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JudgmentBuy Article:

Demand Letters

Should you send a demand letter to your judgment debtor, after obtaining your assignment of judgment; as a first tactic to attempt to settle or recover your judgment?

One of many judgment-related articles: I am a judgment broker, not a lawyer, and this article is my opinion based on my experience in California, please consult with a lawyer if you need legal advice.

Or, would it be it better to go after available debtor assets with garnishments or levies right away, without any notice to your judgment debtor? Even when you hope for some quick settlement offers; most often, sending out demand letters get no responses (either positive or negative) from judgment debtors.

It is usually more effective to send demand letters out, after you have already found an available judgment debtor asset. While you could send a demand letter immediately after getting any assignment of judgment; such letters are usually more effective when you have a "slam-dunk" judgment situation, and you know there is no "wiggle room" for the judgment debtor.

Always include a copy of the judgment itself, the first time you mail something to your judgment debtor. You may offer some sort of a settlement or compromise agreement, and if they do not take advantage of it; you may look good later in court, presuming you do not want to budge on the entire balance owed. Other reasons to send demand letters include verifying the debtor's current address; and some courts take months to process assignments of judgments.

A potential problem with sending a settlement agreement that includes a compromise, is that you may create a possible novation problem. A novation is a new obligation that replaces the old one as soon as you sign it. If you offer to settle in writing, for less than the full amount owed, that new settlement agreement might become the actual new amount owed. The other potential problem is if one forgets to include a "Mini-Miranda" statement in their letter, pointing out that they are a debt collector. Generally, the debtor has 30 days to respond.

Even if you do not send a settlement offer, it is a good idea to send a copy of the court-endorsed notice of the assignment to you, to the debtor; to avoid the risk of a direct payment to the OJC (Original Judgment Creditor). That way, if you send notice that you own the judgment, and the debtor then pays or settles with the OJC, you now have grounds for a lawsuit against each of them, if they try to cut you out.

Most settlement letters do not work because the debtors did not respond to their debt, their creditors, or the judgment itself. Judgment recovery is not an easy business, and if just sending out demand letters often resulted in payments, there would a lot more people working in this business. Judgment recovery takes hard work, and also being smart enough to carefully select the judgments you take assignment of.

It works better to look for available judgment debtor assets, attach or levy against them; then send out a settlement letter. Intimidation is a powerful method of collection so if you find an available asset, either lien it or levy it. Then, inform the judgment debtor that you are in charge; and that you can (presuming you can follow through and will) proceed with the levy. Demand letters make more sense when you have a wage levy planned; they make little sense if they tip off your debtor of your plan for a future bank levy.

Sending demand letters can backfire. There was a case where a VP of a California hotel chain pleaded with a judgment enforcer to drop the wage garnishment because it would be to embarrassing. The debtor promised to pay in installments. They did not follow through, and then they moved to a state where wage garnishments are not allowed. Occasionally, demand letters do work, so try sending one out.


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