The Hidden Costs Of Judgment Collection

After creditors win their judgment, most want to be done paying for courts, lawyers, process servers, private investigators, etc. Most creditors do not want to pay any more fees to get their judgments recovered. However, one way or another, it costs time and money to recover judgments. My articles are my opinions, and not legal advice. I am a judgment broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer. This article highlights expenses, including lesser-known expenses, that creditors may face when trying to get their judgments recovered, under six different scenarios.

1) When you recover your own judgment: The pros are that you keep full control, and you do not have to split what might be recovered. When someone else recovers your judgment, you must share an average 50% of what gets recovered, and other people will usually work on the easiest-to-recover judgments first. If you recover your own judgment, you set the priorities, and keep all possible recoveries. The cons are you gamble that any time and money you invest, will pay off. Judgments are not guaranteed, and any time or money spent trying to recover them can easily go down the drain.

2) When you sell your judgment for cash upfront: The pros are you get some cash, and the only expense is $10 to notarize an assignment of judgment to the buyer. The con is average judgments (without a judgment debtor having massive available assets) sell for 1 to 6% of their face value, and you can waste your time trying to prove otherwise.

3) When you assign your judgment to a judgment enforcer: The pro is they take over the hassle and financial risk of recovering your judgment. The cons are you must assign your judgment to them, and pay about $10 for a notarization of that assignment, and share whatever is recovered over time. Some creditors do not like to assign their judgments, because of the risks of depending on any one person. Some judgment enforcers charge a fee to get started, and/or ask judgment owners to share some costs, and/or have contracts that charge a fee if the judgment is vacated, or the debtor goes bankrupt, etc.

After you assign your judgment to a judgment enforcer, it often takes a long time for any potential progress to be made. Often, it is a case of your judgment debtor having few available assets. However, you might eventually feel the enforcer is not doing enough, and you may want your judgment back. The judgment enforcer might insist you first reimburse them for their court-approved costs. If the judgment enforcer disappears or does not respond, you must then pay for a court motion and hearing, to try to undo the assignment of your judgment to them.

4) When you choose a collection agency to recover your judgment: The pros are you do not usually have to assign your judgment to them, because they work on your behalf. They spend all the time and usually all the money required to attempt to recover your judgment. The cons are that most collection agencies do not specialize in recovering judgments. Those that collect judgments keep a share of what is recovered, and some also charge a fee to get started.

Some collection agencies also charge extra if they have to litigate to recover your judgment, because they have to pay their lawyers. This can happen when the collection agency has to domesticate a judgment to another state, undo fraudulent transfers, etc. Usually, clients are notified before such extra costs are incurred, so if the client does not agree, usually the collection agency will return their judgment. This is almost always an optional choice for the creditor, and creditors should not, and rarely do, get unexpected bills from collection agencies. The best collection agencies use lawyers to recover judgments, so creditors never have to pay any hourly attorney charges.

There is a difference, when the collection agency is owned by attorney(s) or not. When a collection agency is attorney-owned, in many states, when attorneys represent clients on a contingency basis, the law is their clients must pay most or all court filing fees, and certain other fees. When a collection agency is not owned by attorney(s), the agency often pays most court filing fees.

Sometimes, when a collection agency brings up the topic of their client paying a litigation or filing fee (e.g.) to domesticate a judgment, the creditor will not want to pay. One solution is for the creditor to assign their judgment to the collection agency. The reason assigning a judgment to the collection agency can work, is because after the judgment is assigned to the agency, they are no longer representing the creditor, so the agency can pay the court filing fees.

5) When you choose a non-contingency lawyer to recover your judgment: The pros are you get some control of the timing and plans to recover your judgment. The cons are you must pay them a retainer and by the hour, and all expenses, without any guarantee of success.

6) When you choose a contingency lawyer to recover your judgment: The pros are you do not have to pay for the lawyer's time, and they usually advance some of the expenses, except where laws make the creditors pay court filing fees. Also, they usually get the best results. The cons are they usually only accept certain judgments, and may sometimes first place their priorities on clients that pay by the hour. If you later want your judgment back, you might owe the lawyer some money because of their quantum merit contract clauses. Such clauses mean a contingency lawyer can get paid for the work they did, if you choose to fire them.

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Judgment And Safe Deposit Boxes

Bank levies are the first thing to try, when you want to recover your judgment. This being the case, the first information to try to discover is where your judgment debtor banks. Most judgment debtors do not maintain bank safe deposit boxes (or Safety Deposit Boxes - SDBs), however some do. Bank levies require a writ of execution from the court. My articles are my opinions, and not legal advice. I am a judgment broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.

Even when you know that your judgment debtor has a bank safe deposit box (SDB), those are expensive to levy. Levy instructions should request funds from the debtor's checking and bank accounts first; and then to check for any safe deposit boxes in the name of your debtor. At that point, there is a decision to make, whether to gamble on the value of the contents of what is inside their SDB. If you can afford to risk the extra costs of having the Sheriff levy the judgment debtors SDB, it may be worth specifically requesting the SDB contents on your levy, when it gets served on the debtor's bank.

Just as some judgment creditors are not aware that the contents of a debtor's safe deposit box can be levied, many judgment debtors think that the contents of their SDB at their bank is protected from creditor levies. Judgment debtors may think they can hide some assets in a SDB, and no one will ever know. They might keep a wide variety of assets such as cash, collectibles, documents about notes receivable, jewelry, etc. That misunderstanding by judgment debtors, can be good news for judgment creditors. Those valuables can be subject to a creditor's bank levy execution.

To levy a judgment debtor's safe deposit box at their bank, you need to make a request that the bank and Sheriff check for, and possibly freeze the contents of their SDB, on the levy or execution forms filed at the court, or with the proper authority. Once the Sheriff, or other proper court representative; serves the papers on the correct bank, the contents of the judgment debtor's SDB, is subject to being used for payment toward satisfaction of your judgment.

For a levy that includes a check for safe deposit boxes, instruction letters to Sheriffs should say something similar to: "please have the Sheriff levy all funds under the name of Dan Debtor SSN 123-456-7890 at CostAPlenty bank, 123 Rich Street, San Jose, CA, 90001, for the judgment debtor. Please levy first any and all savings and deposit accounts, and then if the writ of execution is not fully satisfied, check for any and all safe deposit boxes in the name of the judgment debtor".

In California, CCP 700.150 specifies the details on how safe deposit boxes are levied, and how debtors are served notice. Government Code Section 26723 is referenced, which simply specifies a fee of $125 to open a SDB. The judgment debtor may be allowed to open their SDB voluntarily, and some do. Otherwise, the creditor must pay for forcing open and then repairing the SDB. Most of the time, this additional levy expense can be documented and added to the judgment debtor's debt.

What will happen if your levy finds a judgment debtor's safe deposit box? If your Sheriff levy instructions specify that you will pay (or prepay) the extra costs of levying a judgment debtor's bank safe deposit box, their SDB will be opened. Sometimes the key to open the SDB will appear, which usually saves the creditor money. All too often, hiring a locksmith is required to force the safe deposit box open.

When the bank's levy department responds with its "Memorandum of Garnishee", it will indicate the presence of any SDBs held in the name of your judgment debtor. At that time, the Sheriff will send you a letter and give you (e.g.) five days to let them know you want the box(es) opened by drilling. If you do, you will have to pay the Sheriff some money (e.g., $150 per visit) and usually, the bank more money (e.g., $300 per box) to drill the box(es).

The bank will offer the judgment debtor a chance to visit the bank and open their box voluntarily (however not to remove any contents). If the judgment debtor does not accept the bank's kind offer, their safe deposit boxholder privileges will be forfeited and the drilling takes place on the appointed day. Some Sheriffs require the creditor to be present on this festive occasion, others do not.

Occasionally the judgment debtor or a third-party, will claim some or all of what is in the safe deposit box does not belong to the debtor. In that case the non-debtor co-owner would have to come forward and file a third-party claim of exemption with the Sheriff, indicating the source of the funds or assets. If you suspect shenanigans, you may be able to subpoena records related to the ownership of the contents of the safe deposit box.

Will the expense of levying your debtor's SDB contents be worth the cost? Anything can happen. Their box could be empty, or it could have rare coins, stolen property, drugs, or a thick stack of $100 bills, or most anything else that can fit. Hopefully, you will find a treasure waiting to satisfy your judgment. The debtor can be in attendance, along with anyone else who has something in their SDB. It is usually fun to watch the debtor's face when their (formerly private) safe deposit box gets opened.

Legal Placement Services: The Difference Between Court Reporters and Paralegals   When Should You Contact a Litigation Lawyer?   Collecting an Unpaid Judgment Against a Judgment Debtor Who Uses Several Aliases   

Contingency Judgment Recovery

When you cannot recover a judgment yourself, and you cannot afford to pay a lawyer by the hour to attempt to recover your judgment, and you cannot sell your judgment for more than a few pennies on the dollar; your best choice is to find a contingency recovery solution. Contingency judgment recovery means future payment. You do not get paid cash up front, you get money in the future if and when, money is recovered from your judgment debtor. Usually, there are no expenses to the judgment owner. Usually, it takes a long time to get any money.

One contingency judgment recovery choice is to assign your judgment to a judgment enforcer. However, there are other solutions that do not require you to assign your judgment. Examples are a contingency lawyer or a collection agency. This article is my opinion, and not legal advice. I am a judgment broker, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.

There is a wide variation in the collection agencies that recover judgments. Most of them are old-school, and use only the telephone and letters, to attempt to annoy judgment debtors into paying. The best collection agencies also use lawyers, and look for judgment debtor assets to have the Sheriff levy. They work just like judgment enforcers do, except you do not have to assign your judgment to them. Usually, when you have a contingency expert recovering your judgment, and no progress is being made, it is because your judgment debtor has no assets showing.

When a collection agency is owned and run by lawyers, often they are not allowed to pay court costs or Sheriff fees. That means even if they charge you nothing upfront, and nothing per hour, you might have to pay some court fees, which are modest when compared to hourly attorney fees.

When you retain a contingency collection lawyer, there are two kinds of lesser-known fees you might face. In some states and situations, you might have to pay the court costs. Also, some lawyers have Quantum Meruit contract clauses where if you fire the lawyer, you might owe them for the time and expenses they put into trying to recover your judgment, even if no progress has been made.

Most people would prefer to be paid cash up front for their judgments. However, for every actual judgment buyer, there are a thousand contingency recovery experts. And, when you do not have to assign your judgment, there is not that much difference, because cash up front buyers must perform due diligence, which can take weeks; and some contingency recovery agencies promise results, or they will return your judgment in 15 days.

When your judgment debtor is poor, cash upfront judgment buyers will pay you almost nothing, and usually no contingency recovery solution will get you paid either. When your judgment debtor is middle-class, a judgment buyer may pay you a few pennies on the dollar, and a future pay contingency expert will probably recover some or all of your judgment money in the future.

When your judgment debtor is rich, cash judgment buyers will take a few weeks to carefully research your judgment situation, because rich debtors can hire lawyers to fight recovery efforts, or hide their assets. Future pay contingency experts might recover money in weeks, if your judgment debtor has lots of available assets showing. So when your judgment debtor is rich, you get money quick, no matter what recovery option you choose.

With future pay contingency recovery solutions, you do not have to assign your judgment. That means you keep ownership, you pay nothing upfront, and usually nothing at all. You do not spend any time or go to court, and get half or most of what may get recovered.

When you want cash up front, shopping your judgment does not help much because actual judgment buyers all pay about the same. They always pay for judgments based on what the judgment debtor's situation is. Shopping a $5,000 judgment around to ten judgment buyers, might eventually bring you a range of offers from $240 to $265.

With contingency recoveries, you can shop around, however there is a problem because often you get what you pay for. Someone that charges 30% to recover your judgment may not try as hard as someone charging you 50%. Sometimes, the cheapest contingency rates come from people that are not very good at recovering judgments. They may try to get as many judgments as they can, and spend very little time on ones that do not look really easy.

Usually, when good judgment recovery companies charge you 33%, they make you pay some court costs, which is not always their idea, it is often the law. The 50% ones usually absorb the fees. When your debtor is rich, a judgment broker knows the best deals. Contingency recovery with a good collection agency or lawyer, is the way most judgments actually get collected. If your debtor has assets, you can get money quickly.

Legal Placement Services: The Difference Between Court Reporters and Paralegals   When Should You Contact a Litigation Lawyer?   Collecting an Unpaid Judgment Against a Judgment Debtor Who Uses Several Aliases