Collecting Judgments: Difficulties Associated With Collecting Your Judgment

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Collecting Judgments:
Difficulties Associated With
Collecting Your Judgment

Business owners know that when it comes to the collection of business debt, they can seek remedy in court and sue the business or organization that owes them money. This usually results in getting awarded a judgment.

Many businesses feel that when trying to collect a past due business debt, the first course of action should be getting a judgment award. What business owners may not know is that when it comes to collecting judgments, courts do little or nothing to help them collect the money owed to them.

Why is this the case? Because with these types of disputes, courts usually only make determination as to who is right, and what the remedies should be...emphasis on should be.

Courts don't usually enforce collecting judgments because they tend to view it as too costly, since it requires the court to spend additional resources to demand the losing party to pay up. Courts also view it too costly to monitor this activity. After a judgment award, the business owner is more often than not left on their own to collect the money.

Difficulties with Collecting Judgments

Successfully collecting judgments is very difficult. In fact, eighty percent of all judgments aren't collected at all, according to Brian Petrone, owner of a judgment enforcement and bail bondsman agency with offices in Brunswick, N.J., and Venice, Fla.

Here's something else to consider: if after a judgment award, the debtor then files for bankruptcy, while your judgment may still be valid, a bankruptcy court will discharge the debtor from most of their debts, INCLUDING YOUR JUDGMENT!

To further complicate matters, even if you do successfully collect money from a judgment, during a certain period before a bankruptcy is declared, you may be forced to return any funds received, according to some bankruptcy court rules!

After obtaining a judgment, and finding that the court doesn’t enforce payment, many businesses then seek out a commercial debt collection agency to collect their judgment. The conventional thinking is that a court-awarded judgment gives more weight and credibility to take to the collection agency. And given that, they should be able to successfully collect the debt.

However, there are a number of problems with this scenario. Businesses with court-awarded judgments often find it difficult to get a commercial collection agency interested in collecting their judgment. Usually, by the time the business relationship has deteriorated to the point of taking a non-paying debtor to court, the debtor becomes even further alienated and hardened against paying his debt once he finds out that the court isn’t going to enforce or demand payment of the judgment against him.

Also, collection agencies frequently work on behalf of companies that have hundreds, if not thousands, of past due accounts.

Collecting Judgments vs Commercial Collections

Many business owners erroneously think they should hire a commercial debt collection agency AFTER they’ve won their judgment award. Actually, there are sound, and more cost-beneficial reasons why commercial collection agencies should be your FIRST option, rather than your last. Most commercial collection agencies work on a contingency-only basis. This means they get paid if, and only if, they successfully collect your past due debt. Obviously, this gives them great incentive to successfully resolve your past due debt. Commercial collection agencies also tend to charge the least in contingency fees, typically around 20%, or even less!

Because commercial debt is different than consumer debt, a business debt collection agency usually have more tools and options at their disposal to help them recover more past due accounts. For instance, asset and private investigations can net much better results than simply sending demand letters and phone calls. Many past due accounts can be resolved relatively quickly using these tools.

While some attorneys defer their fees until a successful award, many charge upfront retainer fees and other costs.

Judgment enforcement agencies are another option for business owners who have been awarded a judgment. These specialty agencies tend to be quite expensive, some charging up to 50% in fees! After having already paid court costs and attorney fees to win a judgment award, giving away upwards of 50% in contingency fees to a judgment enforcement agency turns out to be a very expensive way to recover your past due debt.

If your business has past due commercial accounts, and you're considering getting a judgment, or hiring a commercial collection agency, fill out the quick quote form below. One our consultants will contact you within 24 hours. We will be happy to discuss your options with you.

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