Wilmington North Carolina Business Law and Litigation Attorney Blog

Piercing the Corporate Veil in NC After the Judgment

Over at my North Carolina Judgment Enforcement blog, there is a post about a recent NC Court of Appeals decision regarding an attempt to pierce the corporate veil to levy on shareholder property after judgment against only the corporation.  The short answer is that it cannot be done.  The full post is here.

Judgment Enforcement: An Overview

Many companies, individuals, and attorneys have found, to their dismay, that they've gone through the entire litigation process and won their case, only to find that they are unable to collect any money from the losing party. 

Judgment Enforcement is a term that specifically applies to the process of collecting that money.

Once a judgment is entered, there is still no guarantee that the judgment debtor (as the losing party is called) will pay the winning party (called the judgment creditor). In fact, in most instances, some degree of post-judgment enforcement will become necessary to ensure that the judgment creditor receives payment.   In North Carolina, the process begins by filing a Writ of Execution, once the time for filing an appeal has passed.  The county sheriff then serves the writ on the judgment debtor and attempts to locate and seize assets with which to pay the judgment. 

More often than not, if a Writ has to be filed, the judgment debtor will not have assets readily available for seizure.  If, as usual, the sheriff returns without locating enough assets, more advanced judgment enforcement techniques must be employed.  I will discuss these techniques in more detail in future posts.

Enforcing Judgments In North Carolina - Wage Garnishment

Enforcing (i.e. - collecting) unpaid judgments in North Carolina is much more difficult than in many other states.  Much like Florida -- North Carolina is something of a "debtor's haven."   Among the biggest hurdles is that, aside from judgments ordering child support awards, taxes, student loans, and payment for ambulance services, wage garnishment is not available to judgment creditors.   

There is one narrow avenue for more typical judgment creditors to obtain wage garnishments, however.  The NC Department of Labor has taken the position that if a creditor obtains a lawful garnishment order against the debtor's employer in another state, and the debtor works for the same company in North Carolina, our state courts will permit the garnishment on the same company here.

While for some companies (e.g. privately owned Wal Mart) the applicability of this rule would be obvious, what is not clear is whether franchises from a larger corporate chain such as McDonald's would also be included in this ruling, as many are held by smaller companies.   Creditors - even judgment creditors - can easily run afoul of the maze of debt collection rules, both federal as well as North Carolina's much stricter laws, and find themselves on the hook  for large fines and personal liability for failing to understand the  many laws that apply to them.