Debt Collection or Civil Lawsuit: Which Is the Better Option?

Debt Collection or Civil Lawsuit: Which Is the Better Option?

It is not terribly difficult to understand why someone might file a personal injury lawsuit. A Civil lawsuit is filed by government entities against businesses are also fairly straightforward. But when it comes to collecting an unpaid debt, why would a company take a customer to court? Why not just send the debt to collection? Is going to court a better option?

Sending debts to collection and going to court in search of a judgment represent just two of the many options when customers do not pay their bills. Neither is necessarily a better or worse option. Each case is governed by its own unique details that determine which option is the best course of action. Nonetheless, let us talk about why companies go to court in search of civil judgments.

A Court Decision

The first thing that must be understood is this: a judgment is a court decision. It is the civil court equivalent of a criminal court’s verdict. In a debt collection case, a successful judgment in favor of the plaintiff – also known as the judgment creditor – would mean a decision recognizing the judgment debtor’s legal obligation to pay whatever amount is owed plus any additional court costs, attorney’s fees, and applicable interest.

It would probably help to utilize a specific example to make all this easier to understand. So imagine a landlord who evicted a tenant for non-payment of rent. The tenant is behind by three months. Eviction allows the landlord to take possession of the property once again. As for collecting the unpaid rent, the landlord can either send the debt to collection or go to court.

Sending the Debt to Collection

Sending the debt to collection means enlisting the help of a general collection agency. Most agencies buy debt as assets. However, they usually only pay pennies on the dollar. Other collection agencies work on consignment. Rather than buying the debt, they go ahead and collect and then charge a fee.

This particular option can be effective if there is a high likelihood that the debtor will respond to collection efforts favorably. But when debtors do not cooperate, sending debts to collection has one major flaw: collection agencies are limited in the actions they can take to collect.

State and federal laws dictate how collection agencies can make contact. They dictate how aggressively collection agencies can pursue debtors. Simply put, collection agencies do not have a lot of options.

Going to Court

Taking the debtor to court would be a way for the landlord to establish legal accountability, if you will. A successful lawsuit results in the court recognizing the validity of the unpaid debt and the creditor’s legal right to collect it. With the court order comes access to collection tools that are otherwise unavailable.

What are those collection tools? That depends on state laws. However, most states allow garnishment and property seizure. Writs of Garnishment can usually be obtained against wages and cash assets. Writs of Execution allow creditors to seize and sell nonexempt assets to cover unpaid debts.

Sending a debt to collection does not give creditors access to such tools. When you are talking about a fairly small debt, it probably doesn’t matter. But sizable debts that creditors are unwilling to let go may be better dealt with in civil court.

When civil court is the chosen option, collection agencies like ours are standing by to help creditors collect. Judgment Collectors specializes in judgments alone. If you are planning to seek a judgment against a bad debtor, keep us in mind for collection. We operate in Utah and ten other states.