditor attach a lien to the debtor’s interest in any pending action or special proceeding. Once filed and served, the lien captures whatever the debtor recovers. The debtor cannot dismiss, settle, or compromise the case without your written consent or a court order. That last part is the leverage.

Why This Tool Matters

Bank levies miss what isn’t there yet. Wage garnishments don’t reach contingent recoveries. An assignment order requires an identifiable income stream. None of those tools touch a pending cause of action.

A §708.410 lien does. It reaches a future recovery before the debtor sees the money. It freezes the debtor’s ability to settle behind your back. And it forces opposing counsel in the other case to deal with you directly, because they cannot disburse settlement proceeds without addressing your lien.

The strategic value is not the filing fee. It is the position it creates.

When to Reach for It

Any time the debtor stands to recover money in a pending court proceeding. If the debtor is a plaintiff or cross-complainant in a civil action, the lien tool is on the table.

A judgment debtor with a pending claim is a debtor with a future asset. Find the claim, attach the recovery.

What the Tool Reaches — and What It Doesn’t

§708.410 is a California statute. It reaches pending actions in California state courts and California federal courts. It does not reach lawsuits pending in other states.

If you hold an out-of-state judgment and want to use §708.410, domesticate the judgment in California first. Once domesticated, the California judgment supports a §708.410 lien on any qualifying California action.

How It Works

File a Notice of Lien in the action where the debtor is plaintiff. Identify the underlying judgment, the parties, the court, the amount. Serve the notice on the debtor and every other party in the pending action. The lien attaches on service.

From that point forward, any party who pays the debtor in disregard of the lien is liable to you for the amount paid, up to the lien amount. Opposing counsel knows this. So does the debtor’s counsel.

The Leverage

A debtor who needs to settle their case cannot settle without dealing with you. That is not a minor procedural inconvenience. That is negotiating power.

Most judgment creditors never check. The specialists do. For a deeper view of the full toolkit, see our California judgment enforcement guides and our judgment enforcement tools overview.

Understanding the Challenges of Asset Recovery

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Understanding the Challenges of Enforcing a California Judgments

Winning a judgment is not the finish line. It is the starting point.  This article is part of our source series, focused specifically on post-judgment collection strategy and the enforcement tools available under California law.

A court order establishes that money is owed. It does not compel payment. Many judgment debtors delay, obstruct, shift assets, operate through entities, or simply ignore the ruling. Converting a judgment into actual recovery requires strategic sequencing and disciplined use of California’s enforcement mechanisms.

Our practice focuses exclusively on California judgment enforcement. We help judgment creditors move from paper victory to actual collection.

Why Judgments Go Unpaid

After judgment, the dynamic changes. Litigation is over. Leverage begins.

Some debtors move funds between accounts. Others transfer or encumber property. Some continue operating through business entities while claiming personal insolvency. Others rely on exemptions or assume the creditor will not pursue enforcement aggressively.

The problem is rarely just locating assets. The real issue is identifying where money actually moves and applying the correct remedy at the correct time. Enforcement is not a checklist. It is a strategy process built around the debtor’s structure, income flow, and risk exposure.

Strategic Enforcement Tools Under California Law

California’s Enforcement of Judgments Law provides powerful tools. The effectiveness of those tools depends on sequencing.

A properly timed bank levy can immediately freeze and seize liquid funds. When liquidity exists, this can be decisive.

If the debtor receives wages or ongoing income, wage garnishment or assignment orders can create structured recovery over time.

Recording an abstract of judgment can attach to real property and create long-term leverage. Real property liens often force resolution when a refinance or sale becomes necessary.

A writ of execution allows the sheriff to levy on non-exempt property, including bank accounts and other assets.

Debtor examinations can compel sworn disclosure of financial information, exposing leverage points that are not visible through public records alone.

Each remedy carries procedural requirements, exemption considerations, and tactical consequences. The order in which these tools are deployed often determines the outcome.

Asset Location Is Only Part of the Equation

Locating bank accounts, real estate, or receivables is important. But identification alone does not produce recovery. The key question is how to convert visibility into enforceable action.

Enforcement requires coordination with the court, the sheriff, financial institutions, and sometimes third parties holding assets. In more complex matters, particularly where the judgment originated outside California, enforcement may begin with domesticating a sister-state judgment before moving into collection activity.

The objective is not motion practice for its own sake. The objective is disruption of business as usual until the judgment is addressed.

 

If you are attempting to enforce a California judgment — whether domestic or out of state — you can contact our office to discuss your matter.

Collect From A 1099 Independent Contractor Using An Assignment Order

Signing a contract for 1099 independent contractor using an assignment order.

In today’s workforce, many individuals are classified as independent contractors by their employers. Collecting unpaid debts from a 1099 independent contractor can be a complex process, as traditional wage garnishment is only effective against W-2 employees. For independent contractors, a more labor-intensive method known as an assignment order can be utilized. This blog post provides an overview of assignment orders and how they can be used to collect California judgments.

How Does an Assignment Order Work?

An assignment order is obtained through a noticed motion. Under Code of Civil Procedure §708.510, a court can issue an order directing the judgment debtor to assign to a judgment creditor all or part of a right to payment due or to become due. This can include wages from the federal government that are not subject to withholding under an earnings withholding order, rents, commissions, royalties, payments from patents or copyrights, insurance policy loan values, accounts receivable, general intangibles, judgments, and instruments.

While the court may consider all relevant factors, the primary constraints are that the right to payment should be assigned only to the extent necessary to satisfy the creditor’s money judgment. Additionally, if part of the payments are exempt, the assigned amount should not exceed the difference between the gross amount of the payments and the exempt amount.

Once you obtain the assignment order, it must be served on the third party responsible for making the payments.

An assignment order is a crucial tool in the judgment collection toolbox. If you need assistance with collecting your judgment, contact our office for a consultation.