One of the biggest problems that come with extending credit to customers is that some of those customers will attempt to take advantage of you. Some customers have no intentions of ever repaying their debts.
When you find yourself struggling to collect a debt from someone who is intentionally avoiding you, you may have to look for ways to take payments from them involuntarily. This process can be started by filing a lawsuit and obtaining a legal judgment.
Obtaining a Judgment
The procedure for filing a lawsuit and obtaining a judgment against a debtor varies from county to county and state to state. Before you do anything, it is always a good idea to call your local courthouse and ask for as much information as they have about the procedure you will need to follow.
Regardless of your location, the most important thing you will need to have is evidence. You will want to have paperwork documenting when the debt officially started and the date and amount of any payments that have been made. You will also want to have a record documenting all of your attempts to contact the debtor to settle the debt.
You will likely have to fill out a petition describing all of these facts about the case. You will then have to present these facts in court, after you obtain a court date. Many deadbeat debtors will not even show up to the court date. In these cases you will be awarded a default judgment in your favor.
Having someone represent you through this legal process can be extremely helpful. There are collection agencies for small businesses that have lots of experience handling these types of cases. Having one of them in your corner can be a huge asset, especially if the thought of a courtroom intimidates you.
Collecting A Judgment
After obtaining a judgment, you now have the legal right to take what the debtor owes you. There are a number of steps in credit and collection that can come into play at this point.
Typically, the debtor will have a set number of days to send you a Statement of Assets, which contains any valuable possessions they might have. If the debtor does not return the Statement of Assets, there are further legal ramifications they will have to deal with.
In most states, after obtaining a legal judgment, you can garnish up to 25% of the debtors wages from their employer. You can also have a bank place a levy on the debtor’s account, effectively freezing it until you are repaid in full.
If the debtor does not have an income or a bank account, you can begin the process of placing a lien on the debtor’s property. This lien will have to be paid in order for the property to be sold; so most liens do eventually get paid.
The process of collecting a judgment can often be more tricky than obtaining the judgment itself. There are a number of legal hoops you will have to jump through for each of these processes, and when you finally do collect the debt, you may have invested more time in collecting than the actual debt was worth.
A great way to avoid wasting your own time chasing a deadbeat debtor is to let someone else worry about it for you. There are a number of credit collection agencies that specialize in collecting these types of debts. They have experience dealing with lawyers, as well as garnishing wagers, levying bank accounts, and placing liens on properties. Letting someone else do the dirty work for you is often worth the small cost just in the amount of time you will save.