How do exemptions work when there is a co-defendant or joint judgment?
While many collections lawsuits only have a single defendant and result in a judgment against only one person, some collections lawsuits proceed against multiple defendants and result in a judgment jointly against multiple people. In the collections realm, two common joint judgments are judgments against both husband and wife and judgments against both corporation and owner.
Most judgments against multiple parties are against each "jointly and severally," meaning that each defendant is liable for the full amount of the judgment. The plaintiff-creditor can choose who to collect such a judgment from, although the creditor cannot recover more than the total judgment award.
Exemption rights are individual in North Carolina. Each person who is a debtor on a judgment has a right to independently designate his or her exemptions. On the other hand, corporations and other business entities are given no exemption rights.
These distinctions can result in confusing paperwork. For example, if a judgment is against both a husband and wife, each spouse might receive a notice of right to have exemptions designated at the same time, or at different times. If both receive notices, both need to seek exemption orders to fully protect their property. In the case of a corporate co-debtor, the sheriff might immediately serve a writ of execution on the corporation at the same time as serving an owner a notice of rights. As a result, there might be corporate property lost to the judgment before the individual exemption process has even run.
If there is any doubt about what is going on with a co-debtor judgment, it is best to seek clarification from the court file or from an attorney.