Creditor May Levy Upon Debtor’s Lawsuit Against A Third Pary

Jon Alper Creditor Rights

My client is suing his former business partner for over $ 1 million. The lawsuit is scheduled for trial in about six months. The same client has a judgment already entered against him in favor of a bank that lent him money for a real estate investment. My client hopes to recover money from his partner and use those funds to propose a settlement with the bank.

The client’s problem is that the bank with the existing judgment may levy upon the lawsuit against the partner. The bank could acquire, then take over, the lawsuit and reach its own settlement with the former partner. Any money the bank gets from the former partner would be applied to the judgment against my client, but my client would not have the leverage to offer this money in a settlement.

A debtor’s lawsuit is referred to as a “chose in action.” After opening a proceedings supplementary under Florida Statute 56.29 a judgment creditor may reach a debtor’s choses in action. There are well-known exceptions such as when the debtor’s lawsuit is “personal” such as a personal injury or a malpractice action against a professional. Another lesser known exception is when the debtor’s lawsuit is against the same judgement creditor. There is at least one court decision that held that the debtor/plaintiff would be denied due process if the judgement creditor could levy upon the counter-suit and then dismiss the action filed against itself for no consideration.

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Alper Law is a Florida law firm focusing on asset protection, bankruptcy, and family law.