I would like to pose this premise to you. You have worked hard and spent money to obtain a final judgment, but the judgment debtor will not voluntarily pay. How do you collect? Perhaps this is the wrong question to ask. The fundamental question should be “Can you collect?”
Obviously, if you are the meritorious party in a lawsuit against a company like AT&T or Suntrust, you can rest assured, you will likely be paid. The issue of non-payment most often comes against lawsuits against closely-held companies, individuals, or family-owned operations.
Often to even obtain a modest judgment (let’s say $50k), it can take five figures worth of money spent on attorneys’ fees (and court costs) to obtain that modest result. Combine that with the fact judgment creditors can get so emotionally invested in the outcome of a litigation they often get irrational regarding their own case’s potential for collection.
Research the Debtor
In order to determine whether a judgment can be collected, it takes a global view of the judgment debtor and its finances. While no mathematic formula exists in determining whether a judgment is collectable you should start with some threshold questions:
- Has the law firm that obtained the judgment perfected your judgment lien?
- Did your judgment require the judgment debtor to serve a fact information sheet?
- If the Judgment Debtor is a business entity, is that entity still operating?
- What type of assets does the Judgment Debtor own (e.g. real property, vehicles, assets of the variety that would show up on an asset search (like certain equipment)).
- Has the judgment debtor made any transfers of assets lately?
These considerations may seem obvious, but I can’t even tell you how often people come to me to collect judgments that are obviously uncollectable. Often people do not want to hear that the judgment is not collectable (even when you provide evidence on why it is not collectable). Perhaps they do not care the judgment is uncollectable and they just want someone working on it for a contingent fee hoping for a miracle.
The general fiscal health of the judgment debtor (and if an entity, the principals comprising the management of the judgment debtor) helps paint a picture of collectability. There are many tools you can utilize to help paint that picture, such as asset searches, public records searches (like UCC Lien searches, or searches of the official public records), and simple internet searches. Sometimes it is even advisable to hire a private investigator to research your debtor’s finances.
Lien Perfection and Passive Collection
Keep in mind that a judgment that is not collectable now might not always be uncollectable. That’s why judgment lien perfection is so important. “Has the lawyer that obtained the judgment perfected your judgment lien?” In a previous journal entry, we discuss the process and importance of perfecting your judgment lien as soon as possible. Preserving the priority of your lien may allow you to collect passively (e.g. judgment debtor trying to sell or refinance real property has to address your judgment lien).
Moreover, you might even find 2 or 3 years down the road, the judgment debtor has gotten back on their feet and you can now actively collect your judgment. If the judgment is currently uncollectable, it is advisable to keep an eye on the judgment debtor from time to time. Often judgment debtors (particularly individuals) are very entrepreneurial and will move on to the next hopefully profitable venture.
Not having a realistic assessment or expectation of the collectability of a judgment is often a recipe for disaster. Contact Andre Law today to figure out if your money judgment is one which you can collect against.