Tuesday, November 28, 2006

Pre-judgment collections & post-judgment recovery - two whole 'nother animals...

Our staff participated in an NACM Collections Teleconference, and my personal take was - the pre-judgment collections process is a whole ' nother animal from post-judgment recovery. The focus of the conference was - personal interaction with the debtor. As "Blog Master", I struggled to find even one point that applied directly to judgment recovery. I really couldn't.

Our firm has been extensively trained in - and goes out of its way to comply with - FDCPA, FCRA, GLBA, and applicable privacy law. But the reality is - we just don't have much personal interaction with the debtor. We work within the legal system, and many times, attorneys are involved, and they are the ones doing the talking for us.

In other words, we rarely, if ever, call the debtor and ask - "pretty please, will you pay off this judgment?"

We don't need to. After the judgment, the law does all the talking. This is a great advantage to pursuing a debt post-judgment.

Another difference is - collections is about getting a debt paid off right away. After judgment, hey, we've got all the way up to the state's statute of limitations to collect. That is, on average, 10 years. And those babies can, in most states, be renewed indefinitely...something debtors rarely think about when ignoring that court summons....

It's just too bad so many individuals and corporations give up on post-judgment debt, based on their pre-judgment collections experience. Creditors should continue to track their debtor's financial condition for each judgment they own, throughout its life cycle. We strongly recommend having asset searches performed on judgment debtors every 1 - 3 years. What's true for a debtor today will likely be different in 3, 5, or 7 years from now. (And all that time, the judgment is accruing interest...)

After all - post-judgment recovery is a whole 'nother animal from pre-judgment collections... and viva la difference!

Wednesday, November 01, 2006

Poor Ziggy! He must have a judgment on his credit report!

Rarely do you find the subject of credit in the funny papers, but in today's "Ziggy", those of us who work in the world of credit and collections got a rare treat. In the one-panel cartoon, Ziggy is sitting across from a loan officer's desk. The loan officer says to him - "I'm afraid your credit report doesn't do you much credit!"

Every judgment creditor envisions himself sitting in the chair of that loan officer...and their debtor is Ziggy. In many a judgment creditor's mind, having their particular judgment listed on their debtor's credit report is the "magic bullet" that renders the debtor financially disabled until he or she satisfies the judgment.

Problem is - it rarely works that way. The equation is not as simple as: judgment on credit report + debtor who needs credit = satisfaction of judgment.

To understand why this tactic rarely works, the judgment creditor needs to walk a mile in the moccasins of both the credit manager, and the judgment debtor. They also need to understand how the law works.

From the credit manager's viewpoint: A judgment listed on a credit report is indeed a "red flag", giving the credit manager hard evidence that the applicant has not met a debt obligation, even to the point of legal action. In most cases, the applicant will be turned down for credit. But not all the time!

Why? Because the credit report is not a legal document! It has no enforcement power over the credit manager's decisions. It is not a legal document with the intended outcome of enforcing satisfaction of the judgment. It's only a reporting mechanism that allows credit managers to make informed decisions on whether to grant applicants credit with their financial institution. A credit manager is not legally bound to turn the applicant down if a judgment is on their credit report. It's not unheard of for judgment debtors to obtain credit if a credit manager determines other criteria outweigh the credit risk of the judgment.

From the debtor's viewpoint: Remember who you're dealing with. For most judgment creditors, the reason a judgment was pursued in the first place is because the debtor would not, or could not, meet their financial obligations. If they were really interested in paying what they owed, they would have already, or made a settlement out of court.

For the debtor who can, but won't pay, these types of debtors are often quite cunning and learn quickly how to fly under the radar. If they found a way to circumnavigate your collections efforts so far, they will find a way to circumnavigate the constraints of bad credit. A judgment on a credit report is not a "magic bullet" that suddenly changes the heart and mind of a stubborn delinquent debtor to gladly pay up on his obligations.

For the debtor who simply can't pay - take a number, please. Chances are lots of people need their money too, and their credit is already ruined. Having a judgment on their credit report certainly doesn't help their credit score, but their credit was probably bad anyway. A judgment on a credit report is not a "magic wand" that makes money appear, where there simply is none.

No magic wands. No magic bullets. Instead of banking on an unknown, put the law on your side. Know your rights as a judgment creditor. Pursue all the legal avenues of recovery. Don't leave the recovery of your judgment to the whims of some unknown, unforeseen credit manager, and the stubborn delinquent thumbing their nose at your court order because you haven't yet given it any teeth!