Unfortunately, there may come a time when a debtor is unable to pay the creditor and legal action ensues. In most of these cases, the litigation follows the basic civil procedure rules; that is, the filing of a complaint, followed by an answer, and then resolution of the case by agreement, trial or procedural rule. Most debtor-creditor lawsuits are contract actions.

But beyond that, there are some legal processes that are particular to the debtor-creditor relationship that we will cover in the next two modules. This module will cover those processes that occur before or during the litigation, while our final module will cover the collection process after the litigation is over.


There are several steps that a creditor can take to resolve a debt before filing a lawsuit. The first is repossession, which is the right of a bank, finance company or lender to re-acquire secured property, such as a vehicle, from a renter or borrower.

The lender’s right of repossession is usually built into the purchase contract, financing agreement or lease agreement. Even those repossession procedures that comply with the agreements, however, are subject to limitations of state law. State repossession laws are similar to one another. They do not require a lawsuit to be implemented for the repossession to occur.

When the purchaser defaults on the loan, the lender will generally give the purchaser some time to catch up on payments. If this does not happen, the lender or the lender’s agent (the infamous “repo man”) can physically take the property back, as long as doing so does not cause a “disturbance of the peace.” The borrower typically has the right to redeem the property by paying arrearages plus any contractual interest. If the borrower does so, the property is returned.

If not, the lender keeps the property and the title to the property is returned to the lender. The property can be sold or returned to the lender’s stock. The borrower/debtor is still typically responsible for any further amount owed under the contract in excess of the value of the repossessed property, an amount called a “deficiency.” However, once the property is repossessed, the deficiency loses its status as a secured debt (since the collateral has already been repossessed), and the debt falls back to the status of an unsecured debt.


If a repossession is not possible, either because there is no contractual provision that allows it or because there is no way to repossess the item without breaching the peace, the creditor has other options.

For example, even without a security interest in particular property held by the debtor, the creditor may sometimes reasonably suspect that the debtor is selling off or giving away property to avoid having it secured or attached by the creditor. Under limited circumstances, state law may allow a creditor to attach the property of a debtor before the litigation has run its course. This action may be brought by motion after the case is filed or may be filed at the same time as the complaint.

Attachment requires enough proof by affidavit or other means to convince a judge that the debtor is likely to try to hide or get rid of assets to avoid them being used to satisfy her debts. There are multiple types of actions that are available to courts, whereby the court may impound or otherwise restrict the use of the creditor’s property during the pendency of the litigation. By “property” here, we mean the debtor’s personal property, real property, cash and/or other assets.  While these actions existed under the common law, they are now on the books in one form or another by statute in most states.

The first of these actions is a motion for a writ of attachment, which is brought as a part of the plaintiff’s case.[1] If the write is granted, an agent of the court seizes the debtor’s property and keeps it until the case is resolved. This writ is often used in fraud cases to prevent the debtor from disposing of property allegedly received based on fraud.

Prejudgment attachment is generally available only in one of these limited situations:

  •     When the plaintiff cannot obtain personal service on the defendant because the defendant is out of state or a non-resident, or is in hiding;
  •     When, under statute, there are special circumstances like fraud or that the claim is for “the necessities of life;” or
  •     Where the plaintiff has proof that the defendant has hidden or disposed of or is about to hide or dispose of the property.

Most state laws require the plaintiff to put up a bond to secure the writ. The bond usually requires the plaintiff to pay for any damages to the property plus costs if the defendant wins the case. Attachment laws also require notice to the defendant and a scheduled hearing before the property is attached.[2]

Federal courts follow the rules of the states in which they sit for attachment laws and procedures[3].

A writ of attachment is a quasi in rem[4] action over a nonresident defendant. This means that the action is against the property, not the property owner. If successful, the writ creates a judicial lien on the property in question. For example, if the defendant lived in California but owns a ranch in Nevada, a Nevada court may attach the ranch even if it has no personal jurisdiction over the defendant. This is one way in which states can secure jurisdiction over a defendant who lives in another state. Still, the Supreme Court has limited this ability to ensure that quasi in rem jurisdiction is not used to secure jurisdiction in ways that would be fundamentally unfair.[5]


The second prejudgment motion remedy is garnishment. Though most people think of garnishment as an attachment to wages, there is actually more to this remedy than that. Garnishment can be a prejudgment or a post-judgment remedy. We will discuss the prejudgment remedy in this section and leave the post-judgment garnishment to the next module.

Prejudgment garnishment (also called “trustee process” in some states) is a form of attachment where the property is held by a third party who in turn owes money to the debtor/defendant.

Here’s an example: Bill borrows $10,000 from Mary, to be paid back in monthly installments. Bill defaults on his agreement to pay back the money, and so Mary sues Bill. During that litigation, Bill files an income and expense sheet with the court. In looking at that sheet, Mary finds out that Rufus owes Bill $5,000. Mary does a search on Rufus and discovers that Rufus owns a piece of real property that is not exempt under the state’s laws. In a prejudgment garnishment action, Mary can ask the court to place a lien for $5,000 against Rufus’s property. If the court agrees, Rufus is then referred to as the garnishee. Although this is a form of attachment, it is different from the prejudgment attachment described earlier because the property in this example remains in the possession of the third-party.

While garnished property can be anything, wage garnishments have separate rules that we will discuss next module. Moreover, states often restrict the property that can be garnished by statute. For instance, Texas limits prejudgment garnishment of liquid assets based on the amount owed.[6]

In most states, prejudgment garnishment creates a lien, which is created on the date of service on the garnishee.[7]


A third prejudgment action is a motion for replevin,[8] also called “claim and delivery” or “revendication.” An action in replevin is a way to recover personal property that has been wrongfully taken or held improperly. It is only available to a party that has title to the personal property currently held by the debtor.

An action in replevin seeks the return of personal property and it can be a separate cause of action or a remedy sought in a lawsuit. It provisionally restores ownership of property to its title holder pending the outcome of litigation.

An action in replevin is a writ for an officer of the court (or an agent of the court, such as a sheriff) to seize the personal property of the debtor/defendant and turn it over to the creditor/plaintiff. The action is usually taken to return borrowed property, such as a lawnmower that the borrower refuses to return. The property to be returned must be subject to a security interest or outright title in favor of the plaintiff.

Replevin differs from a repossession because a repossession action does not require a lawsuit. But the intended results of the two actions are the same.

Replevin is an action in equity. It can be used as an alternative to a repossession action when repossession is not possible because either the law forbids repossession, the object of the repossession cannot be located, or the property cannot be repossessed without breaking the law. For example, assume the debtor refuses to return a car after its rental period is up but the car is stored in a facility that cannot be accessed by the repossession company without breaking the peace. A replevin action can be brought which, if successful, will result in a court order to deliver the car to the creditor.

A replevin action can also be used to have a judge determine who is the rightful owner of a disputed piece of personal property.

A variant type of replevin is called sequestration.[9] In this action, an officer of the court will seize personal property and put it in a secure place, like an evidence locker, pending the outcome of the litigation. Another similar action to replevin is conversion, which is a cause of action brought when a person keeps personal property not her own (however it came to her possession). The conversion action is a lawsuit by the rightful owner of the property to force the return of the property. Very old common law cases called conversion “trover.”[10]


The final type of prejudgment remedy is receivership. Like garnishment, a receivership can be a prejudgment or post-judgment remedy. When it is a prejudgment remedy, it is called a receivership pendente lite (which means “during litigation”).

A receiver pendente lite[11] is a disinterested party acting as a trustee who is appointed by the court to collect and hold or distribute rent or other income derived from the property. Receivers can also be responsible for caring for the property, and for collecting any other income that the owner case may be entitled to. They take on responsibilities conferred by law and there are statutory limitations on their powers over the property.

The power to appoint a receiver is inherent in the equity powers of the court, so the court can also determine the extent of the receiver’s involvement. Courts are generally reluctant to appoint a receiver pendente lite.[12] An exception to this restrictive view is the appointment of receivers for corporations in distress, which happens more frequently than with consumers.

Most cases in which a prejudgment receiver has been appointed are those in which there is imminent danger to the value of property by loss, deterioration or the like. The action to appoint a receiver may be sought by motion during a case or by the initial complaint. The receivership acts to protect the property by putting the possession, but not the title, of the property into the hands of a disinterested third party. This means that the creditor does not receive possession of the property or a further lien on the title. Any liens or other creditor claims against the property held in receivership are generally stayed during the pendency of the action by court order.


Both state and federal law create exemptions[13] from debt collection, often called “exemptions from attachment.” Exemptions are used in both creditor-debtor lawsuits and in bankruptcy cases.

An exemption keeps certain property from being subject to action by the creditor because the state or federal government has decided that it is the best interest of society that the debtor keep that property. A good example is the “homestead exemption” that most states recognize. The homestead exemption allows a debtor to keep a family home from non-secured creditors even after a judgment. States vary widely on how this exemption may be employed, but the fundamental idea is that it is in society’s bests interests to keep a family intact by allowing them to remain in their home. In addition, many states allow debtors to keep things like clothing, items needed to earn a living and a limited amount of money for daily expenses.

Exemptions generally have to be raised early in debt litigation to be effective. They cannot generally be used after the litigation in the collections process. When listing property, debtors must typically include exempt property and claim them as exempt. Moreover, many states allow attachment proceedings to be brought even against exempt property to settle certain tax liens, pay child and spousal support and settle mechanics liens.[14]

Federal rules also create exemptions for debtors who owe income tax or certain other federal debts, that put certain property out of the reach of creditors, including some clothing, schoolbooks, “tools of trade” and some personal effects.[15]

In a federal lawsuit, the parties or the court may choose between state and federal exemptions.

Social Security payments, including disability and income, are exempt from attachment by creditors[16]. The same is true of veteran’s benefits. However, an exception may be made under some limited circumstances when the United States is the creditor as the government can attach social security payments to settle tax liens[17] and back child support.[18] It can attach some, but not most, veteran’s payments for back child and spousal support.[19]

In our last module, we’ll transition to post-judgment collection methods.


[1] Ex. Ohio Rev. Code 2715.03.

[2] Sniadach v. Family Fin.Corp., 395 U.S. 337 (1969).

[3] Fed. Civ. Proc. R. 64.


[5] See Shaffer v. Heitner, 433 U.S. 186 (1977)

[6] Texas Civil Practice and Remedies CodeSec. 63.001(2).

[7] David G. Epstein, Bankruptcy and Related Law in a Nutshell, p. 385.





[12] Epstein, Bankruptcy and Related Law ibid


[14] David G. Epstein, Bankruptcy and Related Law in a Nutshell. Epstein, Bankruptcy and Related Law ibid

[15] 26 USC Sec. 6334 (a)

[16] 20 CFR Sec. 404.970.


[18] 26 USC Sec. 6305