You have won a civil lawsuit and are now faced with collecting a monetary award from the losing party. A friend has recommended selling your judgment to a collection agency. Is that possible? And if so, how?
Yes, it is entirely possible to sell a monetary judgment to an attorney, a collection agency, or any other third-party interested in buying it. Most judgment sales involve collection agencies. The real question here is not how selling is possible, but whether doing so is really a smart move.
Judgments Are Considered Property
Obtaining a civil judgment is essentially establishing a legally enforceable debt recognized by the court. Legal debts are considered property under the law. And because they are property, they can be transferred to other parties through a sale.
It’s really no different than a company selling invoices to an invoice financing firm. Those invoices, and the money they represent, are considered property the business can sell at will. It is the same deal for monetary judgments.
Selling the Right to Collect
Selling a judgment to a collection agency also means selling the right to collect. Once the sale is complete, the original judgment creditor can no longer enforce the judgment. That person or business no longer has a legal right to collect from the debtor. That right has been sold to the buyer along with the judgment itself.
The buyer, usually a collection agency, becomes the legal owner of the debt. It now has the soul right to collect. Whatever the agency manages to collect ends up being the payment for its services. Incidentally, that leads to one of the biggest disadvantages of selling a judgment.
Getting Pennies on the Dollar
Collection agencies need to be very careful about how much they spend to purchase outstanding judgments. For starters, they could end up purchasing judgments they never successfully collect on. That equals money down the drain.
Even if they do successfully collect, they are not likely to get every penny owed to them. They also have their own expenses to cover. See the problem here? Covering costs and turning a profit forces collection agencies to offer very little by way of purchase price.
It is not unheard of for collection agencies to pay pennies in the dollar. A company might have a $5,000 judgment that collection agencies are only willing to pay $500 for. Such a small amount might be better than nothing at all, but it also suggests looking at another option.
Collecting on Consignment
There is another option known as consignment. Utah-based Judgment Collectors is one example of a collection agency that works on the consignment model. They do not buy judgments. They offer services for which they are paid only after they collect.
Their fee is generally based on a percentage of the amount they get. As such, they are very motivated to collect as much as possible on every single case. Higher collection amounts mean bigger paydays for the agency. But what if the agency fails?
That is the beauty of collecting on consignment. If Judgment Collectors does not bring in a penny, it doesn’t get paid a penny. Their clients take on no additional financial risk by turning judgments over to the agency. As an added bonus, the agency covers all of its own expenses.
If you have won a monetary judgment or you are thinking of filing a civil lawsuit, you can ultimately sell the judgment to a collection agency. It is legal and easy to do. But selling may not be in your best interests. There are other ways to collect.
