Judgment creditors are fully within their legal rights to collect money judgments on their own. They can engage their attorneys in collection. Judgment creditors can also turn to collection agencies. When the collection agency model is preferred, there are two ways to go about it: sell the judgment or work out a consignment arrangement.
Judgment collection on consignment is the business model adopted by Salt Lake City-based Judgment Collectors. They prefer working on consignment because they believe it produces better results for both parties. If you are working on an outstanding judgment and need help, bringing in a collection agency is worth thinking about.
Consignment vs. Selling a Judgment
Under a consignment arrangement, you would retain ownership of the money judgment. The consignment agreement would essentially turn the judgment over to a collection agency for enforcement purposes only. The agency would act as your legal representative for as long as you retained its services.
The collection agency would:
- Conduct an asset search.
- Contact the debtor.
- Attempt to make payment arrangements.
- Take further action if necessary.
If the debtor refused to pay, the collection agency could seek a writ of garnishment against income or wages. The agency could file a judgment lean against the debtor’s property or ask the court for a writ of execution to seize and sell targeted assets. And if the debtor moved away without leaving forwarding information, the collection agency could employ skip tracing to find him.
Selling a Judgment
When a creditor decides to sell a judgment, he is turning over ownership to the collection agency. The agency pays what it believes to be a fair price for the judgment. Once the sale is complete, the creditor relinquishes all rights to collect. The judgment becomes the sole property of the agency to do with as it sees fit.
The advantage of selling is being done with the matter. A creditor no longer needs to worry about the judgment because it is someone else’s problem. The disadvantage is that collection agencies pay pennies on the dollar. They will never pay full value because they need to cover their own expenses and profit. And the harder a judgment appears to be in terms of collection, the less a collection agency will pay.
The Actual Consignment Process
Judgment collection and consignment are attractive because the creditor retains ownership of the judgment until it is settled. The key to the consignment model is that the collection agency does not get paid until it collects. Furthermore, payment is based on a percentage of the amount collected. This gives the collection agency every incentive to collect as much as possible, as quickly as possible.
As for the actual process, here’s how it works:
- The agency reviews the judgment to determine its collectability.
- If deemed collectable, the agency will submit an offer detailing its collection proposal and estimated fee.
- The creditor can either accept or reject the proposal. If accepted, the collection agency begins work right away.
The collection agency will likely initiate a property search immediately. Most of the time, a creditor will want to use the least aggressive collection method possible. But if necessary, the agency will pursue the most aggressive method: property seizure and sale.
Throughout the entire process, the collection agency covers all its own costs. This includes court costs when additional court orders are sought. This further incentivizes the collection agency to get every dime it can.
There are valid reasons for selling a money judgment to a collection agency. But I’m thinking most judgment creditors would be better off with judgment collection on consignment.