How to Proceed When a Debtor Reneges on a Payment Plan

How to Proceed When a Debtor Reneges on a Payment Plan

In the many years we have worked as judgment collectors across several states, we’ve had plenty of opportunities to interact with clients who have come to us after debtors reneged on their payment plans. It is a lousy situation to be in. A creditor tries to be nice. They offer a payment plan instead of demanding full payment up front. Then the debtor turns around and reneges.

What is a creditor supposed to do in that situation? Truth be told, there are multiple options. There is no one path forward for every creditor. A creditor needs to assess the current situation alongside future potential and then proceed from there.

Try to Assess Truth

Perhaps the hardest thing about moving forward after a debtor reneges on a payment plan is determining what’s truly going on. It could be that the debtor never intended to pay anyway. Reneging on the payment plan was always the strategy. But it could also be that the debtor has run into legitimate problems that are preventing him from making good.

It is important that creditors try to assess the truth as best they can. Maybe not all the information will be forthcoming. Perhaps there are still some things the creditor will have to assume. But if it can be determined at the debtor isn’t purposely trying to avoid payment, a gentler approach may be possible moving forward.

Look at the Available Tools

After determining what’s really going on with the debtor, it’s time to look at all the tools available to the creditor. Options will vary from one state to the next. Why? Because states regulate judgment collection according to their own statues. The statutes in each state are not identical. That said, here are some of the more common tools allowed in many states:

  • In-Person Interrogatories – Some states allow courts to compel uncooperative debtors to appear before them for interrogatories. This is an option if a creditor has tried to solicit information from the debtor but hasn’t succeeded.
  • Garnishment – Many states allow wage garnishment as a way to collect. Not all do, though. Likewise, some states also allow garnishing bank accounts and debt payments from the debtor’s debtors. Garnishments of all types come with restrictions.
  • Property Liens – The option of placing a lien on the debtor’s property exists in some states. It would work similar to any other kind of lien. Once a lien is placed on personal property, it cannot be sold without satisfying the existing debt.
  • Property Seizure – An option of last resort in many states is property seizure. Creditors go to court to get writs of execution allowing them to satisfy the judgment by seizing and selling personal property, real property, and other assets.

Note that all these options require additional court proceedings. Court proceedings cost money, so they add to the total cost of collecting.

You Can Always Try Again

In the absence of additional litigation, another option is to simply try again with a payment plan. Start over in an attempt to work out a more amenable plan. If the previous plan was unrealistic, find out what made it so and make the necessary changes the second time around.

Proceeding when a judgment debtor reneges on a payment plan can feel like walking on eggshells. Unfortunately, it is part and parcel with judgment collection. Maybe that’s why clients in 11 states choose to turn their judgments over to us. Here at Judgment Collectors, we are experts in this particular brand of debt collection. We would be happy to get to work on your cases right away.