Legal Collections
A traditional debt collection agency’s tools are limited. If the debtor does not want to pay, phone calls and letters won’t lead to debt recovery. Legal collections is a far more powerful tool to maximize collection of past due receivables. For example, debtors cannot ignore legal action like they can ignore collection letters or phone calls and fighting legal action requires a major investment in money and time by debtors. Debtors’ attorneys will often encourage debtors to settle, due to high legal costs and lack of good defenses.
Legal collections can introduce a new set of tools for recovering debt which is uncollectible through traditional means. Through legal collections, creditors may obtain judgments and be able to attach assets, garnish wages, conduct court-ordered debtor examinations, and obtain contempt of court sanctions or warrants if debtors fail to comply with court orders.
Judgments can extend the time for debt recovery. Creditors usually have 2-4 years to recover a debt using traditional debt collection methods. However, utilizing legal collections to obtain court judgments can extent the time to recover debts. Once a court grants a judgment to a creditor for an unpaid debt, the judgment generally remains valid for 5-10 years, and may be renewed for additional periods. Interest will accrue on the judgment, often at 10% per year. In that time, debtors can find new jobs, inherit money, buy property and develop the means to eventually pay the debt and interest.