Summary: Kentucky lawmakers changed the rules of judgment collection in 2023 when they reduced the statute of limitations and limited renewals to just one. Under the new rules, judgment creditors are now compelled to be more aggressive.
In the judgment collection space, the term ‘duration’ refers to the amount of time an unpaid judgment remains in force. The legal term is ‘statute of limitations’. In Kentucky, judgment duration changed drastically in 2023. The change has had a profound impact on judgment creditors, who used to have an unlimited amount of time to collect.
Duration Prior to the Change
House Bill 83 permanently altered Kentucky’s statute of limitations on money judgments when it took effect in June 2023. Prior to the change, the statute of limitations on a money judgment was 15 years. Judgment creditors had 15 years from the date the judgment was entered to pursue collection action. If any amount of the judgment remained uncollected near the end of the term, the judgment could be renewed.
The most important part of the old rule was that a judgment could be renewed in perpetuity. Judgment creditors could keep a judgment going indefinitely as long as they made an attempt to collect from time to time. Under the old rule, a judgment could be renewed for an additional fifteen years from the date the last collection action was taken.
To illustrate the point, a judgment creditor could take collection actions in the final month of the initial 15-year term. The judgment could then be renewed for an additional 15 years. This process could be repeated an unlimited number of times.
Duration After the Change
Kentucky lawmakers changed things up in 2023 by both reducing the duration of a money judgment and limiting the number of times it can be renewed. The statute of limitations on a Kentucky judgment is now just 10 years. Furthermore, a judgment can only be renewed once for an additional 5 years.
The result of these changes is that the total lifespan of a money judgment in Kentucky is 15 years. A creditor failing to collect the full amount owed within that 15-year term has no recourse once the term expires.
Apparently, the changes were needed to prevent ‘zombie debts’ from following creditors and their families around for the rest of their lives. Under the old system, a judgment debtor in the state could be responsible for an unpaid judgment after his death. As long as the estate remained in force, collection actions could be taken. Such is no longer the case.
On a positive note, state lawmakers provided a look-back provision for judgments already enforced prior to the 2023 change. A pre-2023 judgment expires on one of two dates, whichever occurs earlier:
- The original 15-year expiration date; or
- 10 years after the legislation was implemented (June 29, 2033).
Going from unlimited time to a strict 15-year limit is quite a change for Kentucky judgment creditors. It suggests a change in strategy for creditors who would otherwise not put a lot of time and energy into collection efforts.
Practical Implications of the Shorter Term
Placing strict time limits on judgment collection translates into practical changes from the creditor’s standpoint. Right from the start, creditors in Kentucky must now be more aggressive in their efforts. Once the clock starts to tick, it will continue doing so until time expires.
Here are two things every Kentucky judgment creditor should now consider:
1. Patience May No Longer Be a Virtue
In the past, Kentucky judgment creditors could afford to be patient. There was even some virtue in doing so. For example, a creditor could place a judgment lien on a debtor’s property and then wait. Subject to applicable homestead exemptions—which vary by state and apply only up to certain amounts—an eventual sale of the property could provide funds to satisfy the judgment.
2. Discovery Is More Important Than Ever
Discovery has always been a key component in collecting money judgments. But with Kentucky’s 15-year limit, it becomes much more important. It is in a judgment creditor’s best interest to be thorough about discovery right from the start. Learning everything possible about a debtor’s income and assets is no longer a nice luxury. It is an absolute necessity.
Collection Strategies Have Not Changed
While the 2023 legislation changed the duration and renewal opportunities for money judgments in Kentucky, it did not have any impact on a creditors options for collection. The same collection strategies remain in force. They are:
- Wage Garnishment – Creditors can garnish debtor wages. Garnishment is limited to the lesser of 25% of a debtor’s disposable earnings or the amount by which weekly disposable income exceeds thirty times the federal minimum wage.
- Non-Wage Garnishment – Non-wage cash assets held by third parties can also be garnished. This typically means garnishing the debtor’s bank accounts.
- Judgment Liens on Property – Creditors can file judgment liens against real estate by recording a Notice of Judgment Lien with the county clerk. The debtor cannot sell or refinance the property without paying off the judgment.
- Writs of Execution – Kentucky law allows for writs of execution against personal property. This is non-exempt property that includes things like cars, RVs, and equipment. Note that some types of personal property are exempt.
Yet another provision of Kentucky law that has not changed is the 10-day rule. This rule stipulates that collection efforts may not begin within the first ten days of a judgment being entered by the court. This gives the debtor time to appeal the decision.
Finding Debtor Assets
Fortunately, creditors still have access to the same strategies for discovering debtor assets. They can rely on interrogatories, which are written questions the debtor is compelled to answer under oath. If interrogatories fail to provide the necessary information, a creditor can depose the debtor or seek subpoenas for records from third parties, like banks and business associates.
The change to Kentucky’s statute of limitations on money judgments is a significant one. It suggests an extra measure of urgency among creditors who might previously have been willing to be more patient. It is an unfortunate change from the creditors’ standpoint. From the debtors’ standpoint, the change is a good thing.
FAQs
How does a creditor in Kentucky renew a judgment?
Although renewals are now limited to just one, the process involves completing a form and submitting it to the court. It must be submitted within 120 days of the original 10-year expiration.
How can a judgment collection agency help me successfully collect?
Judgment collection agencies that specialize in money judgments have access to tools, information, and experience creditors themselves may not possess. Bringing all these things to bear on behalf of a creditor can increase the chances of receiving maximum payment.
How do collection agencies get paid?
While we cannot speak for other collection agencies, Judgment Collectors works on consignment. We base our fee on a portion of what we collect. If we collect nothing, you pay us nothing.
I have tried searching for debtor assets and failed. What next?
Judgment collection agencies can utilize a variety of public and private databases to find debtor assets. Doing so is one of our specialties.