A working judgment collector's numbers show why only a few of every 100 judgments you market for end with a debtor on the phone.
5 min read · Lesson 8.8
Collecting judgments is very difficult. The author of this lesson does it for a living and asked to remain anonymous. His warning: it’s much more complicated than the judgment courses would have you believe.
The three jobs in judgment collection
Find the judgment holders. You need a way to locate people and businesses holding judgments they haven’t collected.
Market your services. The judgment holder has to sign an “Agreement of Assignment.”
Find the debtor and his or her employer. This is the most important step, and where the really hard part starts.
In his business, finding the debtor starts with locating a Social Security number through an online database the company subscribes to; the original judgment holder hardly ever has it. Next comes an address update to find where the debtor lives now. Then comes the step that identifies the debtor’s employer. Once the debtor is found, the company contacts him or her to work out a repayment plan. If the debtor ignores it, the company garnishes wages.
Locate debtors only through lawful means, such as public records, and get local legal advice on collection rules.
Worked example: from 100 judgments to 3.6 debtors
This business is a total numbers game. Every day the company markets for 100 judgments, usually by sending letters to 20 judgment holders who have 5 judgments each. It took over a year of refining the marketing to reach these rates.
Step
Success rate
Left in the funnel
Judgments marketed for
100
Judgment holders respond by direct mail
20%
20
Social Security number found
75%
15
Good, usable address found
60%
9
Debtor responds and employer is identified
40%
3.6
Remember that many of these debtors are hiding from their creditors, which is why so many drop out at the address step.
Out of every 100 judgments marketed for, only 3.6 debtors end up on the phone.
Why judgment courses fall short
The author isn’t trying to scare anyone off. His point is that this is a very difficult business, and it takes a lot of refining and adjusting to find out what works.
He bought judgment courses himself and regrets it. Nothing he does successfully today, he says, came from those courses. If you’re thinking about judgments, don’t spend your money on a course until you understand the numbers above.
How a judgment differs from a note
If you come to judgments from the note business, it helps to see why the funnel above is so steep. A judgment is a court’s ruling that one party owes another money. It looks like a receivable, but it behaves very differently from a performing note.
Performing note
Judgment
Did the debtor agree to pay?
Yes, by signing the note
No, a court ordered it
Payment history
Usually months or years of it
Usually none
Collateral
Often secured by real estate
Often none, unless it becomes a lien on property
Where the debtor is
Normally known
Often unknown
How you get paid
Scheduled monthly payments
Whatever you can collect, if anything
That’s why the hard work in judgments is finding the debtor and income to collect from, not pricing a cash flow. A note buyer studies a payment record. A judgment collector often starts with a name and an old address.
Questions to ask before you get into judgments
Can you afford to market for judgments at volume, knowing only a small share will ever pay?
How will you lawfully locate debtors and their employers, and what will those tools cost?
What do the collection, licensing and garnishment rules in your state or province require? These vary by location and change over time, so check with a qualified attorney before you start.
How long does a judgment stay enforceable where the debtor lives, and can it be renewed? This also varies by jurisdiction.
How will you split recoveries with the judgment holder, and what does your assignment agreement say?
Common mistakes new judgment collectors make
Expecting course promises to match reality. As the author found, the real numbers are far thinner than the marketing suggests.
Measuring success by judgments signed up. Signing an assignment is only the start. What counts is how many debtors you actually reach and collect from.
Underestimating the time. The author says it took over a year of refining his marketing to reach the rates in the table above.
Cutting legal corners. Debt collection is closely regulated. Use only lawful methods to find and contact debtors.
Using the same funnel, suppose a better skip-trace source raised the usable-address rate from 60% to 80%. How many debtors would you reach per 100 judgments?
