Very little of what goes into judgment collection could be considered simple. Both money judgments and the collection process are complicated. Not only that, but collection can also be further complicated by things that happen after the fact. Consider the assignment of debt. It changes collection by changing who actually collects.
The Basics of Debt Assignment
Debt assignment is a legal principle. It is the process of transferring a debt, and all of its legal rights and obligations, to a third-party. A typical example would involve a utility company selling an unpaid bill to a collection agency.
Money judgments are considered legal debts that can be bought and sold as assets. So a judgment creditor could sell his or her monetary award to a collection agency. Once the transaction is completed, the collection agency becomes the owner of the debt. It has the full legal right to collect every penny owed.
Judgment Collectors is a Salt Lake City, Utah collection agency that works exclusively on judgments. They do not purchase debts. Rather, they work on consignment. The big difference is that Judgment Collectors never owns the debt. They simply act as a representative on behalf of the client, in much the same way an attorney would.
Debtor Consent and Notification
One of the advantages of debt assignment, at least for creditors and collection agents, is the fact that transferring ownership of a debt to a third-party does not require the debtor’s consent. A legal debt is an asset owned by the person or entity to whom the debt is payable. As an asset, it can be bought or sold with impunity.
That being said, a debtor must be notified following the assignment of debt. Some states require that debtors be notified within a certain time frame. Others don’t put a time constraint on notification, but they do bar the third party from beginning collection efforts before proper notification has been served.
Other Things to Consider
Assigning debt to a third-party can be an attractive way to get judgments and other debts cleared quickly. But it is not necessarily the smartest thing to do in every case. In fact, several things need to be considered first:
- No Partial Debt – The assignment of debt is only applicable to the entire amount owed. In other words, a creditor cannot assign only a portion of the debt in question. It’s an all or nothing thing.
- Lesser Amounts – Creditors should also be prepared to accept lesser amounts in order to assign debt to a third-party. How much less? Unfortunately, collection agencies often pay pennies on the dollar.
- Legal Rights – Creditors should also be prepared to relinquish all legal rights to the debt in question. Once transferred, the debt becomes the legal property of the third party. The original creditor must cease and desist all collection efforts.
Assigning debt to a third-party means taking a financial hit. Even where a money judgment is concerned, the creditor stands to get less than what is legally owed. So why would a creditor do so? According to Judgment Collectors, the decision is often a pragmatic one.
It is possible to chase a judgment for years and never get paid a dime. Meanwhile, a creditor spends a lot of time and money from nothing. If, at the conclusion of a civil trial, it appears as though collecting from the defendant is going to be exceptionally difficult, it might make more sense to sell the debt and get whatever you can for it. It might be better to get pennies on the dollar, from no work or effort, than nothing at all.
