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Turning Paper Into Cash:
10 Tips on Collecting After You Win a
by Lisa Goldoftas
Copyright © 1991 Nolo Press
After the owners of a car repair shop do $350 of sloppy repair work and
refuse to refund your money, you take them to small claims court. You
come out of
court with a smile and a court judgment--a piece of paper issued by the
that says how much you won in the lawsuit. But your elation may quickly
dismay when you realize that you still must collect the $350 from the
shop. The court isn't about to do it for you.
If you find yourself in a similar situation, don't despair. You can
your own if you know where the debtor is and what assets are available.
ten tried-and-true tips to guide you.
1. Consider Settling for Less
If the debtor is willing to pay a portion of the judgment immediately if
drop your claim for the rest, or wants to barter goods or services
money, don't reject the offer out of hand. You have the legal right to
judgment amount, but collection can take years. It can also be expensive
frustrating. In short, you may prefer the proverbial bird in the hand to
possibly larger one that is still in the bush.
2. Get the Debtor Involved in Problem-Solving
There's a story about a man who was pacing at night, worried because he
pay his neighbor a debt that was due the next day. When his wife heard
problem, she called the neighbor, woke him up and said, "John can't
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
you. If the debtor is willing to pay but just doesn't think the cash is
available, make some constructive suggestions. Resources the debtor may
thought of include ear-marked bank accounts--IRAs or money set aside for
or education, credit card cash advances, loans from relatives and money
3. Know Your Legal Rights
Once you win a lawsuit, you have lots of different ways to press the
payment of the judgment. For starters, you can report the judgment to a
reporting agency. An unpaid judgment is a serious negative on the
report, so that may encourage payment. When you report the judgment,
stick to the bare facts and do not bad-mouth the debtor.
You can also pursue payment. Bank accounts, business income and a
portion of a
debtor's wages are commonly seized to satisfy court judgments. If that
enough, you may be able to seize royalties, money others owe the debtor,
personal property or real estate. In special circumstances, you may be
to payment from a debtor's spouse.
One promising long-term technique is to file liens on the debtor's
lien is a legal assertion that you have a claim for a specific amount
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
lien is automatically created when the court enters its judgment. In
must file a document to create a lien. Liens may not produce money right
but in the words of a former judge, they are "little money machines,"
they are easy to create and can pay off your judgment without further
4. Pursue Easy-to-Reach Assets First
When you begin, concentrate on collection methods that tend to be
relatively inexpensive. Establish liens, negotiate voluntary payments,
from wages, seize bank accounts and intercept money paid to a debtor's
Unless you anticipate that extreme collection measures will push the
pay up, you'll probably save yourself a lot of trouble if you avoid
sale of the debtor's vehicles, house, business assets or personal
5. Know the Legal Limits
Some types of property the debtor owns are not fair game--they are
judgment collection efforts under state law. Creditors cannot seize more
certain amount of a debtor's wages--often 25%. Also off-limits are a
food, clothing and other necessities.
A judgment debtor is also legally protected from harassment and public
embarrassment by creditors. Don't threaten, harass, humiliate or
debtor; it is unnecessary and counterproductive--it could even get you
don't talk about the debtor to others, with the exception of
agencies and officials directly involved in your collection efforts.
6. Practice Patience
If you think in terms of years rather than months, you can develop a
strategy that is likely to produce full payment of your judgment.
anywhere from three to 20 years, depending on the state, and you usually
renew an uncollected judgment indefinitely. While the judgment remains
accumulates interest--often at 10% to 12% per year. Eventually, the
likely to acquire some assets that can be used to pay off the judgment.
7. Keep Track of the Debtor
Has the debtor moved recently? Purchased a boat? Lost a job or fallen
times? It's important to keep tabs on the debtor so you know what assets
after and when.
8. Remember That Timing Is Everything
Many collection techniques require you to act fast--before other
creditors do and
before the debtor gets wind of your plans. Timing is important in other
too. For example, suppose the debtor gets paid at the beginning of each
deposits the money in a checking account. If you try to collect at the
end of the
month, not only will you come up empty-handed, but you'll temporarily
collection fees you fronted. And the debtor is almost certain to move
9. Hire Experts Sparingly
If you have access to good self-help books that explain how to collect a
judgment, a small claims advisor or helpful court clerk, don't turn your
over to a collection agency or lawyer, unless a lawyer won the case and
legal right to collect a fee. Farming out your judgment means you'll bid
to a third to a half of what you're owed. Of course, if you're pretty
never recover a cent on your own or don't want to spend time and effort
collecting, half the amount is better than none.
If your main problem is finding out what the judgment debtor owns, you
able to get that information for a reasonable fee from a computer
company. These companies are often listed in the Yellow Pages; they can
where people live and what real estate, other property or businesses
Other times, it takes plain hard work, perhaps by a skilled
10. Know When To Quit
Obviously, perseverance is a virtue when you're trying to get a court
paid. Even if a debtor declares bankruptcy or dies, you maybe be
entitled to file
a claim and be paid all or part of your judgment. But trying to collect
judgment can be like gambling too long--you want to keep going because
time you'll recoup your losses. But if you spend money on futile
techniques--tapping bank accounts that are empty, seizing property with
value--you simply throw good money after bad.
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