Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Now she's here to answer your credit and collection questions. Got a question for her mailbag? Contact Thea at [email protected]

Dear Thea,
Over the years our company has collected its fair share of judgments that have not paid out. Recently, I have been contacted by attorneys and collection agencies promising to revive the judgments by pursuing the assets of the these who have not paid said judgements. Some of the debts are 3-4 years old, but some are older the seven.

There have been times when an old judgment has paid simply because the debtor sold some property and we were the beneficiary of the proceeds. We are diligent about filing our judgments in other counties, out of state is more challenging.

Is it common practice to hire collectors to go after assets when a judgment has been sitting idle for several years? I have heard of people selling judgments to collectors/buyers.
Signed, Intrigued in St. Augustine

Dear Intrigued,I love that feeling when I put on a coat I haven't worn in a while and find a $20 in the pocket. Best feeling ever! Who doesn't love found money? It's the same feeling with old judgments pay out. Those are the days I feel like I won the lottery. I usually dance around the office, barge into my CFO’s office, and blurt out an incoherent sentence about karma, the universe, and my mad skills. That is usually met with “Good, great,” and a look that is a mixture of concern, bafflement, and a little fear (I think it's the Cabbage Patch dance that throws him).

I then dance my circus act out of his office and back to mine feeling slightly puzzled that he is not jumping up and down with me like a high school cheerleading squad. Only another credit manager understands the sheer joy (euphoria actually) of collecting on the old, forgotten judgment.

So, while it is not a common thing to hire an attorney or collection agency or sell the judgments to a company to collect (be careful on the last one, the deal may have some odd strings attached), maybe it should be. After all, if you go through all that trouble to sue someone, get the judgment, and then record it, why let a little thing like no money or assets at the time stop you?

Before you start farming out those judgments randomly to some opportunistic Rico Sauve smooth-talker, take a step back and assess what you have. I am not saying the company/attorney is not legit; however, it is a business for them. It is a for-profit arrangement. Fees are involved.

Taking a step back, what do you do with a judgment once you get it and find there is nothing to get, at the moment? Do you file and forget it, shocked when one day that useless piece of paper actually becomes some cash? Do you have to scramble around your office asking six different people if they remember a name thrown out by whatever attorney is calling to get a pay off or offer you a settlement on that old judgment? Most of us know the company name that stuck us, sometimes the name of the guarantor gets fuzzy, after all there is always this year's model to take the trophy from last year's “Debtor of the Year.”

Before agreeing to turn over those old judgments, do some investigation. Who is this company that is calling you? What does the contract look like (there always is some agreement)? Who do they do work for? What is the success rate? How much effort do you have to put forth? What is their cut of the recovery? These are your judgments, your company’s earnings that were stolen from you, so take control over this portion of the process.

What does your internal collection process look like? Do you have a spreadsheet or any other type of tracking system for your judgments? If you don’t, this is something you will want to create and then keep tracking going forward. It's pretty simple to create:

  1. Company name
  2. Guarantor's name
  3. Court case number
  4. Judgment amount
  5. Date entered
  6. Pre- and post- interest rate
  7. Attorney fees (if any)
  8. Counties the judgment was recorded in
  9. The attorney or collection agency you used to obtain the judgment
  10. Any relevant notes you want to remember

You spent time, effort, and money to get the judgment; if it doesn’t yield cash right out of the gate, be patient, not complacent. After being told by a collection agency many years ago that if the judgment doesn't pay off immediately it was dead and I should move on, I realized I was relying on others to control my business. I needed to take back the control. I dug up every bad debt write off for the past five years (I had to pick a starting point) to see if I had an unpaid judgment and built that spreadsheet.

Next came figuring out what to do with this information. Start with who got you the judgment. Are you still working with that attorney or agency? If not, or you weren't that fond of them to begin with, then talk to the people you are working with now. Does your current attorney or agency take on collecting of those judgments? At what cost? If you have a batch of them you may be able to get a better split ratio.

Another option is to start working with an agency that specializes in dormant judgment collections. Ask around or start surfing the web. Take your time and qualify who will be the best fit for your company. MAK collections, Hunter Warfield, and NCS are all reputable folks to work with BUT there are lots of companies out there that may fit your needs better. Just because they work for me, doesn't mean they will be a good fit for you.

Periodically, go through your judgment list. Shoot for a yearly evaluation of your judgments. You can see who has acquired some wealth since the two of you parted ways by doing some asset searching (nothing I like better than snuggling up on the couch with a laptop, bottle of wine, and bad debt list on a winter evening and playing a game of “what do you have”). That gives you more hands-on direction for the people you are working or just batch them up and see what they turn up.

Selling them outright is another can of worms altogether, but can produce some cash from your expensive wallpaper if approached wisely. Check the company out completely and make sure you know the details of what you are getting and giving up.

On the road of collection management, you can be a passenger or the driver. It is your choice. Personally, I like to drive.