What Happens When a Debtor Ignores a Court Judgment?

Estimated reading time: 8 minutes

Winning a lawsuit against a business that owes you money is a major victory. However, many creditors are surprised to learn that even if the court issues a judgment in their favor, it doesn’t guarantee that the debtor will pay automatically. In fact, ignoring judgments is a common tactic used by commercial entities debtors.

If you’re a business owner facing this issue, you might wonder: What’s next? The good news is that the law provides tools to enforce the judgment, pressure the debtor into compliance, and finally collect what you are owed. This article explains what happens when a debtor ignores a court judgment, the steps creditors can take, and how experienced judgment enforcement lawyers can assist.

Understanding What a Judgment Really Means

A judgment is a formal court order that requires the debtor to pay a specific amount of money to the creditor. In commercial cases, judgments generally result from unpaid invoices, defaulted loans, or breaches of contract.

But here’s the part many business owners don’t realize: a judgment doesn’t automatically transfer money. The court doesn’t access the debtor’s bank account for you. Instead, the judgment grants you the legal right to take enforcement actions.

Think of the judgment as the foundation of your claim. It proves you are legally entitled to payment, but you still need to take action to collect. Without enforcement, a judgment might just be a piece of paper.

For additional details, see the New York State Unified Court System’s explanation of money judgments.

Why Debtors Ignore Judgments

If the law supports your case, why would a debtor ignore the judgment? Business debtors take this risky step for several reasons.

• Cash flow problems – A struggling business may not have the money available, even if they want to pay.
• Deliberate avoidance – Some debtors think they can “wait out” creditors, hoping you’ll give up.
• Poor management – Smaller companies often lack organized financial oversight and simply don’t deal with court orders properly.
• Strategic delay – A business may try to buy time to move assets, settle other debts, or even consider bankruptcy.
• Willful noncompliance – Sometimes, the debtor can pay but chooses not to out of spite or misplaced confidence.

No matter the reason, ignoring a judgment doesn’t make it go away. In fact, failing to comply can lead to more serious consequences, including contempt of court.

First Steps When a Debtor Ignores a Judgment

If you’ve received a judgment and the debtor refuses to pay, you have options. The initial steps aim to gather information about the debtor’s financial situation and assets.

1. Serve Information Subpoenas

An information subpoena is a legal tool that requires the debtor to reveal details about their finances. This could include bank accounts, business assets, or receivables. If they ignore the subpoena, they risk being held in contempt.

2. Conduct a Debtor’s Examination

A debtor’s exam is a court-ordered process where the debtor must answer questions under oath about their finances. Officers of corporations or members of LLCs may be required to appear. Refusing to attend or answer truthfully can result in penalties.

3. File for Contempt of Court

If the debtor keeps ignoring enforcement efforts, you can ask the court to hold them in contempt. Judges are generally not pleased when businesses ignore court orders. Contempt proceedings can result in fines, attorneys’ fees, or even jail time for responsible officers in severe cases.

By starting with these steps, you send a clear message: ignoring the judgment won’t make it go away.

Judgment Enforcement Tools in New York

Once you identify the debtor’s assets, you can start enforcing the judgment. New York law provides various effective methods creditors can use to collect payment.

Bank Levies

A bank levy is one of the most effective tools. It allows you to freeze and seize funds directly from the debtor’s business bank account. If the debtor has available cash, this often provides the quickest way to recover your judgment.

Property Liens

Filing a lien against real estate or other business property prevents the debtor from selling or refinancing without paying your judgment. Even if they attempt to avoid payment now, your lien can guarantee repayment later.

Wage Garnishment (via personal guarantees)

If a business owner personally guaranteed the debt, you might be able to garnish their wages. This involves deducting a part of their paycheck directly to settle your judgment until the debt is paid off.

Accounts Receivable Seizure

Debtors often depend on payments from their own customers. With the proper court orders, you can seize these receivables. Instead of your debtor receiving the funds, the money is redirected to you.

UCC Article 9 Remedies

If your claim involves collateral secured by a security interest—such as inventory, equipment, or receivables—you can enforce your rights under the Uniform Commercial Code. This may allow you to seize and sell assets to recover what you’re owed.

Each enforcement method has its own requirements and strategy. An experienced attorney can identify which tool will be most effective for your situation.

The Role of Contempt Proceedings

When debtors refuse to cooperate, contempt proceedings can be a powerful leverage. Courts have little patience for parties who disobey their orders.

In a contempt proceeding, the judge can:

• Impose fines for every day the debtor remains noncompliant
• Award attorneys’ fees and costs to the creditor
• Issue a bench warrant for the arrest of responsible officers who refuse to comply

While jail time is uncommon in commercial debt cases, the mere threat often prompts debtors to start cooperating quickly. Ignoring a letter in the mail is one thing; risking handcuffs before a judge is another.

Why Acting Quickly Matters

Judgments in New York are enforceable for up to 20 years. That may seem like a long time, but waiting too long can greatly decrease your chances of recovery.

Here’s why:

• Debtors may move assets or close accounts.
• Businesses can dissolve or file for bankruptcy.
• Other creditors may secure their claims before you do.

The earlier you start enforcement, the better your chances of recovering payment. Acting promptly sends a strong message and stops the debtor from falling too far behind.

When Bankruptcy Enters the Picture

Sometimes debtors respond to enforcement efforts by filing for bankruptcy. This complicates things but doesn’t necessarily mean you can’t still recover.

Bankruptcy triggers an “automatic stay,” which temporarily stops collection efforts. However, not all debts can be discharged. For instance, debts incurred through fraud may remain after bankruptcy. Creditors can also pursue their rights through the bankruptcy court, especially if they have liens or secured interests.

For more detail, review the U.S. Courts Bankruptcy Basics.

Why Work with a Judgment Enforcement Attorney?

Enforcing a judgment is rarely simple. There are rules, procedures, and technical steps that must be followed exactly. Trying to do it alone can cause wasted time, errors, or even losing your claim.

Attorneys specializing in creditors’ rights and commercial debt collection offer valuable experience. They can:

• Investigate the debtor’s financial situation and locate hidden assets
• File motions, subpoenas, and enforcement actions efficiently
• Use bank levies, liens, garnishments, and receivable seizures strategically
• Apply court pressure through contempt proceedings when necessary
• Protect your rights in bankruptcy proceedings

For business owners, the real benefit is peace of mind. Instead of wasting time chasing a debtor, you can focus on running your company while your attorney handles recovery.

A Practical Example

Imagine a supplier who delivers $150,000 worth of materials to a contractor. The contractor refuses to pay, so the supplier sues and wins a judgment. Months later, there’s still no payment.

The supplier’s attorney serves subpoenas, but the contractor ignores them. Subsequently, the attorney schedules a debtor’s exam. When the contractor doesn’t appear, the court finds them in contempt. Facing increasing legal pressure, the contractor finally discloses incoming payments from ongoing projects. The attorney intercepts these receivables and secures repayment.

This example shows how enforcement tools, when used strategically, can convert an unpaid judgment into real recovery.

Key Takeaways for Business Owners

• Winning a judgment is only step one. Enforcement is necessary to collect.
• Debtors who ignore judgments face escalating consequences, including contempt of court.
• Creditors can use powerful tools like bank levies, property liens, and receivable seizures.
• Time matters—the longer you wait, the harder collection becomes.
• Working with experienced judgment enforcement attorneys increases your chances of success.

Call to Action

If your business is dealing with a debtor who refuses to pay—even after a court judgment—it’s time to take action. Every day you delay gives the debtor more chances to hide assets or postpone payment.

Contact Rosenthal & Goldhaber today for a consultation. Our experienced judgment enforcement attorneys know how to apply pressure, use the right legal tools, and help you collect what your business is owed.

Frequently Asked Questions