Regular readers of the Judgment Collectors blog know just how valuable debtor assets are to the collection process. In our business, assets are everything. Perhaps you are wondering how we go about deciding which assets to go after?
Whether a judgment creditor chooses to work with a judgment collection service or handle collection in-house, careful consideration needs to be given to debtor assets. At the very least, a debtor’s assets give the creditor a better understanding of how reasonable collection efforts are. Taking the time to learn about assets could even reveal that a debtor is judgment proof, dictating that the creditor put collection on hold for the time being.
Asset Accessibility and Liquidity
Judgment creditors and collection agencies first do what they can to learn about the actual assets a debtor owns. Sometimes a debtor will try to hide assets, leaving the creditor or collection agency no other choice but to dig around to find them.
Once assets are known, one of the first things creditors consider is accessibility and liquidity. In terms of accessibility, the question is how easily nonexempt assets can be utilized. The quicker, the better.
As far as liquidity is concerned, both creditors and judgment collectors love it. For example, bank accounts are liquid. If a bank account can be garnished for payment, doing so is a lot easier than seizing a piece of personal property and selling it at auction.
Asset Value and Equity
Another thing creditors and collection agencies need to consider is asset value. High-value assets are obviously preferred. At the top of the high-value list is real estate. Nonexempt real estate often represents the most leverage a creditor needs to collect.
Other high-value assets include things like vehicles, boats and RVs, jewelry, collectibles, and so forth. But with certain types of high-value assets, there is equity involved. A piece of real estate might have an exceptionally high value but comparatively low equity. If the equity is limited, going after that piece of property might not be worthwhile.
Asset Security
Next up is asset security. Think of it this way: there are both secured and unsecured assets creditors need to deal with. A secured asset is something like a house. The mortgage to purchase that house is secured by the house itself.
Assets obtained by way of secured loans are secured assets. They are more difficult to leverage for collection purposes because others are in a superior lien position. Allow us to explain.
Imagine a judgment creditor with a piece of vacation property he obtained by way of a routine mortgage. As long as a portion of the mortgage remains outstanding, the bank will have a lien on the property. A judgment creditor could come in behind and place a second lien. But being in second position reduces the chances of actually getting paid should the property be seized and sold.
Unsecured assets – which is to say assets that are not attached to any other parties by way of liens – are obviously the most desirable. They are the ones judgment creditors and collection agencies focus on first.
State Exemption Rules
Everything discussed in this post is subject to state rules regarding property exemption. Some types of property are off limits in some states. In other states, certain types of property are subject to financial limits.
Determining which assets to go after can be more complicated than it sounds. But figuring it all out is just part of the judgment collection game. Because assets are so important to collection, creditors and agencies need to put in the effort. Contact Judgment Collectors to have your judgment collections handled by professionals.