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How to collect court judgments

Most consumers know they can go to court and sue someone to right a wrong. But they often don't know that courts do little or nothing to help them collect money they are awarded.

Welcome to the hole in the judicial system.

"Getting a judgment is the easy part," says Roderic Duncan, a retired judge and author of "Win Your Lawsuit: A Judge's Guide to Representing Yourself in California Superior Court." "When I used to preside over a small claims calendar, the people who won would think there was a window where they could collect their money. Collecting a judgment can be hard because, like a divorce, some disputes can be very emotional."

There are several avenues you can pursue in an effort to collect or enforce a judgment. You can attempt to collect the money yourself or hire a lawyer, collections agency or judgment enforcement agent to get the money on your behalf. These professional may have more success collecting the judgment; however, their help comes with a price tag.

The ABCs of judgments
A judgment is verdict from a court that resolves the particulars of a lawsuit or claim and specifies the obligations of the parties involved. For example, if you sue a contracting company for failing to finish a job that it was contracted to perform, or a relative or friend owed you money and wouldn't pay it back, the judgment would specify which party prevailed, which party was responsible for court costs and whether one party owed money to another.

If you have an agreement with another person or company and that agreement wasn't fulfilled, causing you to lose money in some way, you can seek redress in the courts. The amount of money you are owed will in most cases determine where you pursue your case. For smaller amounts, disputes are handled in small claims court. The ceiling on small claims court cases depends on the state.

The lowest ceiling is in Massachusetts -- $2,000 -- while some parts of Tennessee have a $25,000 ceiling. In most cases, ceilings range from $5,000 to $10,000. Most types of smaller monetary disputes between individuals or businesses can be handled in small claims court; however, matters such as divorces can't be handled there. Cases commonly seen in small claims court include landlord-tenant disputes, failure to repay a loan and service disagreements.

In order to collect money you are owed, you must go to court and get a judgment. Once the judgment is issued in your favor -- not a slam dunk because you must prove the merits of your case in front of a judge -- you get a legal document from the court that spells out what you are entitled to receive. Then you can go about enforcing that judgment.

Do it yourself
The best circumstances under which to collect a judgment are when the other party -- known as the judgment debtor -- is willing to talk to you and has assets, a job or other means of paying the judgment. Unfortunately, in most cases it isn't that easy.

"Eighty percent of all judgments aren't collected, says Brian Petrone, who owns a judgment enforcement and bail bondsman agency with offices in Brunswick, N.J., and Venice, Fla.

"If you're dealing with someone who is gainfully employed or owns property, you have a better chance of collecting, but if they don't agree with the judgment, they may try to hide assets or make it difficult for you to collect," he says. "If you're dealing with an older person who has no job and no assets and no prospects of getting a job or any assets, it is probably not worth the effort to try to collect."

The first step is to approach the judgment debtor with a letter asking for payment. If there is no response or the person won't pay, you'll need to find out if the person has a job and if so, where he or she works, and if he or she owns property or has bank accounts or other assets. You'll need the name of the bank or credit union and account numbers.

You can use your judgment to obtain funds from those sources by going to your county's sheriff or other official. The Web site Nolo.com has its own step-by-step guide to collecting judgments.

However, there are some types of wages and property that are exempt from judgments, so be sure that you aren't running afoul of your state's laws before attempting to garnish wages or seize a car or place a lien on property. If the judgment debtor files for bankruptcy, in most cases you'll be out of luck. Your judgment will still be valid, but a bankruptcy court will discharge the debtor from most of his or her debts, including your judgment.

In some cases, money you collect from a judgment during a certain period before bankruptcy is declared may be subject to bankruptcy court rules, forcing you to return the funds.

"When I collect on a judgment, I hold onto the money for 90 days in case the debtor ends up filing for bankruptcy and I have to give it back," says Mark Shapiro, who operates Judgmentbuy.com in San Jose, Calif.

If you decide to turn your judgment over for professional collection, consider three options.

Hire a professional:
An attorney.
A collections agency.
A judgment enforcement agency.

Attorney
If you go this route, a lawyer will contact the judgment debtor and press for payment.

In most cases, attorneys are paid by the hour for their time, but in some cases they will defer their fee for a percentage of the judgment once it is collected. Lawyers who specialize in collections may work with private investigators, judgment enforcement agencies or collections agencies.

A database of attorneys specializing in retail collections is available at the National Association of Retail Collection Attorneys.

Collections agency
These agencies specialize in the collection of overdue accounts. Collections agencies must abide by federal and state fair collection laws, including the
Fair Debt Collection Practices Act. They will pursue your judgment in return for a percentage of the fee once it is collected.  Individuals with judgments from small claims court may find it difficult to get a collections agency interested in collecting their debt; they frequently work on behalf of companies that have hundreds, if not thousands, of overdue accounts.

Judgment enforcement agency
These agencies use public records and databases to ferret out judgment debtor's assets and salaries and take 30 percent to 50 percent of a judgment collected as a fee.

When working with a judgment enforcer, you assign that judgment to that firm so the enforcer, in effect, owns the judgment and can legally go after the judgment debtor. Many judgment enforcement firms will accept smaller judgments in return for a percentage of the fee, when and if the judgment is collected. The National Judgment Network, an association of judgment enforcers, provides a database of its members online. Members who are certified have passed an examination.

Accrued interest can increase the amount you are owed on your judgment.

States vary in terms of the amount of interest that is legally allowed on judgments. If you have a contract that specifies that you are entitled to any fees incurred in the collections process, your attorney, collections agency or judgment enforcement agency can collect those fees on top of the judgment and interest, enabling you to receive the full amount you are owed in the event of collection, says Petrone.

States also vary in terms of the length of time that judgments can be collected, but in most states you can go back to the court and have your judgment renewed if it is about to expire. Collecting a judgment from a person who has moved out of state is more complicated, but you or your attorney or collections enforcement agency can, in most cases, get a judgment transferred from one state to another.

Professionals collecting your judgment have a number of tools at their disposal to collect payment, including reporting the judgment debtor to a credit bureaus, making it difficult for that person to get credit, placing liens on the debtor's property and keeping tabs on his or her whereabouts, including their employment, any inheritances or awards they receive.

"You have to be persistent," says Shapiro. "It's like a chess game -- in many cases, a debtor will eventually get a job or come into some money and I can collect the judgment. But it can take a lot of time."

A settlement is easier to collect than a judgment because the other party has agreed to pay. But there can be delays.

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