Comments Off on The Myth of Magic Bullets Reality Versus Truth in Debt Collection

The basis of most claims is a written and signed contract. The contract is real, often detailed and unambiguous. It almost always wins in court. Because of this, we often think of a Judgment as a Magic Bullet, capable of solving debt issues with a minimum of effort and excellent results.

The contract is perfect. The Judgment is conclusive. It’s time for a big smile.

So why are claims so hard to collect? There are two primary reasons and they will usually trump that almost perfect contract. Winning in court is a waste of time and money unless it produces payments.

If a debtor has nothing to attach you will not collect anything most of the time. You cannot garnish wages of a person with no job or a low income job. You cannot attach a non-existent bank account. You cannot put a lien on assets that the debtor does not own.

You can greatly reduce this problem by changing your screening policies, but some of you have no time or authority to screen. If you do screen, questionable consumers should be backed up by a co-signer who is completely capable of paying any bill the debtor may owe.

You do not just need good credit. You do not just need income or assets. You need the co-signer to have everything. If you don’t have it all you are asking for a final unpaid claim.

The second cause of not getting paid is less obvious but clearly significant. Your contract may be great but, when it comes to ‘truth’ there is no reality, only perspective. Most of the time, the debtor’s perspective is very different than yours.

You see a final bill based entirely on the signed contract. The debtor often sees an attempt to unfairly and fraudulently go after their money.

You charge too much, way too much. You add extra, ‘bogus’ items to the bill. You charge them for things they never agreed to pay.

There is often a great deal of confusion here. Eviction court is confused for Money court. Accepting insurance is confused for accepting whatever insurance pays, even if insurance pays nothing. Guarantees are limited to one year.

These debtors will almost always lose in court. The problem is that that won’t always help you get paid.

It costs money to go to court. Often the cost is not worth the trial. It costs time to go to court. How much would you need to get back for a day of your life, mostly waiting your turn? Some of these debtors will countersue. That dramatically increases both your expenses and aggravation.

Even if everything goes right and you get a default Judgment, there is a large possibility you will not get paid. If the debtor moves to another state, has a low income job, pays with money orders or never seems to be home when the process server arrives you will not get paid.

More money is collected from these debtors by Clients who agree to settlements. While you will not get everything, you won’t have to lay out money and court time and, most important, you WILL get paid.

There are no Magic Bullets in the court system. In general only about one in 4 Judgments are collected. Our rate is much higher than that but still under half.

To compromise with a debtor isn’t enjoyable but getting two-thirds consistently is better for your bottom line, not to mention your blood pressure.

Forget the Magic Bullet. Focus on the money.