Have you ever seen those TV commercials from personal injury attorneys promising that you will not have to pay if you don’t win your case? The attorneys in those commercials are offering to work on a consignment basis. You consign your case to them, more or less. If they win, you get paid. You also pay them. It turns out the same model can apply to other things, including judgment collection.
Collecting a judgment amounts to collecting the monetary award you were given by the court. An ideal situation would involve the other party bringing his checkbook to court, then cutting a check as soon as the case is decided. But that rarely happens, if it happens at all. Most judgments take time to collect.
Time Is Valuable
Collecting could require anywhere from several months to several years. The total time spent on collection depends heavily on circumstances. But regardless of the amount of time involved, that time is valuable to the judgment creditor. It’s time the creditor could put into more important things.
Not wanting to invest time in collection is one motivation behind hiring professionals. And that is where the consignment idea comes in. Some judgment collection agencies, like Salt Lake City’s Judgment Collectors, work on the consignment model. Other collection agencies purchase judgments outright.
Applying the Consignment Model
The consignment model is easily applied to judgment collection by viewing what collection agencies do as a service. Let’s use Judgment Collectors as an example. Judgment Collectors does not purchase judgments. Instead, they work on behalf of their clients. In the eyes of the law, they are an agent of the judgment creditor. They have been authorized to collect on the creditor’s behalf.
Working on consignment dictates that collection is consigned to Judgment Collectors. They provide the actual service of collection. They handle everything, including:
- Searching public records
- Identifying debtor assets
- Locating debtors otherwise trying to hide
- Locating undisclosed debtor property
- Contacting debtors to arrange payment
The beauty of the consignment model is that collection agencies cover their own costs. They pay their employees and handle all the expenses that come with doing what they do. As soon as a client consigns a judgment to Judgment Collectors, they stop spending money on collection.
Better yet, the agency’s fee is based on a percentage of the amount collected. This gives the agency every incentive to collect as much as possible. If the agency collects nothing, the client pays nothing. The scenario is remarkably similar to a personal injury law firm that does not earn a dime if it loses a client’s case.
The Purchase Model
A collection agency that does not use the consignment model will almost always purchase judgments from creditors. Remember that a judgment is a legal decision supported by a legally recognized claim by the creditor. The creditor’s claim is a claim to any money put toward retiring the judgment debt. That claim is an asset. It can be sold as such.
Some collection agencies purchase judgments because it is a better deal for them. They can pay pennies on the dollar to creditors who just want to get things settled and move on. Meanwhile, they stand to make a pretty good profit if they can collect the full amount owed.
Personally, I prefer the consignment model. I think it is fairer for both the collection agency and the creditor. I also think it gives creditors the best opportunity to get the most money from their judgments. But that’s just me. The consignment model is not the preferred option for every creditor.
