A Judgment Is Only Worth So Much…

Someone owed you money so you (or an attorney on your behalf) brought a legal action.  Whether by default or a hard-fought litigation, you prove victorious and are awarded a judgment.  A letter is sent to the defendant (now known as the “judgment debtor”) demanding that payment be made in respect of your judgment.  Then…. SILENCE.  Now what? 

An unenforceable judgment is often more frustrating and upsetting to a creditor than a pre-litigation debt that they choose to charge off.  Time and money was spent in the post-collection endeavor to get a judgment and now they are left with often a larger negative deficit.  As a corporate attorney and now owner of a collection agency, unenforced judgments come into my office on almost a daily basis.  When able to assist in their enforcement, we do but, all too often, we find that there is simply nothing to enforce against.  To help avoid this scenario, here are some basic questions to ask BEFORE deciding to file suit:

1.  Has this debt been validated and verified with legally-sufficient documentation?  It doesn’t matter how many times a creditor claims (s)he/it was promised payment, unless the diligence was performed to confirm the debt is a timely and valid one, a suit should not be filed.  In fact, when a professional is working with a creditor who has cyclical and ongoing receivables, it is good practice to review the internal credit policy of such creditor to make sure it includes credit applications and/or payment agreements.  Such applications and/or agreements should include language and information, such as a guarantor clause (especially when contracting with an entity), specific interest accrual provisions and identifying pedigree, helpful for collections and the later bringing of a lawsuit.

2.  Who are the actual debtors?  Seems like an easy enough question but you would not believe how many judgments we see where the named judgment-debtors are simply inaccurate.  From wrong spellings to the using of dissolved entity names to the outright failure to name a responsible party or guarantor, we have seen it all.  Who you name as defendant(s) in your action is extremely important and when not done correctly, it can make enforcement much more difficult and, sometimes, legally impossible.  Take the time to make sure you accurately capture any and all responsible parties in your collection activity. 

3.  Were the debtors skip traced for accurate asset information and employment?  As a matter of practice in the pre-litigation collection phase of handling a debt, the work done to trace assets and debtor information can prove invaluable to a successful litigation.  A good collection agency or collection law firm should never recommend litigation until after an accurate asset and employment picture has been researched and, to the extent possible, verified.  As noted in 1. above, the better the internal credit policy of the creditor, the easier the collection of this data will often prove to be.

If a judgment is obtained with all these steps first completed and reviewed prior to your decision to bring suit, chances are you will have real enforcement options available should your demand for payment go ignored.


Laura J. Lowenstein, Esq., owner of the collection agency Capital Resource Management, Inc., specializes in all aspects of receivables management ranging from personalized debt recovery plans to qualified debt settlement.  For more information, please call 516-442-4045, email info@crmcollect.com or visit www.crmcollect.com.