Winning a monetary judgment in civil court leads to the inevitable task of collecting that award. Unfortunately, collecting often turns out to be more difficult than a judgment creditor anticipated. So much so that creditors find themselves wondering if they should just turn their judgments over to collection.
Turning a judgment over to collection could mean one of two things: hiring an attorney or working with a collection agency. Both options have their pros and cons. There is also something to be said about not moving forward with either option. So what is a creditor to do when faced with the frustration of unsuccessful collection efforts?
Here are three things to consider before turning a judgment over to collection:
1. The Chances of Success
First and foremost are the chances of success. In some cases, getting an attorney or collection agency involved does the trick straightaway. A judgment debtor does not want to fool around with professionals and just agrees to pay up. But in other cases, the judgment debtor continues to avoid paying.
It could be a situation in which a judgment debtor is legitimately judgment-proof. What does this mean? It means that the debtor does not have sufficient income to garnish and absolutely no assets worth seizing and selling. In addition, the debtor has no prospects for the future. He may even be bankrupt. This sort of debtor is like the proverbial stone from which you cannot get blood.
If a creditor’s realistic chances of success are low enough, sending the debt to collection might not be worth it. It might be better to just let the debt go and write off the loss.
2. The Fee Model
Attorneys and collection agencies need to be paid for services rendered. So the next consideration is the fee model. Beginning with attorneys, they tend to assess fees based on one of two options: a flat fee or hourly rate. Does a creditor really want to pay an attorney by the hour? Considering that collections can take years, hourly fees are not such a wise idea.
When it comes to collection agencies, it gets even more complicated. Some collection agencies buy judgments as assets, giving them full ownership. Selling a judgment is a quick way out but creditors tend to only get pennies on the dollar.
Some agencies, like Salt Lake City’s Judgment Collectors, work on consignment instead. They function as legal agents of the creditor to collect using all legal means. When they succeed, they get paid. Their pay can be based on a flat rate, or a certain percentage of the amount collected.
3. Attorney or Agency Reputation
The last thing to consider is the reputation of the attorney or collection agency a creditor is thinking of using. The only time this consideration doesn’t apply is when a creditor sells a judgment to a collection agency. Selling gives full ownership to the agency and relieves the creditor of all legal rights and responsibilities.
When hiring an attorney or a collection agency that works on consignment, reputation matters. A creditor wants to work with a partner who does things by the book. It is also good to have a partner with a proven track record of success. Otherwise, a creditor might be throwing more good money after bad.
Sending a judgment to collection might be the only way to reasonably increase the chances of getting paid. Yet there are times when even going the collection route is not enough. There are no easy answers. Each case needs to be considered on its own merits.
