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Objective information on small claims judgement collection

Do’s & Don’ts When Trying to Collect a Small Claims Judgment

First and foremost understand from the beginning that winning doesn’t mean you will get your money. You might consider looking at the debt repayment as a long term investment that will be paid off in time. Then follow these simple Do’s and Don’ts as you start your trip down the road toward that collection,

Do: Stop and think carefully about the steps you will take to collect your judgment. You will have the time to think before the judgement becomes final and enforceable — usually 30 days after the clerk has delivered or mailed the Notice of Entry of Judgment. Use the time well and develop a workable plan of action.

Don’t: Go blindly, quickly, and carelessly after your money. There are mistakes that can be made when you do not stop and think carefully about the next step to take. If you try to collect the money before the Entry of Judgement is final, you could force the debtor to appeal the decision and while the appeal is pending, he does not need to pay you anything. Furthermore, you could lose the appeal in which case you would not be able to collect at all.

Do: Calm yourself and remember that sometimes just asking will go a long way — you may get your money or you may be able to get the debtor to agree to a payment plan. Start off with a simple letter asking for the money and perhaps stating that you will have to take further action if you cannot come to some agreement or if he refuses to contact you.

Don’t: Take an aggressive stance. If you can’t come to an agreement or the debtor refuses to contact you, don’t specify what steps you will take to get your money, as the debtor may be able to take some defensive actions to protect assets if you show your hand.

Do: Think of the debt that is owed to you as a long term investment, and consider how this might work out for you if the debtor does not pay you right away, or seems to be unable to pay you at all. Decide how to go about setting up this long term investment in a way that will work best for you. Consider these strategies opened to you carefully: 1) recording your judgment; and, 2) renewing the judgement. Both have their benefits and drawbacks.

Don’t: Make a hasty decision with respect to future payoff; and don’t give up and do nothing. Keep in mind that the life of a judgment is generally between 5 and 10 years; but can be anywhere from 3 to 20 depending on the state you reside in. The first strategy to consider is to record your judgement in all counties where the debtor owns property (there is a fee for each recording). In this way when and if the property is sold your judgment will be paid along with other creditors. There is normally no interest paid here — only the amount of the judgement you recorded. The second strategy is to keep the debt opened; in other words renew it even if you don’t think you will ever be paid because the debtor may come into some money down the road. Here, you could collect interest as well. Every state authorizes the creditor to collect 8% to 12% annually on an unpaid balance, and this could prove to be a good deal even though you may have to wait.

Do: Consider taking less from someone if it appears that they are willing, but unable, to pay the full amount of the judgment. Your willingness to take less under some circumstances may create an atmosphere where the debtor will be anxious to pay an agreed upon settlement. You have the legal right to the full judgement amount, but your collection efforts can take years. You may be able to end the frustration, expense and the wait for the illusive money, by simply accepting a little less or payments spread over a longer amount of time.

Don’t: Refuse a reasonable solution or a little less money because collection efforts can take years. Don’t reject an offer out of hand without stopping to think; because the offer before you may be the best you will be able to collect.

Do: Get the debtor involved in the process. Talking to him about solutions, future payments, assets he may not have thought of or did not want to give up may be a good idea. Making suggestions and discussing with him the possibility of getting a cash advance on a credit card or a loan against his 401K may be something to consider.

Don’t: Take an aggressive stance and refuse to negotiate with the person or business you are trying to collect from. Don’t let other creditors step in and take what could have been yours if you had just remembered to try and keep the lines of communication open with the debtor.

Do: Keep track of the debtor; know where he just moved; whether he just bought a new car or a new boat; and know if he has lost his job or fallen on hard times. All of these things will let you know when to make a move or when you want to back off in your efforts. Additionally, tracking the movement of assets may help you decide what accounts or properties to gain access to, or where to attempt garnishment or levy.

Don’t: Diminish the importance of the debtor’s movements; the refinance of his property, his marriage or divorce or the expansion of his business. This type of tracking is fairly inexpensive so don’t give up and do nothing. If he is not being cooperative, these bits of information can be the key to getting your money back.

Do: Concentrate your collection efforts on the simpler, less expensive methods such as garnishment of wages, bank accounts, or liens against real property.

Don’t: Concentrate your efforts on the methods that look enticing but may be expensive and time consuming like a levy on personal property that may be worth a lot of money. This strategy is expensive and forcing the sale of personal property will be time consuming, and perhaps impossible.

Do: Develop a collection strategy and know the legal limits of the methods you choose. Proceeding cautiously and knowledgeably can save you time and money; and will improve your chances of success. If you are going to seize money from bank accounts or a business, you will want to be sure that you properly authorize a sheriff to do so. If you are not having any luck collecting the debt quickly, be sure that you utilize at least one of the long term strategies described above. Check with an attorney if you have legal questions about any methods opened to you.

Don’t: Once you have developed your strategy and you begin to pursue the money, don’t bad mouth the debtor. You have a right to collect a judgment but you don’t have a right to bad mouth the person that owes you the money. Furthermore, aggravating the relationship with him can make it much more difficult to collect your money. Don’t misinterpret the methods that you are considering — understand that there may be certain personal property, bank accounts, businesses and even wages that you are barred from taking.

Do: If you have tracked your debtor, seen your strategies through, and been persistent in your efforts, even if you have not been successful, it may be time to stop. Just as important as collecting your judgement is knowing when to call it quits.

Don’t: Throw good money after bad. Your collection efforts can be costly, and while they may be recoverable, if you can’t find the debtor, you may never see that money. Keeping an eye on how much you are spending will ensure you don’t spend more than the judgment is worth.

More articles and resources about judgment collection & enforcement, judgment law, and how to collect a legal judgement

We are available at any time to answer your questions regarding your possible claim, proceeding to court or mediation, judgement collection, judgment enforcement, and ways to collect your judgment. Contact us if you have questions or would like a recommendation for professional help in collecting your judgement.

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September 27, 2010

If you have been awarded a judgment, waited the 30 days required, sent a demand letter giving the debtor a time limit for paying his/her debt; what should you do if you still have no money? You know that the court can do little, but before you take steps to garnish wages or bank accounts, consider suggesting negotiation or mediation if the debtor gives any impression that they want to settle the matter.

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