#commercial judgment collection

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Commercial Judgment Collection: What to do When Other Party Doesn’t Pay?

Collecting judgments becomes crucial for businesses to maintain healthy cash flow. You filed a case in court, and the court made a judgment in your favor. It’s time to collect judgment, but the client refuses to pay. This scenario is not very uncommon. The fact that a company is liable to pay doesn’t mean it will cooperate and pay its owed debt. In such scenarios, creditors need to take additional legal action.  

In this blog, we will discuss what to do when your client doesn’t pay and steps to increase the chances of debt recovery.

Enforcing Judgment

There are plenty of ways to collect judgments. However, the most powerful is enforcing a judgment after commercial litigation. There are two primary areas of focus. The variability of enforcement mechanisms depends on jurisdictions and business entities. Judgment enforcement will only be effective if the debtor can pay through cash, the sale of assets, or any other means. If a company liquidates its assets and winds down its operations, it could be judgment-proof. In such a scenario, pursuing litigation may be futile. A collectability analysis will be better before instituting litigation. 

Writ of Execution 

A writ of execution is a type of court order that directs law enforcement to seize the property of a debtor’s assets. This seizure includes personal property, real property, and bank accounts. However, additional steps may be required to seize the real estate and bank accounts. 

The process of acquiring a writ of execution requires a comprehensive knowledge of the debtor’s assets that can be seized upon which the writ can be executed, often involving preliminary execution measures. In some instances, judgment creditors may have an understanding of the judgment debtor’s assets during the litigation process. 

In some situations where the judgment debtor has assets or bank accounts in multiple locations, you may be required to obtain several writs of execution, one for each relevant jurisdiction. Depending on the specific jurisdiction and nature of the property, the seized asset is either sold and the obtained money is given to the creditor, or the judgment creditor has the option to obtain the property directly.

Attachment of Earnings Order 

An attachment of an earnings order is a legal directive issued to the defendant’s employer, allowing them to withhold a specific sum and forward it to a designated collection office. The collection office subsequently disburses these funds to the judgment creditor. The defendant must be hired by a third party for an attachment order to be issued. An order will not be issued if the defendant is unemployed or self-employed. Moreover, the court may not issue the order or make the payment smaller if the defendant’s cost of living is higher than their earnings.

Send a Debt Collection Letter 

A debt collection letter is a formal notification sent to the debtor regarding the outstanding debt. It includes the due date, a time frame for paying the outstanding money (typically 2 weeks), an accepted payment method, and a statement about actions that could be taken if payment is not settled. The statement about your next steps could be a gentle reminder to avoid further action or a warning that you could hand over the matter to a collection agency or take legal action. You could make these decisions depending on the amount owed, elapsed time, and interest in maintaining a relationship with this client for future business.

Take Legal Action 

If you have tried everything and your client is still not paying, you could take legal action. To take legal action, simply file a case in small claims court. You could assert that the other side has breached your written agreement by refusing to pay, and you want a judgment for the total amount owed. If a client refuses to pay, you can hand your case over to a judgment collection agency. It’s not important to bring an attorney to represent your case because some states prohibit attorney representation. Also, there are certain limitations on the amount that can be claimed in small claims court. Generally, the amount for small claims ranges from $2500 to $25000, depending on the state.

Conclusion 

Collecting commercial judgment is the best way to maintain steady cash flow and manage good financial health. Though collecting judgments could be stressful, it’s worth making an effort. If you have made all the efforts and still have not recovered your debts, a well-experienced judgment collection agency can guide you in the process. They will help you understand the legal jargon and identify the strategies that could help you recover your outstanding money. If you are looking for a trusted judgment collection agency to negotiate debt settlements, you can contact Public Loss Adjusters. We help clients protect their legal rights and resolve their debt collection issues with ease.