How Judgment Collection Agencies Get Paid

How Judgment Collection Agencies Get Paid

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You took someone to civil court and won. A judgment was entered in your favor. Now you need to figure out how you are going to collect payment. A business associate recommended you hire a judgment collection agency, but you’re skeptical. You have heard they charge too much. What’s more, you don’t quite understand how they get paid.

Judgment collection is a service similar to general debt collection. However, it differs from general debt collection in that it has the force of a court order behind it. Companies that offer judgment collection service utilize all the resources made available through that court order. Doing so can make the final price higher than you want to go.

As for how judgment collection agencies get paid, that depends on a firm’s business model. There are four basic models, two of which are primarily utilized by attorneys that offer debt collection services.

1. Purchasing Judgments Outright

Some debt collection agencies purchase judgments outright. They can do that because judgments are considered tradable assets. They purchase a judgment for pennies on the dollar, then go out and collect. The difference between the purchase price and the collected amount, minus their expenses, constitutes their payment for services.

Collection agencies that utilize this model need to be incredibly careful about the cases they take. If they do not believe they have an excellent chance of recovering payment, they will not take a case.

2. Collecting on Contingency

The second model is the contingency model. Judgment Collectors, a Salt Lake City judgment collection agency, utilizes this model. They assume responsibility for a judgment as soon as the client turns it over to them. They cover all their costs and only get paid when, and if, they succeed. Their payment is a percentage of the total amount collected.

3. The Fee-Based Model

Attorneys that offer judgment collection services rarely buy judgments outright. Sometimes they work on consignment, especially if they are fairly confident of success. Otherwise, they may follow the fee-based model.

Under this model, the client pays set fees to cover all the attorney’s collection expenses. Those expenses include court fees, investigation costs, the costs associated with utilizing online tools, etc. If they manage to secure payment, they generally take a percentage of the amount collected as profit.

This particular model may seem like double dipping. It may be if an attorney marks up its collection costs. Otherwise, the fees are only intended to break even.

4. The Hourly Fee Arrangement

The fourth and final model is almost never utilized by judgment collection agencies. It is an attorney model. What is it? Charging hourly fees. The attorney works by the hour whether successful collection is ever accomplished. In such cases, judgment collection becomes just another hourly service the attorney offers.

This model is the least attractive for a variety of reasons, not the least of which is the fact that judgment collection often requires a significant investment of time. The most experienced debtors know how to hide assets. They know how to not be found. It could take years to collect, which would get expensive for a creditor paying by the hour.

  • DIY Collection

If a creditor didn’t like any of these payment models, they could always opt for DIY collection. A lot of creditors do. Unfortunately, the vast majority of them fail to collect. They put time, money, and effort into chasing down deadbeats who simply refuse to pay.

It might cost to hire a judgment collection agency or attorney, but it’s worth it. At least the pros have a better chance of recovering the money.

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