Tuesday, February 16, 2016
Saturday, January 15, 2011
While today’s fractured economy has produced more judgments than ever before, a higher number of those judgments are uncollectible. Just when is a judgment uncollectible? That line is blurred with the right set of circumstances and some thinking ‘outside the box’.
As a case in point, several years ago I received a judgment from a physician who had been duped out of her savings by a boyfriend. A wage garnishment was served upon the boyfriend’s shell corporation. The corporation indicated the debtor was not employed. I had solid information about the debtor’s employment, so I sued the corporation. Having successfully prevailed on the creditor’s suit, judgment was now entered against the corporation.
I subsequently discovered that the corporation was entangled in federal litigation over patent rights in which it was the plaintiff. The defendant was a high-profile software company. I immediately filed a lien in the case; however a review of the case file was disappointing. I did not think the debtor would prevail. In fact, it appeared the case was frivolous. As a lien holder, I would receive monies only if the debtor was triumphant. This was not going to happen.
It soon became apparent to me that the debtor firm conducted no actual business other than frivolous litigation on its one (nearly defunct) patent.The debtor nonetheless was able to retain a major law firm on a contingency. This firm was aggressively pursuing the deep-pocket defendant, causing that firm to incur substantial legal fees. I put in a call to the attorney for the software company and inquired if the client might be interested in putting an end to the litigation. An idea was floated to him. I would go back to court and obtain an order transferring all of the debtor’s patent rights to me in order to satisfy the judgment. Once the order was obtained, the judgment was for sale – for the full amount of the judgment. As the new owner of the patent, the software company would be able to shut down the federal litigation. There was silence on the other end until it finally hit him what I was suggesting. “Oh…. I see what you’re doing….” He indicated the idea ‘had merit’ but he would need to speak with his client.
The client gave the go-ahead. I filed and successfully prevailed on the necessary motions to seize the debtor’s patent which was the core of the federal lawsuit. As it turned out, however, somebody beat the software firm to the punch. The victory in court smoked out the law firm for the debtor. To protect its interest in the case, the firm satisfied their client’s judgment.
So what was the outcome of the patent litigation? As I correctly surmised, the debtor could not prove its case in court. Moreover, it was ordered to pay the defendant’s legal fees. Unfortunately, the debtor’s law firm was out hundreds of hours on their contingency agreement….. as well as the $35,000 they paid to me.
Ramona Featherby is a judgment recovery specialist in San Diego, California and past President of the California Association of Judgment Professionals.
Copyright 2011, Ramona Featherby
Thursday, January 6, 2011
Thursday, December 2, 2010
When is it best to assign your judgment to a judgment recovery specialist? The more difficult a collection is expected to be, the better the case for a recovery specialist. Here are a few things, one or more of which could signify the need for assigning your judgment:
• You don't know where the debtor is.
• You don't know if there are assets.
• The debtor is hiding assets.
• You think there are assets, but they have been transferred to another person or company.
• You have spent a significant sum on legal fees fighting the debtor and getting the judgment in court. (Good indication post-judgment will be no different.)
• You have already had an attorney or collection agency try to collect, without success.
• The debtor has filed bankruptcy but you suspect it is fraudulent.
• You are tired, emotionally spent and want it to be 'somebody else's' problem.
• You have a 'default' judgment. (This type of judgment is frequently open to attack once enforcement is launched.)
• The judgment is a complicated, convoluted 'mess' - shell companies, alter ego, successor corporations, aliases, fraudulent transfers, etc. (Exactly the sort of case that is too expensive for an attorney and too complicated for a 'general' collection agency.)
• Your debtor has died.
Are there drawbacks to assigning your judgment to a judgment recovery specialist? There could be. If you have definite ideas about how a judgment should be collected and approached and wish to retain total control, it is probably best to handle it yourself or be represented by an attorney. Be mindful that when you assign your judgment to a judgment collector, all 'rights, title and interest' pass to the collector - otherwise known as the 'assignee'. Thus the recovery specialist becomes the 'judgment creditor'. If they 'flake out' you could be in trouble. While the vast majority of judgment collectors are honest, a few have gone out of business and still fewer have failed to pay monies due. Choose wisely. Look for someone who is established and reputable. In many cases, the decision to assign a judgment can be the only viable alternative when all the circumstances are considered. Every day, judgment collectors are filing satisfactions on difficult cases which are years - and sometimes decades old.
When should you assign your judgment to a general collection agency? In my opinion, almost never. Large general collection agencies deal in volume. If your judgment is 'easy', they will have no problem collecting. However, if the judgment is 'easy', why not collect it yourself and keep 100% of the amount? I have had too many cases land on my desk which have languished at collection agencies for years, with no results. Phone calls, threats, dunning letters are ineffective with judgment debtors and serve no purpose. Most collectors deal in volume and cannot spend the resources necessary to collect a judgment, especially a convoluted case. (And most judgments entail a wrinkle or two.)
©2010 Ramona Featherby
Wednesday, October 27, 2010
When should you collect a judgment yourself, be represented by counsel, or assign your judgment to a third party? There is no hard-and-fast answer. If there are significant unencumbered assets in the name of the judgment debtor, and you are resourceful and collection is straightforward, (i.e. bank levy, garnishment) there is no reason why you can't collect the judgment on your own. Today there is a plethora of information online to help creditors. Most courts are online and allow you to download forms required for execution of a judgment. State statutes covering the enforcement of judgments are online too. Pay a visit to your local law library. Research librarians can steer you toward the appropriate treatises for your state. Be aware, though, unless your judgment is small claims, rarely will one 'execution' result in full satisfaction. And for every enforcement action, there is an action the debtor can take to thwart your efforts. For instance, in California, if you levy on a bank account, the debtor can file a claim of exemption. If you don't fight the claim by obtaining a court hearing date and filing an 'opposition', the funds you levied upon could revert back to the debtor. Thus you must be prepared to jump through a few hoops if you are to succeed collecting the judgment yourself.
Another alternative, if you wish to outsource, is to hire an attorney. If the judgment is large and you know where the assets are, you may be best to hire this attorney on an hourly, rather than contingency, basis. While there is no shortage of collection attorneys, finding a good one is another matter entirely. You will have better luck with Google than the yellow pages. You could also try calling other attorneys and ask to whom they refer their judgments. If the same name keeps popping up, chances are there must be a reason. If you hire an attorney on an hourly basis, be very clear about the tasks requested and the anticipated costs. At 200.00-350.00 an hour, you may very quickly run up a sizable bill.
This is where using a judgment recovery specialist can be advantageous. It is cost effective. You bear no out-of-pocket costs. Even a collection agency or a contingency attorney charge for costs. This can amount to a significant amount, if you factor in fees for court filings, sheriff, service of process and private investigators. Too, if there is litigation to recover a fraudulent transfer or to obtain an order of non-dischargability in bankruptcy court, these significant costs are rarely included.
Another advantage is that judgment recovery specialists usually devote more personal attention to a case. They do not typically work hundreds of cases like collection agencies and don't report to a 'manager' to make sure they aren't spending ''too much time" on one case. Also, it has been my experience that a recovery specialist is in a better position to 'act quickly' if the case requires it, due to the absence of multiple levels of management and red tape. In judgment collection, 'timing' is everything. Thus this can be a critical factor in reaching a successful result.
©2010 Ramona Featherby
Monday, October 22, 2007
2. Thou shall be selective in your judgment cases.
3. Thou shall not chase the ‘honest but unfortunate judgment debtor.’
4. Thou shall know the difference between the ‘honest but unfortunate judgment debtor’ and one who pretends to be.
5. Thou shall realize that knowledge allows thou to work intelligently and to be effective.
6. Thou shall become an expert in locating judgment debtors’ assets … without breaking the law.
7. Thou shall have an iron stomach and a will to match. Thou will never succeed as a judgment recovery specialist unless thou does.
8. Thou shall not be intimidated by bankruptcy because thou selects judgments which will survive bankruptcy.
9. Thou shall realize that all judgment debtors claim to be a victim.
10. Thou shall spare no expense. This is war. The one with the best weapons wins.
©2007 Ramona Featherby
Wednesday, September 12, 2007
But does the punishment fit the crime? Pretexting is defined as, “the use of false pretenses, including false statements and impersonation, to obtain consumers’ personal or financial information”. Dunn did something stupid and unquestionably wrong. But was the crime so egregious in nature -- or had the world’s largest technology company -- with 150,000 employees and one billion customers in 170 countries -- become an irresistible target? This question may have been answered on December 7, 2006 when Attorney General Bill Lockyer announced that HP entered into a $14.5 million settlement to settle his civil suit and that HP will “finance a new law enforcement fund to fight violations of privacy and intellectual property rights.” With state funds drying up, a review of the past year reveals that the attorney general has indeed been scoring legal touchdowns while finding alternative ways to secure new funding.
The HP scandal pointed out the need to tighten up privacy laws, as pretexting is expressly prohibited to obtain financial information but phone records fall into a gray area. “Stealing someone’s private phone records is a criminal act, but it can’t be prosecuted,” Senator Charles Schumer has remarked. “Phone information and call logs should be protected with the same safeguards as financial data or medical records. With pretexting companies popping up across the country, law enforcement needs the tools to track down these criminals down and put this industry out of business.”
On December 11, 2006 Schumer’s TRAPP bill passed Congress. The TRAPP Act would have made it a federal offense, punishable as a felony, to obtain customer information from a telephone service provider by false pretenses or access a customer account on the Internet to obtain billing information without authorization.
But in a surprise turn, a few days earlier, Senator Debra Bowen’s SB 1666, California’s tough anti-pretexting bill, went down in flames after sailing through the Senate. The demise was due in large part to the effective lobbying by the Motion Picture Association of America. The MPAA was able to convince legislators that pretexting was necessary to discover the source of illegal downloading. It was a disappointment for the ambitious Bowen, a consumer rights advocate, who today is California’s Secretary of State.
There is a lesson here for judgment collectors. If you are purchasing data, just how clean is it? Dunn maintained that she was assured that ‘only legal means’ would be used to obtain records. Plausible deniability didn’t work. There can be little sympathy for those data companies who brazenly offered records for sale on the Internet and are now the subject of a criminal investigation. In California there is no legal way to purchase phone records from data brokers. Furthermore, there never has been.
Unlike HP’s chairwoman, judgment creditors have the legal right to personal information if properly obtained. Not only must your judgment debtor deliver phone records, you can compel the delivery of far more sensitive and revealing documents. But pretexting to get those very same records remains illegal - even when you have ‘permissible purpose’.
©2007 Ramona Featherby