Credit Bidding Tips

I am not a lawyer, I am a Judgment Broker. This article is my opinion, from my California experiences, and laws vary in each state. If you ever need legal advice or a strategy to use, please contact an attorney.

One way that judgments can be recovered is to use the judgment to credit bid. In some auction circumstances, one may be allowed to credit bid for a debtor’s property.

Credit bids are chances for some or all of a secured claim or judgment against a person or entity, to get swapped for the debtor’s assets, if and when those assets become available for sale at an auction.

At the auction sale, you may be able to attend an auction and instead of bidding with cash, you can place a bid using credit from your secured claim, or from your judgment.

An situation where one might be able to bid with credit, is when you paid the Sheriff to levy and auction a judgment debtor’s property. At the time of the auction, you could use the amount owed on the judgment, to pay most of the costs of being the winning bidder.

Credit bidding for a debtor’s property (as an example, a vehicle or real estate), can only happen at a (Sheriff or bankruptcy court) auction for that property, for creditors having a secured interest in that property.

Make sure bidding with credit is allowed, with the local Sheriff and court. In certain situations and places, one cannot bid with credit. In other places, to credit bid, there has to be be another person at the auction, bidding using an equivalent to cash or cash.

Credit bidders have a big advantage at auctions, because most bidders that bid must be willing to quickly present the auctioneer with cash or a cash equivalent, for example a cashier’s check.

A credit bid is not cash. In California, credit bidding at Sheriff auctions are covered by CCPs 701.590 and 701.560. In California, you usually need to make a cash deposit, to be allowed to credit bid at the Sheriff’s auction.

In many auctions situations, one has to spend a bunch of cash, in addition to what one may credit bid. One example is the expense of a debtor’s exemption claim. You cannot credit bid for the amount of that exemption, which by law must be paid to the debtor.

Usually, the opening bid price is what is owed for loans on the property, plus a debtor’s exemption. When there are no bidders at an auction, what happens after that depends on the situation. Sometimes, the property is returned to the debtor.

I have heard from lawyers that I know, that attorneys, when bidding with credit for their clients, don’t have to pay any cash upfront.

I know a judgment enforcer, who paid the Sheriff to levy a judgment debtor’s vehicle that he wanted. At the auction, he paid the other bidders $600 each to walk away, so he was the sole winning bidder on the car for a very good price.