How does one enforce a judgment against a dissolved corporation?

Asked almost 2 years ago - Alhambra, CA

The judgment was entered against the corporation when it was still active. A few months after the judgment, the corporation was dissolved. In the corporation's filing for dissolution with the Sec. of State, it stated that all liabilities have been taken care of, which isn't true for this judgment.

I believe causes of action can be brought against a dissolved corporation, but how does one enforce a judgment against a dissolved corporation?

Thank you in advance.

Attorney answers (5)

  1. Curtis Lamar Harrington Jr

    Contributor Level 20

    3

    Lawyers agree

    Answered . What is the date of the document stating that all liabilities have been take care of? Was it before the small claims suit?

    Have you gathered the corporate papers from the Secretary of State?

    You didn't state what the debt was about.

    Did they show up and challenge the debt? was it a contested matter?

    Do you have evidence of bad faith?

    Do you know the financial status of the corp just before your action?

    Why didn't you do an ORAP just after the verdict?

    Have you searched the Pacer Bankruptcy records? If there was a bankruptcy have you reviewed the record?

    If you find irregularities, are you willing to expend significant sums to re-open / unwind the corporation's last months?

    Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal... more
  2. Sandra Maria Nutt

    Contributor Level 13

    2

    Lawyers agree

    Answered . If one of the owners signed a personal guaranty you can go after him/her/them personally if they haven't filed for bankruptcy. And if, for some reason, the debt is nondischargeable in bankruptcy you can go after the debt during the pendency of the bankruptcy by filing a motion.
    Exceptions to Discharge:
    http://www.law.cornell.edu/uscode/text/11/523

  3. Michael J. Ireland

    Contributor Level 12

    2

    Lawyers agree

    Answered . The answer to your specific question is, it is very difficult (maybe impossible) to collect from a dissolved entity. The process options are way beyond the scope of this forum and might include amending the judgment to add individuals or other entities, actions to pierce the corporate veil, pursuing individual guaranties, pursuing asset buyers or business buyers, etc.

    The first issue is this: Are these efforts and the likely results going to be worth the time and cost? Since the persons involved with the business already have proven they are willing to lie (by filing the false affidavit with the Secretary of State), I am guessing they are willing to lie again and cheat to ensure you are not paid.

    The process is time consuming and expensive. If the judgment is less than $20,000, you are probably better off framing the judgment and remembering the situation as a life lesson rather than spending more time, money, angst and stress pursuing a ghost.

    Good luck.

    If you need further clarity, please email me at MICHAEL@MIRELAND.US Answers to questions are for general... more
  4. Greg R Groeneveld

    Pro

    Contributor Level 7

    1

    Lawyer agrees

    Answered . This is a hard situation and it is happenning more and more. I see a lot of it.

    First, we need to know what the judgment is for. California law probably allows you to recover your attorney's fees for collecting a wage judgment and that may make it more attractive to an attorney.

    Second, you need to know a little about the corporation. Was it run properly or did the owners ignore the differences between the corporate entity and themselves. Did they pay personal debts out of company money ete. Did they fold up and open a new corporation doing the same things for the same people in the same way ? Were they doing business as the corporation after they voted to disolve ?

    Did they have a liquor license ? May be some information there. Did any of the owners get divorced ? Somethimes good things show up in divorce files.

    There is a lot you can do but it all takes time, money and the ability to get information.

    You may want to make a more detailed post or just call a few debt collection specialists.

    It is probably worth the time and money to order the corporate records from the Caliofornia Secretary of State (use the form on their web site) .

    Good luck.

    Greg G

    This answer is not intended to provide legal advice and you should always consult a qualified lawyer in your state... more
  5. Lucy Magness Hebron

    Contributor Level 10

    2

    Lawyers agree

    Answered . I agree with the prior comment by Sandra. Your options may be limited at this point. If your judgment was against a corporation and the corporation is now dissolved there are no corporate assets available to satisfy your judgment.
    Is it possible that the corporation may have also filed bankruptcy (chapter 7) and gave back any secured property/assets to secured lenders? Whether there was or was not any bankruptcy, there might not have been any assets available other than to pay taxes, priority claims, and claims of secured parties at the time of dissolution.
    If you did have a personal guaranty by any individuals you could pursue those persons individually.

    This answer is for informational purposes only and may not be relied upon as legal advice.

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