Credit collections are tricky businesses. The debts can be large or small, but there are almost always awkward to deal with. And sometimes, downright impossible. This is when you finally go to court and obtain a judgment in your favor. But what’s next?
Well, you now have a fancy piece of paper that looks pretty impressive and has probably cost you quite a bit too. You feel like you’ve won, and you send the notice to your overdue debtors, and they ignore it and still refuse to pay!
It’s hard to believe, but sadly, no judge can turn the judgment into hard cash. It takes a bit more effort, slightly more money, and a lot of expertise to collect debt post-judgment.
These are the few tried and tested techniques we use for our clients.
Before diving into harsher methods for debt collection, it’s always a good idea to try and negotiate a settlement. This option may encourage the debtor to pay since it will allow them to pay slightly less than the complete judgment.
The simple incentive will also ensure partial recovery for you and will save you from spending too many resources over a comparatively small debt. Alternatively, you could try settling on a payment plan based on installments.
Once it’s apparent that a settlement is out of the question, the first technique most collectors employ is debtor’s interrogatories.
Although it’s wise to first locate the debtor’s assets before proceeding, it can be pretty hard to identify the assets that a debtor may levy, but it needs to be done to streamline the processes ahead. Not knowing where the debtor’s assets are located is often one of the main reasons why enforcing judgments can become so hard.
Once the assets are identified, the debtor’s interrogatories can be used as a tool to get the debtor to come to court. The debtor will then be expected to answer questions under oath about their finances and any property that they own.
In case the debtor doesn’t show up at court, they’d be issued a Rule to Show Cause. If they still fail to show up, then they can be taken into custody.
In general, the debtor’s interrogatories, when successful, are able to inform the creditor about the debtor’s assets.
A levy isn’t very common, but it’s not exactly a technique unheard of. If you as a creditor choose to pursue a levy, then basically, the local authorities would seize the debtor’s personal property. This could be anything from their house to their car, jewelry, or other personal possessions. The idea is that value of the property should be able to cover the money judgment.
The debtor’s property is sold at a sheriff’s auction, and the proceeds from the sale are paid to the creditors while the authorities are paid for any expenses related to the auction.
Levies, even though uncommon, are pretty satisfying, but they have their drawbacks. For instance, if the debtor doesn’t have any valuable property worth seizing, the entire technique becomes useless. In fact, it could cost the creditor to even attempt it.
This is why, as stated earlier, it’s very crucial for the creditors to identify the debtor’s assets before proceeding with any post-judgment debt collection techniques.
Garnishments are a very useful technique and can be used to satisfy unpaid judgments as well as any court costs and interest. Basically, in garnishment, a court instructs a garnishee, i.e., a third party, to hold any funds that are owed to the debtor. These funds are then paid in court or directly paid to the creditor. In case the garnishee ignores the garnishment notice, the creditor can ask the court to make them pay the full amount.
There are two basic types of garnishments worth keeping in mind. One’s a regular garnishment, and the other is a continuing garnishment.
Regular garnishments are a one-time process. They’re usually filed against the debtor’s bank and basically order the bank to freeze the debtor’s bank accounts. Alternatively, they may ask the bank to withhold the funds equivalent to the judgment amount. The funds are only released when the court orders them to be paid to the creditor or be disposed of. And the best part is that the debtor is only informed about the garnishment when the bank is served with the notice, so they can’t take out their funds beforehand.
Continuing garnishments are slightly different. They’re filed against employers or the debtor’s tenants. With these, the court orders the garnishee i.e., the employer or the tenant, to hold part of the debtor’s income or rent payments respectively. This is continued until the matter is back at court.
This is known as a passive technique. In a judgment lien, the creditor basically records the unpaid judgment along with the land records of the city or county where the debtor has any property.
This is a way to attach the judgment to real property, and it prevents the debtor from selling said property. The only way to sell is to clear the unpaid debt. Needless to say, though, a judgment lien can take years to be effective since people usually don’t sell properties very often.
These post-judgment debt collection techniques probably sound complicated to you, and that’s because they are. This is why it might be a good idea for you to get a professional bad debt collection agency like cash In the USA on board. They can help you out with post-judgment debt collections as well as professional account receivables management.
Give them a call to learn more about their services!
About The Author
The author is a legal and financial expert with over 20 years of experience in the field. They serve as a legal advisor for the team at Cash In USA and also write for the company’s blog from time to time.