In New York, creditors can use "disclosure" subpoenas to gather information about a debtor's assets to satisfy a money judgment through methods like personal depositions, document requests, or written questions. Understanding this process is crucial to know one's rights and obligations when faced with such demands.
Under New York law, once a judgment has been entered for a debt, the creditor can demand information about assets that might be available to satisfy the debt from anyone that the creditor thinks may have the information. Note that the creditor has this right not just when the judgment is entered but at any time after that until the debt has been paid off or the judgment is set aside by the court.
This process is called "disclosure," and the rules for it are set out in New York CPLR §5223 and §5224. As part of our effort to summarize all of the provisions of Article 52 of the New York Code, we will take a look at the disclosure process in this post.
Three Types of Disclosure Subpoenas
A creditor's demand for information is made through a subpoena. There are three different kinds of subpoenas a creditor can use for disclosure: 1) a subpoena for a personal appearance at a deposition, 2) a subpoena to turn over documents (also called a "subpoena duces tecum" and 3) a subpoena to provide written answers to a set of written questions provided by the creditor. This is called an information subpoena. Here's a quick look at each:
I. Subpoena for Personal Appearance at a Deposition
A disclosure deposition subpoena must give the person to be deposed (called the "deponent") at least ten (10) days' notice of the deposition unless the court allows a shorter time. The deposition needs to be scheduled during business hours and is subject to the general requirements for the location of the deposition and who can serve as the examiner under New York law, but the deponent can waive these requirements and consent to a different location or examiner. The examiner must always be someone authorized to administer an oath (sometimes referred to as an "officer of the court.") Lawyers authorized to practice in New York are officers of the court, as are certain other individuals.
Disclosure depositions may be recorded. Although not required by the statute, it is a common practice. There can be examination and cross-examination of the deponent, just as there would be for a witness in court. If the deponent does not speak English, the creditor needs to supply a translator – and pay for it.
At the end of the deposition, the creditor who requested it has the right to ask the deponent to read the deposition, make any needed corrections, and sign it to certify the responses are accurate. If the deponent fails or refuses to do this, the officer of the court who took the deposition can read the responses and certify they are accurate, in which case they will be treated just as if the deponent had signed.
Deponents other than the debtor are entitled to reasonable travel expenses a one-day witness fee for appearing at a deposition and can ask for these fees to be paid in advance. However, when the debtor is deposed for disclosure, he or she is not entitled to any fees.
It's important to note that creditors need to get permission from the court to take a deposition from a debtor more than once in the same year.
Examples of When a Subpoena for Personal Appearance Could Be Effective
Witness Testimony: A creditor believes a third party has witnessed a transaction or event that's critical to proving the debtor's assets or liabilities.
Authenticity of a Claim: To question a debtor in-person about the details of a large transaction to ascertain if it was genuine or a strategy to divert assets.
Business Dealings: To investigate a debtor's involvement in multiple business ventures and partnerships, especially if they seem to be a means of hiding assets.
Property and Real Estate: To gather in-depth information on a debtor's real estate holdings, especially if there are suspicions about under-the-table sales or transfers.
Offshore Activities: If there's suspicion that a debtor is diverting funds or assets overseas, a personal deposition might reveal details or inconsistencies in their statements.
II. Subpoena Duces Tecum
A subpoena to produce documents can be served on the debtor or on an individual, corporation, partnership, limited liability company, or sole proprietor doing business in New York. The subpoena needs to be served in New York.
Once the subpoena is properly served, the person receiving it must produce the documents it requests. When the subpoena is to someone other than the debtor, they can supply a transcript of the documents relevant to the subpoena instead of supplying the original documents requested.
It's important to note that creditors also need to get permission from the court to issue a subpoena for the production of documents to the debtor more than once in the same year.
Examples of When a Subpoena Duces Tecum Could Be Effective
Bank Records: To obtain detailed banking statements that could reflect hidden income or suspicious transactions.
Property Deeds: To get a clearer picture of a debtor's real estate holdings and any recent transfers.
Business Contracts: To scrutinize business agreements, which might hint at a debtor's financial position or show deferred payments.
Tax Returns: To ascertain a debtor's true income and financial standing, especially if they've declared a much lower income to the court.
Digital Evidence: Requesting emails, digital transaction records, or other forms of electronic communication that might demonstrate a debtor's financial maneuvers.
III. Subpoenas for Information
Subpoenas for information are a bit different from the other types in that they can be served through the registered mail return receipt requested. The subpoena needs to be accompanied by a pre-addressed and postage-prepaid envelope for the return of the responses—answers in writing need to be returned within seven (7) days. Except when the subpoena is served by the state or is directed to the debtor, it needs to include a certification that the person serving it believes that the person being served has information that will assist in collecting funds to satisfy the debt.
Subpoenas that require this certification and do not include it are not enforceable, and the person receiving the subpoena can make a motion to the court to quash it in the court that issued the judgment. Information subpoenas can be issued electronically in certain cases, usually involving corporations.
Examples of When a Subpoenas for Information Could Be Effective
Employment Details: If a debtor is suspected of having undisclosed income, a subpoena might request information from current or past employers about salary, bonuses, and other benefits.
Membership or Club Affiliations: These might reveal expenses or assets the debtor hasn't disclosed, especially if they are members of high-end or exclusive clubs.
Travel Records: To find out if the debtor has made frequent or recent trips, especially to destinations known as tax havens or if they've been diverting assets abroad.
Educational Institutions: If a debtor claims inability to pay but has dependents in expensive institutions, it might provide a clearer picture of their financial obligations and priorities.
Credit Card Companies: Requesting detailed statements might unearth undisclosed expenses or lifestyle clues inconsistent with what the debtor has presented to the court.
For anyone concerned about a judgment, understanding the "disclosure" process ensures that they are aware of the methods creditors can employ to collect on debts and equips them to navigate their rights and responsibilities, potentially avoiding further legal complications or financial burdens.
