Should I pay up-front for a debt collector to sue my debtor? - CALIFORNIA

[encinoman]

Hello,

I have a Small Claims judgment against someone for $900 who didn't show up to the hearing and ignored my letters before and after. It was for a car accident, so I have no other relationship with the debtor.

After a year of nothing, I assigned it to a large and well-known debt collection agency. They got in touch with the debtor, who belligerently blew them off. Somehow the agency found out he has plenty of money in the bank. They suggested suing for triple the amount in Superior Court for theft of services, and asked me to pay $825 up-front for their attorney to file the case and pursue it to a garnishment order, at which point they can withdraw it from his bank account. They say with interest, attorney's fees, collection costs and court costs that would be added, this would get up to $4,000, and I'll get to keep most of it! When the agent told me about this, he seemed to be in a rush to get me to go with this, almost like it was a sales pitch. He says it's virtually certain we'll get all the money if we do this, because the court would withdraw it directly from the debtor's bank account. I asked him, can't a resourceful and clever debtor move the money out of his bank account? He said they could track it, but I just don't know that. If people really don't want to pay, it seems like they can avoid it.

This just smells a bit scammy--the promise of much more money if I pay some up-front. I've never heard of paying up-front as a client of a collection agent. Is this routine? At how much risk is my $825 I might pay to collect on a debt that's now about $1,000 (from interest), in hopes of getting much more?

The agent told me, rightly, that if we don't pursue this aggressively, we'll never get paid, and I believe that.

 

[zddoodah]

They suggested suing for triple the amount in Superior Court for theft of services

You've already sued and won. Suing a second time would almost certainly be inappropriate, but that depends on the applicable state law, and you didn't identify your state. Before I read further, please identify the relevant state.

 

[adjusterjack]

This just smells a bit scammy--

It is scammy.

the promise of much more money if I pay some up-front.

That's how frauds are perpetrated on the unwary.

At how much risk is my $825 I might pay to collect on a debt that's now about $1,000 (from interest), in hopes of getting much more?

About 100% in favor of you never seeing a nickel of that debt after paying $825.

The agent told me, rightly, that if we don't pursue this aggressively, we'll never get paid, and I believe that.

That's right.

If your judgment debtor didn't obey a summons for a debtor interrogation, consider filing for contempt. If he still doesn't obey, ask for a warrant for his arrest to answer for the contempt.

Otherwise, let's face it. Some judgments are just uncollectible and there's no sense in throwing good money after bad. I was a landlord, had a few myself.

 

[quincy]

Hello,

I have a Small Claims judgment against someone for $900 who didn't show up to the hearing and ignored my letters before and after. It was for a car accident, so I have no other relationship with the debtor.

After a year of nothing, I assigned it to a large and well-known debt collection agency. They got in touch with the debtor, who belligerently blew them off. Somehow the agency found out he has plenty of money in the bank. They suggested suing for triple the amount in Superior Court for theft of services, and asked me to pay $825 up-front for their attorney to file the case and pursue it to a garnishment order, at which point they can withdraw it from his bank account. They say with interest, attorney's fees, collection costs and court costs that would be added, this would get up to $4,000, and I'll get to keep most of it! When the agent told me about this, he seemed to be in a rush to get me to go with this, almost like it was a sales pitch. He says it's virtually certain we'll get all the money if we do this, because the court would withdraw it directly from the debtor's bank account. I asked him, can't a resourceful and clever debtor move the money out of his bank account? He said they could track it, but I just don't know that. If people really don't want to pay, it seems like they can avoid it.

This just smells a bit scammy--the promise of much more money if I pay some up-front. I've never heard of paying up-front as a client of a collection agent. Is this routine? At how much risk is my $825 I might pay to collect on a debt that's now about $1,000 (from interest), in hopes of getting much more?

The agent told me, rightly, that if we don't pursue this aggressively, we'll never get paid, and I believe that.

It sounds very much like a scam. You can enforce your judgment by seeking a wage garnishment on your own.

The state is California. It is noted in the thread title.

 

[THS Warrior]

Hello,

I have a Small Claims judgment against someone for $900 who didn't show up to the hearing and ignored my letters before and after. It was for a car accident, so I have no other relationship with the debtor.

After a year of nothing, I assigned it to a large and well-known debt collection agency. They got in touch with the debtor, who belligerently blew them off. Somehow the agency found out he has plenty of money in the bank. They suggested suing for triple the amount in Superior Court for theft of services, and asked me to pay $825 up-front for their attorney to file the case and pursue it to a garnishment order, at which point they can withdraw it from his bank account. They say with interest, attorney's fees, collection costs and court costs that would be added, this would get up to $4,000, and I'll get to keep most of it! When the agent told me about this, he seemed to be in a rush to get me to go with this, almost like it was a sales pitch. He says it's virtually certain we'll get all the money if we do this, because the court would withdraw it directly from the debtor's bank account. I asked him, can't a resourceful and clever debtor move the money out of his bank account? He said they could track it, but I just don't know that. If people really don't want to pay, it seems like they can avoid it.

This just smells a bit scammy--the promise of much more money if I pay some up-front. I've never heard of paying up-front as a client of a collection agent. Is this routine? At how much risk is my $825 I might pay to collect on a debt that's now about $1,000 (from interest), in hopes of getting much more?

The agent told me, rightly, that if we don't pursue this aggressively, we'll never get paid, and I believe that.

Before you decide to jump at the chance to receive a windfall of several thousand dollars from a debt collector you have never met--one who wants you to give them up front money to pay his "lawyers" to go after your debtor I have only one thing to say: No reputable Florida lawyer--nor any other lawyer in any other state I am aware of--would ever high-pressure anyone by promising them anything like this "scammy" smelling deal.

 

[quincy]

Here is a link to collecting on a California judgment:

https://www.courts.ca.gov/1178.htm?rdeLocaleAttr=en

You could ask the debt collection agency if they want to buy the debt from you. At least you could get some money out of it.

 

[Zigner]

I'm trying to figure out why "theft of services" would ever be brought up in such a case.

 

[quincy]

I'm trying to figure out why "theft of services" would ever be brought up in such a case.

Either encinoman has misunderstood what the debt collection agency is telling him (which is a good possibility) or this debt collection agency is looking for a payday from encinoman because it is unlikely to get one from the judgment-debtor.

I am surprised, actually, that ANY debt collection agency would take on a $900 debt, seeing it would receive only about $180 for their efforts (unless they are charging more than the typical maximum 20%).

 

[Zigner]

Either encinoman has misunderstood what the debt collection agency is telling him (which is a good possibility) or this debt collection agency is looking for a payday from encinoman because it is unlikely to get one from the judgment-debtor.

I am surprised, actually, that ANY debt collection agency would take on a $900 debt, seeing it would receive only about $180 for their efforts (unless they are charging more than the typical maximum 20%).

I agree. Our go-to collector only takes such small amounts from us as a "favor" based on our prior business.

 

[THS Warrior]

Here is a link to collecting on a California judgment:

https://www.courts.ca.gov/1178.htm?rdeLocaleAttr=en

You could ask the debt collection agency if they want to buy the debt from you. At least you could get some money out of it.

Former commercial banker speaking here: Most debt collection companies make their money by paying banks and other financial organizations pennies on the dollar for the old uncollectible debt gathering dust in rusty filing cabinets. Example: A debt collection company would probably not pay more than $100 to $150 to the guy stuck with the $900 small claim debt--but only if it looked like it could be collected.
That is what it looks like is happening here: The debt collector may or may not know that the debtor has money in the bank that could be subject to garnishment (most don't). But rather than offering to buy the $900 debt for $150, why not tell the hapless creditor that if he will "invest" another $800 in the "joint" legal collection effort (allegedly to be done by a real lawyer) they can "share" in the alleged $4,000 the debt collector says is possible to collect. This is where the human greed factor creeps in: The hapless creditor who initially only wanted his $900 back is presented with the possibility of a huge windfall--sharing in $4,000--which usually causes greedy people to bite. So now the debt collector--who has already collected $800 of the $900 total value of the old debt--is in the catbird seat. And the hapless creditor is now out $1,700, $800 of which is totally uncollectible because it is not a debt; it is a loss on the bad investment.

 

[quincy]

Former commercial banker speaking here: Most debt collection companies make their money by paying banks and other financial organizations pennies on the dollar for the old uncollectible debt gathering dust in rusty filing cabinets. Example: A debt collection company would probably not pay more than $100 to $150 to the guy stuck with the $900 small claim debt--but only if it looked like it could be collected.
That is what it looks like is happening here: The debt collector may or may not know that the debtor has money in the bank that could be subject to garnishment (most don't). But rather than offering to buy the $900 debt for $150, why not tell the hapless creditor that if he will "invest" another $800 in the "joint" legal collection effort (allegedly to be done by a real lawyer) they can "share" in the alleged $4,000 the debt collector says is possible to collect. This is where the human greed factor creeps in: The hapless creditor who initially only wanted his $900 back is presented with the possibility of a huge windfall--sharing in $4,000--which usually causes greedy people to bite. So now the debt collector--who has already collected $800 of the $900 total value of the old debt--is in the catbird seat. And the hapless creditor is now out $1,700, $800 of which is totally uncollectible because it is not a debt; it is a loss on the bad investment.

It sure sounds like that is what is happening here.