You have won a money judgment against another party. A year into collection efforts, you decide it is not worth your time and effort to continue working on it. You are seriously considering selling the judgment to a collection agency. But should you? Are there any other options?
First things first. Yes, there are other options including continuing in-house collection efforts, working with a collection agency on consignment, assigning collection to your attorney, and simply walking away. As for selling the judgment to an agency, it has its pros and cons.
The Advantages of Selling
It is possible to sell a judgment to a collection agency because the law considers judgments legal assets. They are in the same league as real property, securities, etc. Note that there are advantages to selling:
- You get some money out of the deal.
- You bring an end to collection efforts.
- You do not have to invest another dime in collection.
- You can put the matter behind you and move on.
Being able to put the matter to rest is attractive to some judgment creditors. After having unsuccessfully tried to collect in-house, they want nothing more than to be done with the whole thing. Selling certainly accomplishes that. But when a judgment creditor sells, he also relinquishes all rights associated with that judgment. That leads to the disadvantages of selling.
The Disadvantages of Selling
Losing all the rights associated with a judgment is one of the big downsides of selling. Remember that a judgment is an asset. Once a creditor sells, all the rights associated with the judgement are assigned to the collection agency. The other big disadvantage of selling is only getting pennies on the dollar.
Collection agencies willing to purchase judgments will never pay full value for them. Paying full value would mean not making a profit. The best a collection agency could do his break even. But collection agencies rarely come close to full value, either. They generally pay pennies on the dollar to give themselves plenty of room to earn a profit no matter what they have to do to collect.
Imagine getting pennies on the dollar for a judgment worth tens of thousands of dollars. Such a small sum kind of puts the damper on selling, doesn’t it? On the other hand, if the chances of getting paid are fairly low, even pennies on the dollar is more attractive than nothing at all.
Debt Collection on Consignment
Judgment creditors who want help but do not want to sell do have another option: debt collection on consignment. Salt Lake City-based Judgment Collectors works on the consignment model. Their explanation is very simple.
When they accept a case, they take over all the financial obligations that come with it. Their fee is based on the total amount they collect. Furthermore, they do not get paid until they collect. If they collect nothing, they get paid nothing.
Every Case Is Different
It would be inappropriate to say that there is one best collection strategy that works for every case. Each case is different. Whether or not a judgment creditor enlists the services of a collection agency is a decision that the creditor can only make after looking at all the circumstances.
Should a debtor bring in a collection agency, selling is one option. Debt collection on consignment is the other. Both have their pros and cons. The one thing all the debtor’s options have in common is that they may or may not succeed. Winning a money judgment does not guarantee getting paid.
