Commonly Asked Questions

1. When is it appropriate to consider legal enforcement for an uncollectible debt?

Our standard for recommending litigation is a minimum of $1,000. if a City, Civil or District Court can be used, and a minimum of $1,500 if it is necessary to file the case in Supreme Court. This approach is followed in order to treat the case in a cost effective manner.

When a Summons & Complaint is served and filed with a court, it is necessary to obtain an Index Number from that Court. At present, City, State and District Courts charge $45.00 for an Index. Number. Supreme Court Index Numbers are $210.00. Further, if the debtor is a business corporation, service on the Secretary of State is also required and costs $40.00 per Debtor. Process server fees typically range from $50 to $100 per Debtor. Although Index Numbers and some costs can be recouped if a judgment is obtained, we do not find it worthwhile for the client to litigate for amounts lower than $1,000 (or $1,500 if it is necessary to file the case in Supreme Court).

2. What Is the Fair Debt Collection Practices Act and what is its impact?

The Fair Debt Collection Practices Act was passed to provide protection to debtors by establishing standards which govern the methods and practices that debt collectors may be use when contacting a debtor. The Act is strictly enforced and protects debtors rights with regard to privacy, harassment and the right to contest a case. The Act was passed as an Amendment to the Consumer Credit Protection Act (15 U.S.C 1601 et seq) and is enforced by the Federal Trade Commission.

3. What is the time limit for attempting to collect on an overdue debt?

If you have overdue receivables or other debts, a good rule of thumb is not to let them sit. After 6 years, you may no longer be able to file suit in order to legally enforce collection. Depending on the nature of the business, clients submit cases anywhere from 30 days overdue up to an estimated 5 years overdue.

4. For what types of uncollectible items do clients typically use a law firm?

We typically see a wide variety of items for which legal enforcement is used. They include but are not limited to

  1. Uncollected receivables for services rendered, work performed or goods delivered
  2. Defaults on credit lines
  3. Defaults on promissory notes
  4. Auto loan defaults
  5. Judgments obtained as a result of Copyright Infringement
  6. Judgments obtained as a result of unpaid rent
  7. Tuition arrears
  8. Parking and building violations
  9. Mechanics liens
  10. Student loan defaults
  11. Checking overdrafts
  12. Equipment Rentals
5. When submitting a case for legal enforcement, what information should be included?

You should include all pertinent, applicable information for which you maintain records, including

  1. Invoices mailed to the debtor
  2. Statements of account
  3. Signed Applications
  4. Signed Contract
  5. Singed Promissory Note
  6. Copies of bounced checks
6. What is the typical time period required to obtain a judgment?

Uncontested, default judgments typically require 4 months from the purchase of an index number and commencement of service, to the date the judgment is entered in the court. If pre-judgment collection activities include demand letters, add approximately 3 months to the overall time required to obtain a judgment. It should be noted that if the debt is contested, timing then becomes based on subsequent legal/court activity which can include a number of motions, court dates and possible trial before a decision is reached. It should also be noted that once the judgment is obtained, the judgment debtor may still object by filing an Order to Show Cause, which will also result in legal action to decide the case.

7. Once the judgment is obtained, how do you locate assets?

Assets are located in a variety of ways which can include, credit research, bank canvassing, employment subpoenas and other forms of information subpoenas, land/mortgage research, legal research, business research and outside 3rd party skip tracing efforts. It should be noted that if initial efforts are unsuccessful, periodic follow-up (typically every six months to one year) is essential and often achieves results over time.

8. Once an asset is located, how is can you be certain to collect?

Often, when an asset such as a bank account or job is located, the judgment debtor will make scheduled payment arrangements in order to avoid further legal activity. Typically, in such arrangements, proof of employment is required and payments are usually arranged so that the debt can be repaid in a reasonable time frame. If a payment arrangement is not obtained, an income execution (wage garnishment) or a property execution (money taken directly from a bank account) is done. In the case of executions, the actual collection is achieved by assignment to a marshal or sheriff. In such cases, a "poundage" charge of an additional 5% is collected by the marshal or sheriff.

In extreme cases and only where warranted, court actions or involuntary bankruptcy procedures may also be enacted to force payment. Such processes are costly and are only used when the outstanding debt is significant.

9. Is there a minimum number of cases which can be submitted for legal enforcement?

No. As long as the case meets the criteria for legal enforcement, which is a minimum amount of $1,000 for City, Civil or District Court submissions or $1,500 for Supreme Court submissions, we can accept a single case or unlimited ongoing cases from our clients. All cases are entered into our system for purposes of ongoing tracking and follow-ups and to monitor all activity both before judgment and during enforcement procedures.

10. What are the typical costs to the client that can be incurred on a collection case?

In addition to attorneys fees, which are usually contingency -based and average approximately 1/3 of the amount collected, the following cost outline illustrates the types of out of pocket costs that can be incurred (It should be noted that not all of these items apply to any given case; the list provided is an overview of the types of items that occur):

  • Index number costs (all litigated cases); may be recoverable, $45.00 for City, Civil and District Courts; $210.00 for Supreme Court

  • Process Server Costs: Range from $50 to $100 per debtor, based on the difficulty in completing service

  • Secretary of State Filing Fee: Applies to Corporation debtors: $40 per corporation

  • Court Costs: If legal action necessitates, additional court costs may be required. Items can include motion filing fees, Requests for Judicial Intervention, Judgment Filing Fees, etc.

  • Transcripts of Judgment: Cost vary by municipality and county but are usually less than $50.00. Transcripts are typically used to record the judgment in another venue in order to establish a lien on real property or to perform an execution if the employment or bank account is in another county from that in which the judgment was perfected.

  • Sheriff/Marshal Costs: Filing fees required if an income or property execution is used to obtain assets;.

  • Third Party Skip Tracing: Costs if an outside service is used to locate assets
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