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Collecting a Court Judgment: You're on Your Own
This article contains a host of useful tips to help you collect what the defendant owes you.
If you win your case, you'll probably feel vindicated by your day in court. After all, the judge saw things your way and awarded you a judgment against the defendant. But unless the defendant pays you voluntarily, your post-trial jubilation may quickly turn to surprise and then dismay: surprise that the court does nothing to make sure the defendant pays you, and dismay at the time, expense and work it takes for you to do it.
To get paid, you or someone you hire must follow specific legal procedures to get money or other assets from the loser (called the judgment debtor). The exact procedural trail you must follow takes slightly different twists and turns in every state, but the following tips should be helpful everywhere.
1. Don't rush it.
Don't be in a hurry to start bugging the defendant to pay up. Most states allow a losing defendant to appeal, so it's usually wise to wait until the appeal deadline (usually 30 days or so) passes before asking for your money. Otherwise, your demand for payment may nudge the defendant into filing an appeal. Appeals threaten your collection chances for two reasons: first, you may lose the appeal, and second, while the appeal is pending, the defendant probably doesn't have to pay you a penny.
2. Don't forget to ask.
A surprising number of debtors will pay once a court judgment is issued -- if you politely ask for the money. A business-like written request often does wonders, especially when it reminds the debtor that an unpaid judgment will probably show up in the debtor's credit file. You can also mention, in general terms, that you plan to take legal measures to collect if payment isn't forthcoming. But don't specify what measures you plan to take -- for instance, garnishing the debtor's wages or seizing a bank account -- since this will give a wary debtor time to thwart your plans.
3. Consider Settling for Slightly Less
If the debtor offers to pay a substantial portion of the judgment immediately if you will drop your claim for the rest, or wants to barter goods or services instead of money, or offers to pay in installments, don't reject the offer out of hand. Realize that while you have the legal right to the full judgment amount, your collection efforts can take years. Trying to collect from an intransigent debtor can also be expensive, not to mention frustrating. In short, you may prefer the proverbial bird in the hand to the possibly larger one that is still in the bush.
4. Get the Debtor Involved in Problem Solving
There's a story about a man who was pacing at night, worried because he couldn't pay his neighbor a debt that was due the next day. When his wife heard about the problem, she called the neighbor, woke him up and said, "John can't pay -- he doesn't have the money." Then she hung up, turned to her husband and said, "Go to sleep now. Let him do the pacing."
The moral of the story? Let the debtor do some of the pacing -- and legwork -- for you. If the debtor says he is willing to pay but just doesn't have the cash right now, make some constructive suggestions. For example, you may be able to point to resources the debtor may not have thought of (or wanted to consider) including ear-marked bank accounts -- such as an IRA or 401k account or money the debtor has set aside for vacation. Also, suggest that the debtor take a cash advance on her credit card, negotiate a loan from a relative or even raise money at a garage sale.
5. Adopt a collection strategy.
There is no one best collection approach. Once you win a lawsuit, you have lots of different ways to press the debtor for payment of the judgment. For starters, you can report the judgment to a credit-reporting agency (they may have picked it up already through their own methods). An unpaid judgment is a serious negative on the debtor's credit report, meaning that the debtor may have a considerable incentive to eliminate it. When you report the judgment, however, stick to the bare facts and do not bad-mouth the debtor.
But chances are you'll also want to actively pursue payment by properly authorizing the sheriff or marshal to seize money from a debtor's bank account, grab business income or garnish a portion of a debtor's wages. Or you may be able to seize the debtor's royalties, money others owed to the debtor, valuable personal property or real estate. If a business that handles cash is involved, you can collect directly from the judgment debtor's cash register (called a "till tap").
One particularly promising, albeit long-term, technique is to file liens on the debtor's real property. A lien is a legal assertion that you have a claim for a specific amount against certain property. You get paid the amount of your claim when the property is sold or refinanced and the new owner or lender wants clear title. In some states, a lien is automatically created when the court enters its judgment. In others, you must file a document to create a lien. Liens may not produce money right away, but in the words of one former judge, they are "little money machines," because they are easy to create and can pay off your judgment without further effort on your part.
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