Small Judgments

August 13, 2023

I am not a lawyer, I am a Judgment and Collection Agency Broker. This article is my opinion, based on my experience in California. If you ever need legal advice, please contact a lawyer.

Debts and judgments do not recover themselves. In this article, when the words (judgment or judgment debtor) are used, they mean judgments or debts. Judgments are usually much stronger than debts, and almost all civil money judgments start out as owed debts.

Compared to regular debts, there are many more tools available to recover judgments. However, when judgments are too small, many judgment recovery tools become too expensive by comparison. Judgment and debt recovery costs, are similar – when the amount of money owed is small.

Why recover a small (e.g., $400) judgment? First, because there is a strong relationship between the size of a judgment and its enforceability. Second, because you can charge the creditor a bigger portion, perhaps 60-70% of what is recovered, and some of the small judgments that might pay off easily.

The chances of half, of a $400 judgment being recovered with just a little bit of effort are very good. The chances of half, of a million-dollar judgment being recovered (with 100 times as much effort) are about a million times less.

When a judgment is small, it makes sense to contact the debtor by mail and/or by phone, and very politely suggesting they pay it off. Suggest a payment plan. Emphasize how you want to help them to get rid of their judgment debt without any extra hassles or expenses for them.

Instead of being a bill collector, become a polite problem solver. The combination of being nice, then using cheap enforcement procedures only if needed, is a potent combination.

Of course, if the judgment cannot be recovered by calling or mailing letters, you have choices. You can wait and let the judgment accrue interest, record a cheap lien, or enforce the judgment with cheap techniques, or find a judgment enforcer.

When debtors are poor, maybe settle with them or you can work out a payment plan, perhaps $10-$20 a month? If you have a judgment, and when the debtor has money but will not pay, even when you are patient and nice, consider a judgment debtor exam in the future. In California, a served judgment debtor exam creates a one-year “silent lien” on all their personal property, which might make you a secured creditor if they later file for bankruptcy protection.

In a nice way, let the judgment debtor know that they can avoid extra expenses and/or spending hours in court, by setting up a convenient payment plan with you.

Never threaten anyone. It is common sense, to bring up the subject of the debtor satisfying the judgment without consuming more of their time, or incurring any extra expenses for them.

Judgment debtor exams cost money, and such expenses can usually be added to the judgment debtor’s debt. Of course, getting personally served with a court order to show up in court, might cause a judgment debtor to find their checkbook.

If the debtor does pay you after you spent money trying to recover the judgment, make sure they pay you extra to also cover your extra costs, for scheduling and serving the debtor exam, etc.

A debtor voluntarily writing you a $500 check is much more likely to happen, than them writing a $50,000 check.

Every judgment enforcer’s dream is to find a big judgment and make a big recovery cheaply and quickly. In this economy, that does not happen often enough to be considered a realistic primary business plan.

For lawyers, there is no doubt that “heart attack letters” from attorneys impress many people. If you are an attorney, you can make money with a polite, yet stern template. By mailing demand letters, you can get some payments for the cost of postage stamps.

For judgment enforcers, consider looking at smaller judgments, with the goal of using the powerful tools of being nice, and using the advantage of satisfying judgments more often; and using expensive recovery techniques only on big judgments less often.

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