Getting Your Stuff: The Practical Side of Prejudgment Remedies
By Richard C. Macias

Prior to 1972, obtaining a prejudgment writ was easy: the creditor filed a simple application and the court clerk issued a writ. Advance notice to the debtor was not required. In 1972 the United States Supreme Court ruled these procedures lacked basic safeguards for the rights of the debtor and were unconstitutional.
In response, every state created intricate rules governing the proceedings on a prejudgment writ application. Now, an application for a prejudgment writ of attachment or replevin involves a detailed legal proceeding. There are several practical points to keep in mind that will help you to better understand the process and the current legal requirements.

Getting started
The first step in obtaining a writ is filing a suit against the debtor. This means that your lawyer will immediately need detailed information to prove the amount you are owed, including the most recent monthly statement and copies of the open invoices, both those that are due and those that are still current but which will become owing. Be sure you have checked all company files to verify that you have located any contracts, guarantees, security agreements and financing statements. For the most part, these will be the basis of the rights you claim against the debtor and of your right to a prejudgment writ.

The Writ Application
The next step involves presenting the evidence supporting the writ application. Most courts handle a writ proceeding like a trial on paper. In other words, there won't be any live witnesses. The testimony will be submitted in written declarations (called affidavits if the document is notarized) prepared for your witnesses, mostly likely company employees, by your attorney. The declarations must explain to the judge why there is good cause for granting your request for prejudgment relief before your debtor has a day in court and a full blown trial.

For example, the declarations will need to explain to the judge when the debt arose, what the business purpose of the debt was, whether the debtor is shutting down the business or hiding assets or has been failing to pay other creditors and how you learned this information. Although often overlooked, correspondence from the debtor, such as letters addressed to all creditors asking for a moratorium on payments, may contains admissions that support the issuance of a writ. The ultimate focus of the declarations will be to show the judge that you are not being paid in the ordinary course and the debtor has no bona fide defenses to the debt.

Many cases require multiple declarations because more than one person has the information necessary to support the writ application. If other people are necessary to substantiate the information, they need to be available to talk to your lawyer about what they know.

Hearing or No Hearing
Your lawyer may attempt to get a hearing on the writ application with no advance notice to the debtor. Lawyers refer to this as an ex parte proceeding. Typically, an ex parte writ hearing is not permitted unless your declarations show the judge the debtor is hiding assets or is engaged in conduct that will make assets unavailable for levy. Things like bulk sales, inventory clearances or bounced checks will get a judge's attention. Usually, however, a hearing with prior notice to the debtor will be necessary before a judge will issue a writ. In a typical hearing, the judge initially reviews the writ application and declarations in chambers to become familiar with the issues involved. After the judge reviews the application, there may some courtroom dialogue in which the judge seeks information from the attorneys present to help resolve the judge's questions. There may be opposition presented by the debtor that your attorney will need to rebut. The judge may require additional hearings for presentation of additional declarations, although that is rare. As a rule of thumb, if the evidence to support the writ is not in a creditor's initial declarations and other pleadings, a writ is unlikely to be issued.

And Then There Is The Bond
You will probably be required to post a bond as security before the writ is issued. The bond is an insurance policy for the debtor's benefit just in case the writ is issued but at trial you fail to prove your right to keep any seized goods. The amount of the bond varies. California uses a fixed amount of $7500 for attachments. For replevin, most states require bonds up to three times the value of the property to be seized.

The judge will make the decision on the amount of the bond based on information about the value of the assets to be seized included in your declarations. There are many different formulas for setting value. Two that are commonly used are either fair market value or invoice cost. You need to carefully consider the valuation issue in advance. If you set a value too low, the bond will not be as great but most states allow the debtor to post a counter bond to get the goods back. As a rule, the bond must be purchased through a bonding company that has been screened and approved in advance by the court. Don't be surprised if your lawyer is pushing to get the bonding company lined up well before the writ hearing. One of the most frustrating and frequent setbacks in levying the writ is the delay in getting the bond.

Conclusion
The procedures for obtaining a prejudgment writ continue to become far more demanding. The many obstacles to obtaining a writ can be avoided, however, with advance preparation and coordination between credit manager and attorney.