Garnishing Stock Certificates

Published: 17th January 2012
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I am not an attorney, I am a judgment and debt expert (Judgment and Collection Agency Broker). This article is my opinion, based on my experience in California, and laws vary in every state. If you want legal advice or a strategy to use, please contact an attorney. Most of the time, judgments tend to be not easy to recover. The most popular and cost-effective tools to enforce a judgment are employment (wage) or bank levies/garnishments.

Some debtors have some assets, but some keep their assets in brokerage accounts. Usually, bonds, stocks, commodities, and similar assets; cannot be reached with a common garnishment.

Brokerage account entities include Ameritrade, Merrill Lynch, Ameriprise, Scottrade, Etrade, and Charles Schwab. Similar to banks, some accept a levy at any branch or office, others require levies to be served at the office the branch was opened at. Some insist one to domesticate a judgment to a state where they conduct business, others do business in every state, etc.

How do you figure out if your judgment debtor has assets in a brokerage account? Three ways to find this kind of information are:

1) Tips from an ex-spouse, ex-partner, or ex-friend of the judgment debtor.

2) Hiring an asset search firm, or a private investigator. This is not cheap.

3) Conduct a court-based judgment debtor exam (OEX) with subpoenas issued for the production of tax, financial, or business records of the judgment debtor, their bank, spouse, and/or business associates. If you get tips about judgment debtor assets at a brokerage firm, then subpoena them for any records pertaining to the debtor. Plan on reimbursing brokerages and banks for their costs to comply with your document requests.

In most states and situations, you can't usually garnish retirement or other protected accounts, or distributions from them; even when you have a judgment for fraud, which makes very little sense to me.

What happens after a garnishment is served on a brokerage, as a third party possessing the debtor's assets, is often very different that a regular bank garnishment. When the bank is garnished, the debtor's assets are cash, a very fungible asset; that is frozen, then turned over to the sheriff. Then, after a waiting period, the sheriff sends the money onto the creditor.

At a brokerage, after a levy is served, they put a hold on the judgment debtor's account, at least as much as is required to satisfy the levy. However, if the judgment debtor's assets are not in cash, the brokerage does not send any funds to the sheriff automatically. Instead, they wait for a creditor-initiated court order, instructing the brokerage to sell the debtor's stocks and other assets.

After a garnishment is served, the brokerage confirms the assets that are in the judgment debtor's name, such as stocks. Then, they wait for a court order, instructing them to sell stocks and other assets. After the court order is issued, the debtor's assets are sold for cash, and the cash is sent to the sheriff.

Because brokerage houses are not banks, they are not regulated by Departments of Financial Institutions. Brokerages are regulated primarily by the Office of the Comptroller of the Currency ("OCC"), located in Houston, Texas at

In certain circumstances, long-arm statues may be used to reach accounts far away from the court or the creditor where the judgment originated.

Long-arm statues allow local courts have jurisdiction over a non-local entity or person (who is for example, a judgment debtor). A typical test is, whether the debtor or third party (for example, a bank or brokerage) Possessing the judgment debtor's assets, does or did business local to the court or creditor.

The judgment debtor's stock is usually held in "street name", for example "Merrill Lynch, Inc., for the benefit of Barry Debtor".

Uniform Commercial Code, section 8-317, defines creditor's possible rights to judgment debtor's assets at brokerages. Especially when the judgment is large, it is a good idea to hire a lawyer, especially when you haven't tried to garnish on a brokerage account before.

What if the brokerage is named and served as the garnishee and ignores, and refuses to answer the sheriff's levy? I know judgment recovery specialists, that in this situation, sued the brokerage for the amount they should have held and released to the sheriff, pending a court order.

The brokerage, after being served notice of the creditor's lawsuit, did not show up in court, or file an answer, so a default judgment was obtained against the brokerage.

The judgment recovery specialist waited for the default judgment to become final. Then, they sent the brokerage a demand letter, telling them that they may either pay, or the judgment would be domesticated to their state, and the sheriff would seize their assets. The brokerage paid, but there is no guarantee this would work in your case.

An alternative to levying the brokerage where the judgment debtor maintains an account, is to obtain a turnover order for all shares of stock owned at a brokerage, as of the date of the turnover order. One problem is that some judgment debtors will move their assets, as soon as they are served a copy of the court-approved turnover order, violating the court's order.

Prior to, or at the same time the turnover order is served, one could serve a court-approved temporary restraining order (TRO), preventing the judgment debtor from doing anything, except for withdrawing funds and sending them to the sheriff.

Then, if the debtor does not comply with the court order, you can request an order to show cause "re: contempt". If your judgment debtor violates the turnover order or the restraining order, what happens next depends on which judge you get, and what state you are in.

Way too often, contempt of civil court orders result in very little ramifications for the contemptee. Once again, especially if the assets or judgment are large, it's a good idea to retain an attorney.

------ - the fastest solution, where Judgments and debts quickly get recovered by the best - matched for free to your debtor. is the fastest way for creditors and collection agencies to find each other.

Mark Shapiro - the best judgment expert, with the best quality free leads for enforcers, collection agencies and contingency collection attorneys.

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