Judgment collection is not an easy journey. While obtaining a judgment seems like a win, it’s only a single step, and the real challenge lies in recovering the owed amount. This why creditors sometimes give up on collecting judgment. Judgment collection presents several types of challenges, which sometimes can be annoying to deal with. It requires a good understanding of legal laws, and resources, and requires a significant time. Because of these challenges, many creditors find the judgment collection process overwhelming and stop the collection efforts.
Here are some main reasons why creditors give up on judgment collection.
Reasons Creditors Give Up on Judgment Collection
A settlement is Reached
Generally, settlements are not very common in the judgment journey, but they can arise when the debtor initiates the conversation. In such cases, the creditor’s attorney may work for some mutual settlement, often in the form of a lump sum payment that is typically less than the full amount owed.
A Legal Issue
Dealing with legal issues can be especially challenging for creditors. This is why sometimes they give up on judgment collection. For example: some states may ask about the judgment validity or enforceability, complicating the efforts of judgment collectors. In such situations, rather than spending more money and effort, creditors decide to walk out of the process.
Lack of Resources
Lack of resources can also sometimes impede the judgment collection efforts. Judgment collection also requires steps such as wage garnishment, asset seizure, and levying bank accounts. These steps demand constant efforts, resources, and time. Also, creditors must be prepared to invest substantial amounts as it involves the filing fee, court fee, and other expenses. If a creditor doesn’t have the necessary financial resources, they may give up on the collection.
Judgment is Sold
Judgments are considered assets in legal terms, which means they can be bought and sold. Sometimes creditors give up on the collection efforts by selling their judgment to a judgment collection agency or debt buyer. In such scenarios, the person who bought the judgment pursues the collection efforts rather than the debtor.
Debtor’s Bankruptcy
When debtors file bankruptcy, it can create significant challenges for creditors pursuing the collection efforts. Bankruptcy provides financially unstable individuals a fresh start, but obstacles for creditors hoping to collect their money. When a debtor files for bankruptcy, creditors are required to stop all collection efforts including wage garnishment, property seizure, and other efforts to collect the judgment.
Debtor Financial Condition Change
Creditors may also cease the collection efforts if the debtor’s financial condition changes, and they are incapable of paying the debt. A judgment can be only helpful if the debtor has assets or property. If the debtor has no property or money, it’s futile to continue collection efforts. Once the creditor understands the financial situation of the debtor, they stop the collection efforts.
Creditors Priority Change
Not only debtors, but sometimes creditor priority can also change, and they may stop the collection efforts. For small business owners, this becomes especially true. As the challenges of juggling multiple things arise, collection efforts may fall short. If the creditor focuses on other things, they may stop investing in collection efforts.
Judgment Become Expired
If the judgment expires, creditors stop the collection efforts. In most states, judgment comes with a time limit. Generally, creditors get 7–10 years, depending on the state. If they fail to collect the debt within this period, they have to stop the collection efforts.
Collection Costs are Expensive
Creditors may also stop the collection efforts if the collection efforts are costing more money than their budget. Indeed, the collection process can be expensive, and if creditors don’t know how to navigate the collection they risk wasting both effort and money.
Emotional Stress & Burnout
Judgment collection is a challenging journey, and sometimes the burden and stress involved in the process can lead to burnout. Initially, the process seems manageable, but after delving deeper, creditors understand the real challenges of collection. Ultimately, the stress and burden lead them to abandon their collection efforts.
Conclusion
The judgment is a significant decision in legal proceedings. While it seems like a victory step, the process goes longer than expected. Creditors face a lot of legal challenges along the way, leading many to discontinue their collection efforts. Understanding these challenges will help you recognize why creditors give up on the collection process. If you are a creditor facing difficulties in the collection process, a professional judgment attorney can assist you. They will use their expertise and resources to help you collect your debt. At Public Loss Adjusters, we are committed to helping our clients in recovering their hard-earned money.