With a typical case – and, fair warning, most cases end up being atypical in one way or another – the collection process will look a lot like this:
1. You will find an attorney to represent you. Typically, you will want an attorney who does some volume of collections. Collections are often distinguished by the fact that even meritorious cases are uncollectible because the debtor has no income or assets. An attorney with a volume of collections work can provide legal services on a contingency basis; the paying claims will, in effect, subsidize the cases that end up being financial dead ends. This business model minimizes the risk for both lawyer and client. You will explain the claim to the attorney, provide him with supporting documentation, and provide him with any information you have about the debtor that will assist with collection of the debt. For example: contact information and information about the debtor’s income and assets.
2. The lawyer will send a demand to the debtor. For retail debts, the letter might be necessary to comply with the Fair Debt Collections Practices Act. However, for most debts, even in the absence of obligations under the FDCPA, it is simply sound practice to give the debtor notice that an attorney is now involved and give the individual a chance to voice any disagreements or provide the individual with an opportunity to resolve the matter before formal litigation begins.
3. The lawyer will file a summons and complaint. This step requires the creditor to advance a filing fee for deposit with the Clerk of the Court. The exact amount of the filing fee can vary somewhat, but generally speaking, a small claims suit will require a filing fee of $94 and a suit filed outside of the small claims docket will require a filing fee of $154. There are some strategic considerations for choosing between the small claims and the plenary docket; but the small claims limit is $6,000. To obtain a judgment in excess of that amount, a creditor will need to file suit outside of the small claims docket. The complaint is a (usually) brief set of allegations establishing that, if those allegations are true, the defendant/debtor owes the plaintiff/creditor money. The summons is a document containing instructions from the court informing the defendant as to his or her obligations to respond to the complaint.
4. The summons and complaint will be served on the defendant. Or, at least, service will be attempted. This step can be troublesome if the debtor does not stay in one place for long or is actively avoiding the summons. However, successful service of the summons on the defendant is the mechanism by which the court acquires personal jurisdiction over the defendant. Personal jurisdiction is what gives the court the right to direct orders to the defendant. (The plaintiff submits to the jurisdiction of the court by virtue of filing the complaint.) Service is typically accomplished either by certified mail or by Sheriff’s service. Certified mail involves the debtor (or agent) signing for the mail. Sheriff’s service is usually accomplished either by personal service (e.g. handing the documents directly to the defendant) or by “copy service” which is accomplished by leaving a copy at the specified location and by mailing an additional copy. If neither copy is returned to the Sheriff, service is generally regarded as sufficient. If the summons and complaint are returned unserved, the case can not move forward; and it will be necessary to attempt service again.
5. Once service on the defendant is accomplished, the defendant-debtor has an opportunity to respond. If it is a small claims matter, the defendant is usually required to appear and indicate his or her dispute in person. If it is on the plenary docket, the defendant is usually required to file a response in writing. Often times, the debtor does not respond, and the creditor-plaintiff is entitled to a default judgment. Often times, the debtor does not have a dispute with the fact that the debt is owed, and an agreed judgment is entered. If there is a material dispute, then the litigation process will be followed. For small claims, this can be relatively quick; consisting of a brief hearing in front of the judge where the each side presents their witnesses and documents within perhaps a month or two of initially filing the claim. For larger disputes, the process can be lengthy, potentially requiring a year or more of discovery and a jury trial.
Ultimately the goal of this process (assuming that payment is not forthcoming) is to obtain a judgment. The judgment reflects that the court has determined that the judgment debtor owes the judgment creditor a certain amount of money. From there, it is no longer necessary to argue about whether or how much is owed. The judgment also gives the judgment creditor certain rights and tools for discovering income and assets and having them applied toward satisfaction of the judgment. The post-judgment proceedings will be the subject of a later post. (See Part 2: Collecting the Judgment).
Have a collection matter in Lafayette or the surrounding counties that requires legal attention? Contact us.