Your company’s accounting department is looking at half-a-dozen outstanding judgments they have been trying to collect on for years. You have recently been approached by a debt collection agency offering to buy those judgments from you. What do you do? Is selling the judgments a smart idea?
Judgment creditors really only have three options when debtors do not cooperate:
- Giving up and ending collection efforts
- Continuing to try to collect in-house
- Turning their judgments over to a collection agency.
The first option guarantees the creditor will never get paid. Between the second and third options, the third seems most reasonable given that in-house collection efforts have failed. But does that mean selling judgments is the best course of action?
Why Judgments Can Be Sold
Before getting to the actual answer, it is important to know why judgments can be sold. The law views judgments as real assets no different from property or securities. As a real asset, a judgment is owned by the party to whom it is awarded. That party can sell ownership to another party if it so chooses.
Selling Judgments to a Debt Collector
A debt collector looking to buy your judgments is looking to buy ownership of them. Once that debt collector pays you, your legal interest in the judgments is eliminated. There are advantages to this strategy:
- You can put the judgments behind you once and for all.
- Your company doesn’t have to spend any more money on collection efforts.
- Your accounting and legal apartments can put their efforts and other things.
- Selling guarantees you get at least some money from the judgments.
The big disadvantage to selling is that you will not get full value. Utah-based Judgment Collectors explains that a judgment collection agency pays less than full value because they need to cover their costs and make some profit. How much less? That depends on the agency.
It is possible that an agency will offer you pennies on the dollar. You need to ask yourself if it is better to take a lesser amount or continue trying to collect on your own. If neither option suits you, there is one more to consider.
You have probably heard of personal injury attorneys who work on contingency. They only take cases they believe they can win. In order to attract business, they promise to not charge clients unless, and until, they do win. The client pays nothing if the case is lost.
A similar model exists in the judgment collection space. Judgment Collectors is an agency that works on contingency. Once a judgment is turned over to them, they take full financial responsibility for it. They cover all their own costs from start to finish.
Should they successfully collect, they assess either a flat fee or percentage of what they collect. That amount is removed from the debtor’s payment and the remainder transferred to the creditor. Should judgment Collectors fail to collect, the client pays them nothing.
Speed May Be a Factor
For some creditors, the final determination is speed. They agree to sell their judgments because they want to dispose of them as quickly as possible. Selling certainly accomplishes that. On the other hand, contingency-based collection may still take some time. Being willing to wait could mean getting more in the long run.
Is selling judgments to a debt collector a smart move? That depends on your circumstances. Knowing what you now know, you might think selling is the best way to go. Then again, you might think it is a bad idea. You ultimately need to make the call for yourself.