From the 'Lectric Law Library's Stacks
Verbosity leads to unclear, inarticulate things. -- Vice President Dan Quayle
If you win your small claims case, you'll probably feel vindicated by your day in court. The judge saw things your way and awarded you a judgment against the defendant. But in the weeks and months that follow, post-trial jubilation may turn to surprise and then dismay: surprise that the court does nothing to make sure the defendant pays you, and dismay at the time, expense, and work it takes for you to do it.
To get paid, you (or someone you hire to do it for you) must follow specific legal procedures to get money or other assets from the loser (called the judgment debtor). The procedural trail takes different twists and turns in every state, but the following tips should be helpful everywhere.
1. Don't rush it.
Don't be in a hurry to start bugging the defendant to pay up. Most small claims courts allow a losing defendant to appeal, so wait until the appeal deadline (usually 30 days or so) passes before asking for your money. Otherwise, your pushing may nudge the defendant into filing an appeal. Appeals threaten your collection chances for two reasons: first, you may lose the appeal, and second, while the appeal is pending, the defendant doesn't have to pay you a penny.
2. Don't forget to ask.
A surprising number of debtors will pay once a court judgment is issued - if you ask for the money. A polite written request often does wonders, especially when it reminds the debtor that an unpaid judgment will probably show up in the debtor's credit file. You can also mention, in general terms, that you plan to take legal measures to collect if payment isn't forthcoming. But don't specify what measures you plan to take -for instance, garnish the debtor's wages or seize a bank account - since this will give a wary debtor time to thwart your plans.
3. Treat the judgment as a long-term investment.
Every state authorizes you to collect interest, commonly 8% to 12% annually, on a judgment. Viewed as a long-term, uninsured investment, court judgments can pay off handsomely. Compared to limited partnerships, start-up companies and even many stocks, a court judgment has relatively low risk and moderate performance.
In most states, a judgment is valid from 5 to 10 years (the range is from 3 to 20 years) and can be easily renewed. Renew it, even if you don't think you'll ever get paid - years from now, the debtor could win the lottery, inherit a bundle, or write a bestseller. At that auspicious time, a renewed judgment could be worth a lot with the accrued interest thrown in.
4. Think through a collection strategy.
There is no one best collection approach. Your strategy must depend on the debtor's assets and income and the cost of the collection methods available in your state. For example, going after one debtor's wages might pay off the judgment, but might prompt another person to file for bankruptcy.
As a general rule, the easiest and most effective collection methods to collect a small claims judgment include:
Two more techniques are a little more complicated, but can also pay off:
5. Bank on the future by creating liens.
An important step in any collection plan is to establish liens (legal claims) against the judgment debtor's real estate and business property. Liens put you in the best position to get paid if the debtor declares bankruptcy or acquires, sells, refinances, or transfers property.
6. Do your homework.
The more you know about the business or person who owes you money, the more likely you are to get paid. So here's your opportunity to be a private detective of sorts, and keep tabs on the debtor's assets, lifestyle, and projected financial situation.
Here is a little test: Would you know if the debtor moved, got married or divorced, expanded or sold a business, refinanced real estate, or inherited money? Do you know whether or not the debtor cares about his or her credit rating? Do you know what could pressure the debtor into bankruptcy?
If you can't answer "yes" to every one of these questions, you've got work to do. Periodically write or telephone the person who owes you money. Keep in touch with business contacts who also know the debtor.
7. Know when to call it quits.
You've heard the warning, "Don't throw good money after bad." There is much you can do to collect a judgment, but these efforts cost money. And although most judgment collection costs are recoverable, that won't do you any good if you never catch up with the judgment debtor. So keep a sharp eye on how much you are spending trying to collect - you may not get it back.
Brought to you by - The 'Lectric Law Library
The Net's Finest Legal Resource For Legal Pros & Laypeople Alike.