Judgment creditors win cases against debtors every day. Sometimes we wonder how many of those creditors realize the financial implications of winning at the moment the judge’s gavel falls. Why? Because the hidden costs of DIY collection are very real.
We recommend bringing in a collection agency as soon as a creditor is legally allowed to start the collection process. An attorney can also handle collection, but attorneys have other things on their plates. A collection agency only does collections.
The third option is DIY judgment collection. While collecting in-house is possible, it is usually not ideal. DIY collection is time-consuming and frustrating. It can also be expensive. There are plenty of hidden costs creditors never even consider at the start of the collection process.
1. Legal Fees and Filing Expenses
Unless a judgment debtor immediately makes full payment or agrees to a payment plan, additional legal actions are likely. Those additional actions cost money. There are filing fees, costs for serving papers, fees for additional legal advice, and more.
2. Enforcement Costs
Some of the more advanced enforcement methods incur additional costs that are billed to the creditor. Perhaps the costs can be passed on to the debtor, but what if the creditor fails to actually collect? He ends up eating the additional expenses.
If law enforcement is brought in β for purposes of seizing property or garnishing bank accounts β such services need to be paid for up front. Guess who has to pay them?
3. Asset Location Costs
Advanced collection strategies are supported by debtor assets. For example, a creditor can file a writ of execution against a debtor’s vacation property. But the creditor needs to locate that property first. There are costs associated with doing so, especially if a creditor needs to hire a private investigator.
4. Additional Labor Costs
When judgment creditors are businesses, there may be additional labor costs involved. Consider a small business that puts the task of collection on the billing department. Billing personnel are paid for their time. So the creditor is paying for collection efforts through normal wages. And every minute spent on judgment collection is a minute billing staff cannot devote themselves to other tasks.
This is especially important because judgments can take years to collect. Rarely does a debtor pay what he owes immediately after losing his case. Chasing debtors for years is common. It happens more often than people know.
5. Lost Opportunities
Lost opportunities are another hidden cost of DIY judgment collection among creditors operating as businesses. A small business owner should be putting their time and effort into bringing new customers on board. They should be able to devote themself to improving products and services, ensuring customers are happy, and so forth.
When a business owner needs to devote time and energy to judgment collection, they can’t do the things they needs to do to grow their business. They miss opportunities that pass right by because they do not have the time or resources to put into them.
We Cover Our Own Costs
If there is any good news here, you can find it in two places. First, most states allow judgment creditors to charge interest and additional fees until an outstanding judgment is paid in full. At least some of the costs associated with DIY collection can be recovered.
Second, if you turn your judgment over to us, you will not spend another dime. We cover all our own costs. You only pay our fee if we collect. Doesn’t that sound like a win for you?