It is a powerful tool for one who knows how to use it. I’ve seen all kinds of amateurish blunders from otherwise experienced lawyers, including:
Not getting a transcript. This is encouraged by most courts. Judges don’t want to waste their time presiding over creditors exams. So they “allow” lawyers to do them at their offices or in the court hallway. When the defendant lies or refuses to answer, the lawyer can’t prove it.
Not requesting documents. In most jurisdictions, you can require the witness to produce documents like tax returns, bank records, contracts, and check registers. If you don’t get the documents, the debtor can lie about what they say. Many jurisdictions limit the frequency of debtor’s exams. So if the debtor lies about bank records, it may be six months before you can question him on the issue again.
Not examinin other witnesses. As you say, this is the best part of the deal. Most lawyers never use it.
Not understanding enough business law to meaningfully question the debtor about transactions involving business entities.
For instance in the Ohio case that I mentioned earlier, I hired a firm that specialized in collection law to try to find the debtor’s assets. I got a call back from the associate who had done the debtor’s exam.
She said, “He’s got an interest in an LLC.” I said, great, who else has an interest? Dunno. Is he a member? Dunno. Is it member managed? Dunno. What do the LLC documents say? Dunno. Didn’t he bring them? No. Why not? I didn’t ask for any documents. So we don’t have tax records, bank records, corporate records, or records of real estate transfers? No. I shipped you a bunch of documents that I found on the Internet, did you ask him about any of those? Nope. Let’s attach his LLC interest. How do I do that? Can you send me a copy of the transcript? Um, we did it at our office. I get that, why didn’t you have a court reporter present? Ummmm . . . Was the debtor even under oath? Ummmmmmmm . . . Are you sure you are an attorney? And on and on. Worthless.
If my client’s paying me, and I can get a record of what I’m doing, I’m getting the record. Even if I never order the transcript, at least there will be one.
Too late! It’s on now:
You, sir, are a genius. Now I will giggle at inappropriate times all day today. [/hijack]
Dictionaries often list unjustifiable usages after the preferred ones. In this case, Bryan Garner, editor of Black’s Law Dictionary (whatever-it-is’th edition) and author of A Dictionary of Modern American Usage and A Dictionary of Modern Legal Usage, calls the use of garnishee as a verb “historically unwarranted and therefore ill-advised.”
The disturbing thing is that I had to review this at one point as a tangential item to my main research. I have since forgotten the bulk of it; rough memory tells me that it has something to do with whether the claim is connected with origins or basis of the main action or debt.
Cool beans. This is the part I fuzzily remembered:
“More precisely, the main distinction between the two is that while setoff arises from a cross-action that is premised in its application upon the existence of two independent mutual obligations, recoupment arises from the right of a creditor to reduce the amount of a claim against it held by the debtor and does not require the creditor to prove the existence of independent obligations.”
I wish I could remember more things. One of the drawbacks to being a general practitioner I guess - you find the answer to so many things, but then five years later, having only needed the answer for that one particular circumstance, you know that you found it once, but no longer remember what it was (of course you have your papers, but it’s much more fun to say dazzlingly, “As I recall . . . .”).
hmmm. to continue the digressions, I don’t recognize the term “recoupment” - here in Canada, we distinguish between common law and equitable set-off, which sounds similar to those definitions. Several years ago, I was involved in a major appeal that considered the differnce between the two types of set-off, amongst other issues.
If you listen to the radio enough you’ll hear ads for Nevada corporations. These can be used to hide assets since the state does not collect any info on ownership, officers or directors. As long as you are willing to commit perjury…
Bob should, of course have been more careful. Simply create a note from Bob to an llc owned by his trusted Uncle Joe, have Uncle Joe own the llc, and then proceed as outlined.
Of course, if the dollars are big enough there are off shore methods for illegally hiding dollars.
Want a legal way to do this? Take all your money and move to Florida buying the biggest house you can for cash. Our courts will protect homestead from even fraud claims! Just make sure its 1/2 acre or less in munis, or 160 acres outside!
And how will you explain the payments to the IRS? If Uncle Joe doesn’t 1099 you, then he’ll have to report the payments as income and pay taxes on them himself. And even then, you’re both still committing tax fraud and perjury.
And tax fraud.
Plus, Nevada requires one to list managers or members:
Of course, you could hire a manager, or get a friend to be manager, but you’d still have all of the issues previously discussed to contend with, plus you’d have to count on someone else to lie for you and risk criminal sanctions for perjury.
Offshore trusts usually don’t work if you create them in order to hinder known creditors.
