Collect Your Judgment .org

Objective information on small claims judgement collection

Should I Hire an Expert or Third Party?

There are lawyers, people who can help you collect your judgment, and there are those who can help you find a person’s hidden assets. The question is whether or not to utilize their services.

The use of lawyers may certainly be necessary for legal questions and issues, but they may not be cost effective when it comes to locating assets or as a method of collecting a debt.

I. First consider the laws that may affect your collection efforts:

The Fair Debt Collection Practices Act was passed by Congress in response to abusive conduct by collection agencies, and concern that the abuses were causing an increase in the filings of personal bankruptcies. The purpose of the Act is to provide guidelines for collection agencies which are seeking to collect legitimate debts, while providing protections and remedies for debtors.

In addition, many states have their own statutes regarding debt collection and debtor’s rights.

The Federal Trade Commission is responsible for the regulations with respect to this act and they are the agency that handles consumer complaints about third party collection practices.

II. Next consider the costs involved in the use of commercial services:

Commercial or third party collection agencies may certainly be an option if you do not want to attempt to collect your small claims judgement, but they do not come for free. Generally, they take a percentage of the amount of the judgment collected. Those that charge a percentage, charge between 18 and 30% of the total debt owed. Furthermore, many of these fees are paid before the money is even collected. Keep in your mind that collection professionals make no guarantees that the money will be collected, so you could be paying that fee but getting nothing in return. There are some that charge a flat fee which can be lower; and they do remove the hassle of your involvement in the collection.

The use of a lawyer for debt collection would be costly and perhaps cost prohibitive for some. However, all states have a free or low cost legal service that can give you some assistance or forms and samples, but you will have to do most of the work yourself.

There are investigative services that will find people and assets for you, and some complete quite extensive searches. Here again, they come with a price tag. With the internet, a small amount of money, and some persistence you could do much of this yourself.

III. Thirdly, consider the practices of third party collection services:

Remember, if you chose to hire a collection agency, do your homework and find a reputable service. Less reputable ones can be costly to both your wallet and your reputation.

Debt collectors are prohibited from utilizing certain methods of collection which may prove successful, but are both unethical and illegal:

  • Harassment — They cannot threaten a debtor with violence or harm; use profane or obscene language; use the phone constantly to annoy the debtor; or publish a list of those who do not pay.
  • False Statements — Debt collectors cannot lie in order to make the debtor pay; falsely claim they are attorneys; claim that you have committed a crime; lie about the amount you owe; claim they have sent you legal papers when they have not; stating that you will be arrested if you don’t pay; or state that they will take legal action against you if it is not allowed or they do not intend to do so. Furthermore, they cannot use a false company name.
  • Unfair Practices — they cannot deposit a postdated check early (where those checks are legal); cannot add charges, fees, or interest to what you owe where it is not allowed by law; cannot threaten to take your property; and cannot contact you by postcard.

These types of activities by collection agencies are unethical and illegal under The Fair Debt Collection Practices Act. The debtor can file a complaint with the Federal Trade Commission when these practices are used and this could affect your ability to collect on your judgment. Use of these methods can cost you money, and can cause you to lose what might be an important relationship with those that owe you money. It may also make it impossible for you to collect your judgement from the debtor who has now lost respect for you.

Even if you chose to collect the debt on your own without a third party, the same guidelines apply to you. You may not use any of the practices that the collection agencies are prohibited from using.

Therefore, no matter if you chose to do this yourself or hire an agency, be sure you do your homework. Know the law and check the reputation of the agencies you are considering. Complaints against agencies can be found by checking with the Better Business Bureau, the Attorney General’s office in your state (consumer divisions), and the Federal Trade Commission.

IV. Lastly, consider all of your options before you make your decision:

You first need to decide whether you would like help with your debt collection; whether you want no part of the effort; or whether there are other options which will keep you involved without having to shoulder the whole effort.

Look at the relationship you have with the debtor. Is it one you prefer to maintain or must maintain? Is it a family member or friend? Is this someone you routinely do business with? Is it someone that you will not be dealing with in the future?

If you will not be dealing with the debtor again, then you can chose the method you feel most comfortable with; however still be certain that you make a choice that will not be too costly, and choose help that will be ethical — one that utilizes only legal practices.

If you need or want to maintain a relationship with the debtor, you might consider a method in which you will maintain some involvement. Something you might consider is “Interrogatories” which require the debtor to go before a judge and disclose his assets. Knowing this will give you a better understanding of where you stand and it may help you determine the best method.

With this information in hand, you might also consider a neutral third party to help negotiate a settlement — a strategy that may allow you to salvage a necessary relationship.

There are many options just be sure you consider the cost, cost effectiveness, time, chances of success, and relationship consequences before you finalize your decision.

More small claims articles and pre-litigation resources

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

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Tip of the Week

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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