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Show me the Money
By Dan Heilman
Dan.heilman@minnlawyer.com
So you've obtained a judgment for your client? Congratulations: Your work may be just beginning.
If your case is typical, getting a judgment is only the first step. Collecting on it can be time-consuming and aggravating, but not if you go about it the right way, according to collections attorney Heidi Staloch of Minneapolis.
Staloch recently offered tips on judgment collection as part of a debt collection CLE at Minnesota CLE in downtown Minneapolis.
She said the first step in collecting on a judgment is looking closely at both the judgment and the files pertaining to it. If it's a Conciliation Court judgment, docket it to District Court and transcribe it to the registrar in all counties pertinent to the case. From there, figure out how to collect - or if you even should.
"If the debt is $1,000, don't spend $900 collecting it," Staloch said. "You need to make a business decision about which collections are worthwhile. Sometimes the best thing to do is just close the file."
At the same time, Staloch said, be wary of cases in which the client wants all or nothing from the debtor.
"Some clients won't settle for 90 percent of a debt," she said. "If the client clearly has a vendetta, don't take the case on contingency,"
Repo the ride
From evaluating the debt and the terms you've worked out with your client, the next step is to find out who you debtor is. Many debtors get sued because of their reluctance to pay, which is usually translates to a reluctance to be tracked down and identified.
Whether the debtor is a registered business, or sole proprietor or a personal guarantor, the goal is to get information. Find out a few basic fact, such as whether the business is operating, whether it has a working phone number, whether it has any known assets and the identity of the owner.
Staloch said services such as Accurint and Lexis are valuable tools with which to identify addresses, phone numbers, and property holdings. Other sources for finding assets include a report from the debtor's credit bureau, post-judgment interrogatories, creditor's interrogatories to financial institutions and city licensing paperwork. She said even a simple Google search can turn up unexpected information.
Once the existence of assets is established, that leads to t he key part of collecting: discovery. If the debtor is a business that's still operating, it's a relatively simple matter of garnishing know bank accounts, contacting the debtor (not the business's accounts payable department) and sending the sheriff to levy the debtor's property if necessary.
If that doesn't get results, do a UCC-1 (Uniform Commercial Code) search of the debtor's business debts, and follow up by calling the debtor's secured lenders. Keep in mind that the debtor's money might be tied up not only in property, but in things like vehicles that don't have liens on them.
"The number of motorcycles, ATVs and things of that sort that debtors own without liens is shocking," Staloch said.
If you can establish ownership, the sheriff's department can help repossess vehicles. "As soon as you take someone's car, that's when they start talking," Staloch Said.
Garnishment guidelines
The procedure is similar with individual debtors. Garnish wages and known bank accounts, and call or write the debtor offering settlement within the guidelines agreed on by you and your client. If that doesn't work, conduct an asset search or obtain an order for disclosure, keeping in mind that Minnesota statues only allow for such orders within 30 days after the judgment is dated.
Staloch said garnishment is an underutilized tool to get debtors to the negotiating table. "We often serve garnishments instead of writs of execution," she said. "It's cheaper, and it's more likely to start a dialogue."
Be careful, however, that you don't garnish income gained from public assistance programs. "If you're holding a debtor's money and it turns out to be public assistance, you could be in for an ethics complaint," Staloch said.
Another roadblock for collection is in the form of nonhomestead property (such as a lake cabin) or other assets that are in the name of a non-debtor spouse.
"Those can't be levied in Minnesota," said Staloch. "You can't have a fraudulent transaction between spouses. It stinks for people like us, but that's how it is."
Work it out
Staloch added that the Minnesota law that went into effect Aug. 1 reflects amended statues relating to homestead exemption - a tax break that permits debtors to protect all or part of their house and the property on which it sits, depending on the value of the house and size of the lot. Some highlights of the amendments to Minn. Stat. Sec. 510.02 include:
• The exemption was increased from $200,000 to $300,000 for one or more debtors.
• A court order must be obtained by the executing creditor to levy on real property that is a homestead.
• The burden of service on the debtor has shifted from the sheriff to the creditor.
• The order of redemption by creditors is now determined by the order in which judgments were entered as memorials on the certificated of title, or docketed in the District Court if the property is not Torrens.
Legal details aside, Staloch said an often overlooked key to collecting is to maintain a professional attitude and be respectful toward debtors.
*You're generally talking to people who are not at the highest moment of their lives," she said. "If you're not genuine with debtors, that doesn't produce collections."
She recommend using the form of expression that seems most pleasant to other when trying to collect: If you've got a nice phone manner, call; if not, send a letter.
"Most of our money comes in from voluntary payments from debtors, not garnishments," she said. "It pays to work with people,"
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