Collecting Your Debts
The information below is for education and marketing purposes only. In no way it is intended to provide legal advice or create a client-attorney relationship. Should you have a question regarding the content or your situation, please contact a lawyer.
How Do I Get Money That’s Owed To Me?
There are multiple ways that debts can be collected, both formal and informal. In a perfect scenario, the person who is owed the debt still hold some leverage over the indebted person, which can help incentivize them to settle the debt and avoid the need for formal action. In other cases, it may be necessary to involve third parties to help resolve a dispute. Debts can be sent to collections, resolved through the court system, or both. This article covers the process for resolving a dispute through the court system.
Why Go To Court?
Going to court helps create a solid record of what is owed, by whom, and for what purpose. This helps prevent debts from later being contested and possibly thrown out due to some technical defect. Once you have gotten through the court system and obtained a judgment for a debt, you can be relatively certain that the debt is valid and enforceable.
The court system can itself help facilitate collection of debts. Once the court has determined that a debt is valid and owed, it can authorize further steps to aid in the collection of the amount owed, including enforcement by police, when appropriate.
How to Collect Through Court
When a court issues a decision that someone owes you money, that is, unfortunately, not the end of the matter. Unless the other party willingly pays the money owed, further steps are necessary to enforce the judgment. The court typically takes no action on its own initiative to make sure a party fulfills its obligations. Judgments are not self-enforcing.
Once you have a judgment in-hand for money owed to you by some other person or entity, you are ready to proceed with appropriate collection actions through the state court system. Here are a few of the primary types of collection actions that are available:
Garnishment. In many cases, you can simply have the wages of the debtor garnished (seized) to fulfill the amount owed with payments over time. This is accomplished by contacting the employer and determining exactly how much money is available to be garnished and having them withhold a portion of each payment they make to that employee. If the employer fails to provide the required information, the employer may itself become liable for the debt. Garnishment is helpful because it does not take any cooperation on the part of the debtor, and can take a small piece of each paycheck from someone who may otherwise not have the funds immediately available to fulfill the entire debt. The downside of garnishment is that this method is often not available when collecting debts from self-employed people, those without steady employment, or when you are not able to identify who the employer may be.
Property Seizure. Another primary way to collect on a debt is to have some known property seized in order to satisfy the debt. This can be in the form of bank accounts, physical property, or even rights to property that a debtor does not yet possess. Court can authorize the police to confiscate certain property and apply the proceeds to the satisfaction of the debt. Some property may be exempt from collection, so it is important to navigate the process carefully so that you don’t violate the law in trying to collect what is owed to you.
Liens. A lien allows the person owed money to claim some portion of an asset, and therefore the proceeds when that property is sold. Liens can prevent the debtor from freely transferring the asset until the debt is satisfied. In this way, liens are a great way to attach a debt to a highly visible asset such as cars or houses, which cannot be easily transferred or concealed. In certain cases, it may even be possible to force the sale of an asset so that the debt can be paid.
Time May be of the Essence
It is typically wise to obtain a judgment and attempt to collect a debt as soon as possible. This helps ensure that the records, witnesses, and other information necessary to obtain a judgment are fresh and at hand, but also increases the chances that you will be able to actually collect on the debt. If you wait to collect, there may be later creditors that beat you to the punch and lay claim to available assets that may become exhausted or be transferred away. By proceeding promptly, you can help minimize the chances that you are left holding only a piece of paper (a judgment) with nothing to show for it.
A Word of Caution
There are numerous laws at both the state and federal level that govern debt collection practices. These laws limit the ways in which debt collection can occur and protect certain rights of the debtor. It is important to comply with these laws, because a violation could result in a significant penalties, often exceeding the amount of the original debt.
What if I Owe a debt?
See here for our guide to Debt Collection Defense