Collecting legal judgments is big business in the U.S. Specialized collection agencies go after judgment debtors and encourage them to pay through whatever legal means are at their disposal. Still, not every case is a good case for a collection agency.
Some judgment collection agencies buy judgments for pennies on the dollar. Others utilize a consignment model, similar to personal injury attorneys who take cases on consignment. Under either model, judgment collectors need to assess six specific things before deciding whether to take a case. They cannot afford to assume a judgment they do not feel they can collect on.
1. Current and Future Asset Information
Debtor assets generally play a significant role in how judgments are settled. According to Judgment Collectors out of Salt Lake City, UT, collection agencies are in a better position if they know the types of assets they are dealing with ahead of time. In addition, they need to be able to successfully uncover any future assets the debtor may come in possession of.
2. Possible Court Challenges
There are legal means by which debtors can challenge judgments entered against them. It is no secret that defense attorneys encourage court challenges when the chances of success are relatively good. Judgment collectors need to assess the potential for future challenges so they don’t get caught with a judgment that will eventually be dismissed.
3. The Collection Timeline
An experienced collection agency can look at a case and come up with a fairly reasonable timeline for collection. However, there are no guarantees. The timeline assessment acts as a guideline that tells the agency whether a particular case is worth pursuing. For example, if they feel a case will take 10 years to settle, an agency working on consignment may decide the profit margin is too low to proceed.
4. Applicable Legal Issues
Judgment collectors also need to assess all applicable legal issues. A state statute of limitations immediately comes to mind. If a collection agency is given control of a judgment during the fifth year in a state with a seven-year statute of limitations, accepting the case means getting it settled within two years.
There are other legal considerations attached to the various legal tools judgment collectors utilize. For example, a collection agency may have to wait 30 days from the conclusion of the trial before issuing interrogatories.
5. Collection Costs
Assessing collection costs is necessary on multiple levels. Whether the collection agency covers the costs itself or requires the client to pay them along the way, costs influence how much money there is to be made on a given case. They need to be low enough in comparison to what the collection agency expects to collect in order to make pursuing a debt worthwhile.
6. Applicable Jurisdictions
When a judgment is entered against a debtor, it is entered only within the local jurisdiction in which the trial took place. If enforcement activities will take place outside of that jurisdiction, the judgment must be entered in those additional jurisdictions. This is something collection agencies need to assess prior to taking a case. Why? Because there may be some jurisdictional issues that would prevent the agency from ultimately succeeding.
Based on these six things, it should be evident that collecting on an outstanding judgment is not as easy as asking the debtor to write a personal check. A lot goes into successful collection. For this reason, hiring a collection agency is not the right choice for every case. Some cases are just not worth enough to go the professional collection route.
