It is frustrating when someone owes you money and is unwilling to pay you. If the debt is small, you can go to small claims court, pay a small filing fee, serve the debtor, usually by certified mail, and wait for your court date. If you have supporting evidence of the debt and that the defendant owes it and has refused or neglected to pay, the court should grant you a money judgment.
This is generally the easiest step in a money collection action. The most difficult is in forcing the debtor to pay you if he or she refuses despite your court judgment.
Ask for Payment
Before undergoing any of the steps necessary to collect your debt, consider just asking the debtor to pay the debt and then filing a satisfaction of judgment, if requested, so that the credit agencies will reflect payment. You might want to ask for a reduced amount or installments to avoid the time and costs you will be expending to collect on your judgment.
Uncovering the Debtor’s Assets
All too often, obtaining a judgment in a money collection case is no more than a pyrrhic victory since debtors will disappear or claim they have no assets. Because you have a court judgment and are a judgment creditor, you can order the judgment debtor to appear at the courthouse for a deposition. In doing this, be sure you follow certain steps:
- Have the debtor personally served with the order compelling the deposition. If the debtor does not appear, he or she is subject to arrest for contempt of court.
- Request in the court order that the debtor supply records of bank statements, tax returns, pay stubs, mortgage payoffs, ledgers and other financial documents.
- Hold the deposition at the courthouse so a judge can order the debtor to answer questions. Get permission from the court clerk first to use a courtroom or other available room or area.
- Keep track of the documents the debtor did not bring so a judge can order the debtor to produce them.
- Have a court reporter present to record the questions and responses.
- Bank Levy or Wage Garnishment
If your state allows it, you can levy on the debtor’s bank account after obtaining a writ of execution or garnishment from the court. Certain accounts are exempt, however, such as wages, public benefits, retirement funds and if the account is a joint. Have the sheriff serve the writ on a bank officer who is obligated to withdraw non-exempt funds from the debtor’s account. You will need the account number and debtor’s exact name on the account.
If the judgment debtor is employed, you can garnish up to 25% of the debtor’s wages from their paycheck until the amount is paid. A sheriff or levying officer will collect the money for you. You cannot garnish wages if the funds are for basic support, are subject to another garnishment, the debtor is on public support or is a member of the military.
Real Estate Lien
If the judgment debtor has real estate, you can file your judgment with the lands records office in the county where the real estate is located. You will have to wait until the property is sold before collecting, though you do get post-judgment costs and interest.
Hire a Collection Agency
Another option is to hire a collection agency. These companies charge either a flat fee or a percentage of the money collected. Before hiring these companies, you should consider whether your debt is substantial enough or worth the expense. You should also know that typically an attorney can get better results and more money than using a collection agency. It is recommended that you speak with an attorney who dedicates a portion of their practice to collecting money on behalf of their clients.
Hire an Attorney
Hiring an experienced attorney is oftentimes the best option for collecting money. In some cases, an attorney may not charge you any fees upfront and instead take their fees either from the debtor or from a portion of the money recovered. Because of this arrangement, the attorney is likely to be more aggressive in attempting to collect the total amount that is owed to you. It is highly recommended that you speak with the Law Offices of Andrew Ritholz about any questions you may have with regards to collecting money that is owed to you.