It is a mistake to win a money judgment in civil court and then delay collection efforts. As soon as the law allows a creditor to begin collection, that is exactly what should happen. Otherwise, things could go south fairly quickly.
Collecting could take years even under the best of circumstances. So delaying collection efforts only draws the process out longer. More importantly, delaying collection efforts can ultimately make a judgment creditor’s job more difficult. So difficult, in fact, that the creditor might never collect a dime.
The Statute of Limitations
There are three reasons timeliness is everything in judgment collection. The first should be the most obvious: the states impose statutes of limitation on civil judgments. On average, the limit is 7-10 years. I have seen a few states with statutes of limitation as low as 6 years and others as high as 15.
Salt Lake City-based Judgment Collectors say the statute of limitations in Utah is 8 years. From the moment a judgment is entered by the court, the creditor has 8 years to collect. Upon reaching the 8-year deadline, a creditor has a choice to make. He can either allow his collection rights to expire, or he can file to renew the judgment.
Either way, most creditors do not realize how quickly time passes when they are pursuing uncooperative debtors. A seemingly long 7-10 years can pass by very quickly.
Debtors Transfer Their Assets
Timeliness is essential to judgment collection when creditors choose to go after debtor assets. Why? Because savvy debtors often try to transfer or otherwise hide their assets. It is common for a judgment debtor to sell a piece of property to a family member for a nominal fee, for instance. And that’s just one example.
In most states, it is illegal to transfer assets in order to protect them from collection efforts. But enforcing the law requires that hidden assets be found. And that’s another matter entirely. It is no wonder that creditors hire companies like Judgment Collectors, companies with highly trained team members who know how to find assets debtors are trying to keep hidden.
The good news is that most states will nullify property transactions if it can be proved they were undertaken in order to avoid collection. The assets in question can then be leveraged for collection purposes.
The Need to Be in First Position
Finally, timeliness is critical in the event a creditor decides to file judgment liens or request writs of execution. It is all a matter of position. To illustrate, let me turn your attention to a judgment lien on a piece of real property.
A judgment lien is a legal document that establishes a creditor’s financial interest in a debtor’s property. It is similar to the lien placed on your home when you signed your mortgage documents. The debtor cannot sell, transfer, or otherwise dispose of the property without first addressing the balance of the outstanding judgment.
Here is the problem: if other creditors have also placed liens on the property, the creditor would have to fall in line behind them. Being in the second position is risky enough. But being in the third or fourth position virtually guarantees very little financial benefit from filing a lien. Ideally, the creditor wants to be in the first position.
Delaying Does Not Help
Creditors sometimes delay collection efforts because they don’t want to seem too aggressive. They want to cut judgment debtors some slack. But delaying is a bad idea. It is better for judgment creditors to begin initiating collection efforts as soon as state law allows them to.