A prejudgment remedy is a technique that may be used by creditors during financial lawsuits. In the event that a debtor fails to repay a creditor, a creditor may initiate a lawsuit to acquire the payment that he/she is entitled to, or to seize the property that the debtor has been provided. In most instances, a creditor will be prohibited from collecting from a debtor or contacting a debtor for collection purposed during such procedures.
The most common example of this occurs in bankruptcy cases. If an individual files for bankruptcy, all of his/her creditors are prohibited from contacting him/her throughout the duration of the case. However, in some instances, an individual may attempt to transfer his/her property, so that this property cannot be seized to compensate the creditors. This can notably diminish the repayment that creditors receive, causing them to lose an extensive investment.
If a creditor has reason to believe that a debtor may hide certain property prior to the court judgment, the creditor can petition for a prejudgment remedy. In the event that the court grants this remedy, the remedy will protect the assets until a judgment is made. The assets will be taken from the debtor and overseen by the creditor until the case is resolved.
Due to the nature of a prejudgment remedy, these aggressive techniques are rarely approved by the court. If a creditor wished to acquire a remedy, he/she must meet rigid eligibility requirements and adhere to detailed procedures. In order to obtain a prejudgment remedy, a creditor is required to present suitable evidence, indicating the potential loss of pertinent assets.