Attempting to collect from a judgment-proof debtor is the stuff of nightmares. But believe it or not, there may be a worse scenario: attempting to collect from a debtor who is facing claims by multiple creditors. Trying to stake a claim in the midst of multiple creditors is one of the hardest things to do in the judgment collection arena.
This is not to say that success is impossible. It’s not. But competing with other creditors means a judgment creditor is likely going after limited resources. Getting paid as much as possible under such a circumstance requires patience, knowledge, and skill.
Competing Claims Are Complicated
Multiple creditors could mean competing claims on the same asset. The more creditors involved with a given asset, the more complicated the whole matter becomes. The best way to fully explain why this is such a big deal is to talk about something known as ‘lien position‘.
Judgment Collectors might advise placing a lien on a judgment debtor’s property. A lien is a legal tool that establishes a financial interest in the asset in question. Your bank has a lien on your home, a lien that will remain until your mortgage is paid in full. That lien legally establishes that the bank ‘owns’ a value of your home equal to what you still owe on your mortgage.
The other thing to remember about liens is that they take certain positions based on when they were filed. A mortgage banker may have the first position on a debtor’s vacation property. A home improvement contractor may have placed a lien after the debtor did not pay his bill. That lien is in the second position. You come along with your judgment and place a third lien on the property.
Should the property end up being seized and sold, the bank gets paid first. That is the privilege that comes with first position. The contractor would be paid second. If there is anything left over, you would be paid third.
Legal Challenges Are Common
When you are dealing with multiple creditors, legal challenges are common. Debtors and their attorneys file all sorts of motions to delay or stay enforcement. And because there are so many creditors involved, there are also more reasons to attempt to delay proceedings. Debtors and their attorneys want to delay things as long as possible while courts sort out the issues.
The goal of such a strategy is to continue delaying until enforcement efforts cease entirely. In the case of a money judgment, the judgment may expire. The creditor walks away rather than continuing the fight.
Asset Distribution
In the event assets are actually seized and sold, proceeds still need to be distributed among creditors. This is almost always a time-consuming enterprise that has complications of its own to deal with. For example, each creditor must prove its legal claim and the amount owed. Guess what that means? More time in court.
Even after all claims have been proven and verified, enforcement actions among the various creditors need to be coordinated. Otherwise, their efforts could undermine one another to the extent that none of them get paid. They put in a considerable amount of time and effort only to walk away empty-handed.
Bring in the Experts
Successful judgment collection in the midst of multiple creditors is not impossible. But multiple creditors do make things more complicated. We recommend bringing in professionals with the knowledge and experience to look out for your best interests. Perhaps you might consider letting Judgment Collectors manage your collection efforts. Contact us to learn more.