Making The Accounts Pay
I am not an attorney, I am a judgment referral expert (Judgment Broker). This article is about on collecting what is owed to you. This article is based on my experience in California. Laws vary in each state, and nothing in any of my articles can ever be considered legal advice.
There are many variations, and it often means the debtor(s) did not pay. Perhaps a loan was not paid back, or they did not pay for a product or service.
As a judgment broker, I talk to many business owners with a bundle of unpaid accounts, asking for my advice. First off, we are discussing debts that have not yet been turned into judgments by winning a lawsuit. If you already have a judgment, you “just” must get it recovered.
If you don’t yet have a judgment, you have to choose what to do. Every debt or judgment stands alone, tied to a unique debtor. In fact, if you do not really know who your debtor is, recovery might be very hard. If you can’t locate the debtor, and do not know their real name; or address, email, phone number, or anything else about them, the game is over, and it may be best to write off the debt.
The first step to recovering some of your money is to gather up what you know about the debtor for each unpaid debt. If there are hints, reasonably follow up on those hints to find out what you can about the debtor. Then you have 4 choices: settle, sue them, hire a collection agency, or give up.
1) Settling. It costs time and/or money to transform a debt into a judgment, and then to have a judgment or debt collected. In most places, even small claims court costs hundreds of dollars to begin a lawsuit. Even when you win a judgment, to get any money back, you have to give up a lot – an average of one-half, of what is collected. For this reason, settling might be your best option.
One need to spend hundreds to sue, and then give up between one-fourth and 1/2 of what is collected, to end up with (usually) one-half. Because of this, a good starting settlement offer may be half. If your debtor is poor, it is probably a good idea to settle for much less, perhaps (20%|25%). The reason is, if the debtor is, and remains poor, it is going to be tough and expensive to recover money from them.
2) Sue. Especially if the amount owed is large and/or the debtor is rich, suing is probably a good option to consider. When you win a lawsuit, you get a judgment, which earns interest and is much stronger than any debt. Of course, the judgment must be recovered, they do not collect themselves.
If you sue a debtor, be sure to have them personally served by a sheriff or a registered process server. Insuring that service of the lawsuit is perfect, making it harder for the debtor to vacate the judgment later. Once you get a judgment, find a judgment broker, a judgment enforcer, or a collection lawyer.
3) Hire a collection agency. This makes sense if you do not want to go to court, and/or have a bundle of small debts. A collection agency usually makes calls, writes letters, and often gets the debt on the debtor’s credit report.
Sometimes that is all a collection agency does. If the amount owed is big and the debtors appear to have assets, collection agencies may use a lawyer to sue the debtor to get a judgment. Read the fine print, some collection agencies charge you extra if they have to sue.
4) Give up. Especially if the amount owed is under $500 and/or the debtor cannot be found, or they will not settle at any price. It’s not cost-effective to sue for tiny amounts. Of course, if money is no concern to you, you could spend $500 on a PI to locate them, $200-$600 to serve and sue them, then give up 50% to a judgment enforcer to get (at most) $250 back.
If the debtor is poor, giving up might be a smart move. Knowing when to hold them, and when to fold them, is good advice.