Until October 1, 2023, a judgment creditor had the ability to enforce a judgment made in small claims court in Maryland by way of oral examination (i.e. oral deposition before the court) or through interrogatories. Now, following the enactment of a new Maryland Statute, if you obtain a judgment in small claims court, there is no reliable path to enforce collection of that judgment.
Small claims court is a function of the District Court of Maryland that considers cases in which there is less than $5000 in controversy. It is intended to provide an efficient, less burdensome means for creditors, debtors, and the court system to work through these smaller judgments.
Prior to the enactment of Md. Annotated Code, Cts. & Jud. Proc. § 11-704, the prevailing party in a small claims matter could obtain the necessary information from a judgment debtor to enforce collection of the judgment; specifically, the prevailing party could obtain that information via oral examination or interrogatories. The new Statute now provides that the District Court of Maryland may not, in aid of enforcement of a money judgment resulting from a small claim or a judgment debtor, or an individual to “(1) Appear for an examination; or (2) Answer interrogatories.” In other words, judgment creditors (i.e. small business owners or individuals who rely on the collection of their accounts recoverable) are now toothless in small claims court.
To make matters worse, the District Court created a Judgment Information Sheet, permitting a judgment creditor to send to the judgment debtor a form requesting that the judgment debtor provide the judgment creditor with important collection information about the judgment debtor. If the judgment debtor does not respond, however, there is now almost nothing for the judgment creditor to do.
The effect of this Statute was not lost to the General Assembly. Prior to approving the two bills that ultimately enacted the Statute (2023 SB 594 and 2023 HB 127), the Department of Legislative Services authored a Fiscal and Policy Note regarding its potential impact. The Note states:
The bill limits the methods judgment creditors/plaintiffs in small claims actions may use to obtain information about a judgment debtor/defendant in order to collect on a judgment. Absent information about the judgment debtor’s income or assets, a judgment creditor is unable to file an accurate petition to garnish the judgment debtor’s wages, assets or property. Thus, judgment creditors may file inaccurate garnishment petitions based on their own knowledge, which may result in garnishments that cannot be completed, delayed collections of judgments, and additional petitions.
The bills were put under further scrutiny in the Maryland House of Delegates and Maryland Senate. When the bills were in consideration by Maryland House of Delegates’ Judiciary Committee and the Maryland Senate’s Judicial Proceeding Committee, its proponents argued that the bills were intended to prevent individuals from incarceration for failure to pay debts. The proponents claimed that the system in place allowed for a “modern-day debtors’ prison” that targeted low-income debtors, who could not afford to respond to interrogatories, or appear at depositions or court hearings. They claimed that alternatives to these methods, including hiring credit reporting companies and other third-party search companies, would be more effective for creditors and fairer to debtors.
The opponent at these hearings emphasized that judgment debtors are not incarcerated for failure to pay debts; rather, if such incarceration does occur, it would be the result of an absolute failure to abide by the requirements of the Maryland court system. Oral examination and interrogatories are merely methods to gather information about any assets or income available to the debtors. If a judgment debtor fails to respond to interrogatories or appear at a deposition, the judgment debtor can then ask for a show cause hearing with the court. Next, if the judgment debtor does not appear at the show cause hearing, the court can order a body attachment for the judgment debtor. Finally, if the judgment debtor still does not appear at that point, then there is a possibility for a judge to order a bond. Even in that situation, the court has its own discretion. This sequence applies to all types of lawsuits in which a judgment has been ordered, not only cases in small claims court or those involving collections. In short, the opponent stated, any incarceration as described by the proponents would be the direct result of ignoring the court system and not merely an outstanding debt. Moreover, alternative means of learning information about the assets and income of the judgment debtor are not ideal. These means are not always accurate, and can be costly for small businesses and individuals.
As the opponent also argued, it has been our experience that if a bench warrant is issued against the debtor, the courts allow the debtor to come into the court to properly respond to discovery in aid of execution.
This new Statute severely limits the ability of small business owners in small claims court to recover monies owed to them, to the point of near impossibility. Judgment creditors now need to spend additional resources to discover basic information from judgment debtors, when the court system already had in place effective means of discovery. These alternative means are costly and inherently less accurate than depositions or interrogatories. Nonetheless, a judgment creditor cannot garnish the wages of a judgment debtor without accurate banking or employment information of the debtor.
Because there have been individuals who have abused the court system and were consequently incarcerated for that abuse, the General Assembly decided to destroy the entire system of recovery in small claims court in the name of social justice. This not only burdens judgment creditors who rightfully attempt to recover their judgments, but the wresting of the authority of the judiciary to issue orders at its own discretion is contrary to the entire court system of the State of Maryland. The General Assembly must consider an alternative to this Statute. For now, however, any person or business that intends to seeks collections in small claims court will need to weigh the cost of investing in credit reporting company with the cost of the amount owed.
If you have any concerns about your rights to recover monies owed to you, contact The Law Offices of Oren D. Saltzman, LLC, or email me directly at jsaltzman@saltzman-law.com.