Re: I have won many judgements, but I have never collected one cent… - Posted by David Butler America’s Note Network
Posted by David Butler America’s Note Network on May 07, 2000 at 20:09:34:
Yes, there are several courses on collecting judgements available, and I believe one of them is right here on this site. Don’t remember for sure, but I bump into them from time to time, and I received solicitations for them as well. I am also aware of several note brokers and other investors who have become active in buying judgements from folks who have been unsuccessful in collecting on them.
The collection industry itself has been around forever. The traditional method is a consignment arrangement. They take anywhere from 40% to 60% of whatever they collect, if and when they collect. Several of these companies also purchase bad debt, but usually at prices ranging from 10 cents to 30 cents on the dollar.
But you have hit the problem right on the head. You need to analyse the time and the energy, versus the reward of collection. In saying that, I often see people leave a lot of money lying on the table, or flushed down the drain, because “It just isn’t worth the effort!” Only once in awhile do I see the opposite… where a guy is wasting his time and his money, and loses even if he collects.
So you want to be sure that you are fair to yourself when you make these decisions. I can’t begin to tell you how many folks work for $10, $15, $20, and even $50 per hour day jobs, who routinely turn down very simple opportunities in their daily financial activities to earn $70, $80, $100, even $200 per hour for themselves!?! In this instance, I would say that it depends on what you earn right now, and what kind of judgements you have. If you rent property for example to people who were awful going in (bad credit, poor income history, many other problems, etc), chances are that judgement wasn’t much good before you bothered to go get it… in which case, if you can sell it for 10 cents to 25 cents on the dollar - well, you are still ahead of where you are now.
I have been very fortunate in chasing down my bad debt over the years, although I have had occasion to collect under some very unusual circumstances, and a lot of luck. I have had a sheriff blocking a tenant’s driveway just as they were sneaking out with all of their belongings in the middle of the day, and collect $500 from them before they could go anywhere.
I’ve had attorneys with garnishment orders sitting on a trustee’s doorstep after going through the effort to pierce a spendthrift trust, and serve the garnishment on the distribution days, to make sure we got ours. I had people disappear in the middle of the night, who accidentally left a whole storage shed full of antique furniture. I managed to get it seized before they could get back, and collected on one large judgement, but the second debt was still in the legal system.
They got the antiques back by paying off the judgement I did have… took another 15 months to track them down in another part of the state and get a garnishment slapped on them to collect on the second judgement… but wound up getting it all.
Had a guy give one of my employees a bad check for $800 to rent one of my vacation properties. Came in at midnight on a Friday and bank was closed for the Labor Day weekend. My gal took the check for his four night use of the property. On Tuesday, he was long gone, and it turns out the check was written on a closed account. After six months of trying to collect, we did give up, but we got lucky - in that the State of Arizona changed their bad check laws significantly. Almost a year after the incident, I called the District Attorney’s office, and learned that we could file a claim for the check under the new laws… four months later, we had the money and treble damages!!!
A lot of times, it’s a matter of due diligence, and disciplined effort. Sometimes, a little luck finds it’s way into the mix too. I have a handful of clients who owe me for consulting services rendered, who never paid, and disappear on me. I didn’t even bother trying.
What I did do, was take my written proof of the debts (including the contract agreements), over to a credit collection agency. Out of nine of those, I have received full payment on four of the accounts, and some dribs and drabs on two others. The collection agency took 50%, so I got something, with no effort. Their main weapon was simply to put a derog on the deadbeat’s credit report. When they needed the credit bad enough, they found the money to pay off their bills.