There are special procedures within the EJL for determining the claims of third persons (i.e., those other than the judgment debtor and creditor, or plaintiff and defendant in attachment or claim and delivery proceedings) in property under levy. They are optional and may be used by a third party who claims ownership or possession of real or personal property, or a superior security interest in or lien on personal property. A third party claim may also be filed where the claimant has an equitable right to the property (real or personal) levied upon.
Title or Possessory Claims to Real or Personal Property A third party claiming legal or equitable title to, or a right of possession to, real or personal property under levy may file a claim with the levying officer. This halts the levy process and forces the levying officer to release the property unless the judgment creditor files an undertaking (bond) or obtains a restraining order.
Claim of Security Interest In or Lien On Personal Property or Fixtures A third party claiming a superior security interest in or lien on personal property (or security interest in fixtures) follows more or less the same procedures as for claims of title or possession.
Either the levying creditor or third party claimant may petition the court for a hearing to determine the validity of the third party claim and the proper disposition of the property. A petition for hearing on the claim must be filed by the third party or the judgment creditor within 15 days after the third party claim or undertaking to release the property was filed with the levying officer. The judgment creditor may have as little as 10 days to file the petition because the levying officer has five days in which to notify the creditor that the third party claim and or undertaking was filed. If the petition is not filed in time, the court that entered the judgment loses jurisdiction to entertain the summary proceedings.
The hearing must be held within 20 days after the petition is filed, unless the matter is continued by the court for good cause.
Pending the hearing, the property levied upon may be sold, delivered or released by the levying officer if proper undertakings have been filed by the creditor and or third party (or a deposit made by the creditor). However, the court can order that this is postponed until the hearing is concluded.
The parties are entitled to a trial with all due process protections, but the hearing is decided by the court – there is no right to a jury.
The third party claimant has the burden of proof. However, if the creditor contends the property was fraudulently transferred to the third party claimant and the third party claimant introduces evidence showing he or she owns the property, the burden shifts back to the creditor to prove the property was fraudulently transferred.
At conclusion of the hearing, the court must determine the validity of the third party claim, and may order disposition of the property or its proceeds. The judgment is conclusive as to the parties to the proceedings (i.e., third party claimant, levying creditor and judgment debtor). The judgment may be appealed.