After countless calls and past due notices throughout delinquency, the consumer still has not made a payment or brought the file current, the collateral may have been repossessed and sold leaving a deficiency balance. The file is now charged off… So now what? What is the next logical step to recover the money owed?
For some creditors, the options are:
- Continue in-house collection attempts
- Offer bargain basement settlement options
- Outsource to a collection agency to continue the calling, lettering, and digital contact efforts
- Place the file in a queue of charged-off assets and do nothing
- Place the file in a sales queue
However, many creditors have learned of another option, filing a lawsuit. A legal strategy and the potential of a judgment award are a sound and pragmatic approach to managing charged off debt. Let’s look at why a legal strategy may be the right approach.
The litigation strategy offers the following benefits:
- Extends the statute of limitations
- Allows courts to assist in involuntary remedies to collect funds if needed
- Judgment awards can add interest and attorney fees to offset the delay in recovery and costs of managing a litigation program
Often consumers do not respond because they just don’t know what to do to resolve the matter. They may feel that the only options were already provided and they could not meet those options.
However, once a consumer is served with the summons and complaint the file takes on a new level of seriousness and at this point, a consumer will often reach out to see what options are available. Many of these consumers will end up speaking to a collection professional at the law firm handling the matter. These representatives are trained on not just the legal process but in a manner that will treat the consumer with respect, dignity, and understanding. By approaching consumers in this manner, often the debt can be resolved amicably with both sides reaching a mutual agreement that will resolve the file without the additional expense and embarrassment of post-judgment remedies.
In the cases where the consumer still has not engaged and if a court awards the creditor a judgment, at this point, the law firm handling the matter can use the remedies available in their state to recover funds.
These remedies vary from state to state and can include:
- Filing a judgment lien
- Garnishing non-exempt wages
- Garnishing non-exempt bank deposits
- Deposing a consumer under oath to answer questions about income and assets
- Non-exempt personal property attachments
- Garnishing of state tax refunds (Michigan)
- Attaching non-exempt sources of income other than wages
- Suspension of driver’s license privileges (subrogation claims)
- Subpoena of a third party for asset information
While each of these remedies has its own nuances, sometimes complicated by state law, creditors who use a legal strategy recover far more and realize a significant ROI compared to those who do not.
If you have any questions, contact director of legal collections Gary Marszal
at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.