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DON'T BE HAMMERED BY YOUR DEBT

DON'T BE HAMMERED BY YOUR DEBT

Friday, November 16, 2007

THE TOUGHEST DEBT TO COLLECT - THE SELF-EMPLOYED DEBTOR

The most difficult debt to collect is the one owed by the self-employed debtor. Typically these are middle-income individuals who own their own small business, for example a general contractor, plumber, or beautician. These individuals tend to consider themselves judgment proof and that mentality is reinforced by the economic nature of their employment. They are well experienced in dealing with cash flow problems and pay all of their bills when they are flush with cash and pay none of their bills when they have no cash. They are typically not intimidated by having past due bills and are for the most part, are immune from typical judgment collection activities. The main reason that they are immune or consider themselves immune is that a standard garnishment on the employer, either themselves or the business that they own and run, results in no cash. They will typically answer the garnishment that the business either makes no money, if it’s a garnishment on the business itself or if it’s a garnishment on the owner, that he takes no salary from the business. However, there are several effective methods for collecting debts from a self-employed debtor.

First, you can garnish the cash draw. This simply means issuing a Writ of Garnishment, which is a court order authorizing the Sheriff or Law Enforcement Official to go to the business and seize any money found at the business. The garnishment may be issued for the cash draw and/or the cash register and/or any money found on the person of the business owner. The Writ of Garnishment for the cash draw will not typically result in the collection of enough cash to satisfy the debt. However, it does not take this occurring more than once or twice before the self-employed debtor will contact you and make arrangements for satisfaction of the debt.

A second effective method of collecting from the self-employed debtor is a Writ of Execution or Attachment on the work vehicle and tools of the business or business owner. Again, this is a court order issued by the court directing the Sheriff to go to the place of business and seize certain physical assets of the business. I typically file Writs of Execution for the vehicles and for the tools of the trade of that business. For example, for a plumber, the Writ of Execution would specify the work truck and all of the plumbing tools found on the premises. Again, auction of these items on the courthouse steps, will not typically generate sufficient cash to satisfy the outstanding judgment. However, before you can proceed to auction, I guarantee you will be contacted by the self-employed debtor seeking arrangements for satisfaction of the debt and return of his vehicle and tools.

A third effective method for collection of a debt from a self-employed debtor is the issuance of a Subpoena in Aid of Execution. A subpoena is a court order requiring a person to appear at a given place and time and give sword testimony. I subpoena the self-employed debtor to my office to give a post-judgment deposition regarding his or her assets, the business assets and include in the subpoena a requirement that they present the tax returns that they have filed for the previous five (5) years, copies of all bank statements, for all checking, savings accounts they and the business have, copy of any retirement account information and copy of any business records they have. The tax returns can be invaluable, especially when you discover that a self-employed debtor has not filed taxes for a given year or years. During the deposition, my primary focus is asking the self-employed debtor about current work they are performing and who those clients are and how much they are owed. I then issue a Writ of Garnishment the same day to those clients. This requires the people who owe the self-employed debtor money for work he has performed to pay that money into the registry of the court. In this case, this leaves the self-employed debtor performing work and not getting paid for it. Again, these Writs of Garnishment typically do not generate enough cash to satisfy the judgment, but get the attention of the debtor to the point that he or she will do practically anything to satisfy the judgment.

Collecting a debt from self-employed debtors is difficult. It requires going the extra mile and thinking creatively and uniquely. However, if a debt collection attorney is willing to go the extra mile, these debts can be collected.

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45 comments:

Anonymous said...

Are all of these methods post judgment?

Anonymous said...

you are completely right, I have had a lot of luck with the writ of execution taking the money in the till (we call them till taps).

I have also noticed they are not used that often, and there can be issues getting the clerks to issue the writs and process the proceeds.

Anonymous said...

your an asshole

Mich Guy said...

Great stuff! but how do you do a writ of garnishment for a cash draw? The writs that I use (in Michigan) require that there is a Plaintiff, Defendant, and a garnishee (such as employer, or bank). So who would be the garnishee in this situation?

Anonymous said...

You must love sitting atop your little perch, pretending you are better than everyone else. There is a storm coming buddy ... one day roles will be reversed and you will be the one people are after. Have fun when someone comes and takes all the money out of YOUR wallet.

MrGS said...

This is a lot of great information on debt collection services. Thanks for the post!

Anonymous said...

This is a great resource. Sounds like a few people had some sour grapes. Perhaps they should have presented a better case at trial, and then they wouldn't be worried about someone taking money (that doesn't belong to them) out of their wallet.

Anonymous said...

sitting atop your little perch? Come on! I'm the bird whose been blown away over and over and now all I have is a judgement. All of this information is greatly appreciated when you are owed money from someone who has lied, cheated, and stole from you. It's about time people just pay what they owe and such extreme measures won't have to be taken.

Anonymous said...

Question, what possibilities are there for collecting a debt when the person in question has become an expatriate?

Anonymous said...

Your absolutely right about using these methods to collect judgments. I use these same methods myself and have found over the years that judgment debtors seem to be mentally warped about not paying their bills.
Your methods kick these folks in the ass which is exactly what they need.
Using the debtors examination and a turnover order, if the debtor still refuses to turn over after being ordered by the court, he finds his ass smelling the inside of a jail cell and his new celly named buba. Keep up the good work!

Anonymous said...

I have won a garnishment judgement.The defendent now has filed a slow pay so he doesn't have to pay 25% of his pay check to me. I want him to prove how much he makes and I am also representing myself. (TN) I know he has many assets and is also selfemployed. The garnishment is from his sales job. I want to know how and what forms I can serve him with to make him bring tax forms and bank statements ect.Is it in my rights when representing myself that I ask for him to bring this to court? Can you garnish his sales job and his selfemployment job?
Thank,
Anonymous

Anonymous said...

I agree with those who said you're an asshole! What goes around does come around and some day, the crap will land at your feet.

The Mighty Wynss said...

What do we do with the information based professional who does not operate with cash and operates with little or no equipment, such as a financial planner?

Anonymous said...

These collection services seem like they'd be mighty costly for the regular Joe. Better to settle with your debtor than pour money into the gaping maw of a bottom feeder like this.

Anonymous said...

Please ignore the insults that are posted in these comments. The advice you impart is legal, practical, and accurate. As someone in this profession who is respectful of and courteous to the clients (defaulted debtors) I contact, I greatly appreciate your perspectives.

Anonymous said...

I am a self employeed person that recently lost my business due to the state of the economy. I am currently doing everything I can to pay back the 40000 that I owe my vendors. I have set up payments that I am not certain that I can make. I literally have no money left to even pay for my childs lunchs at school much less grocerys or my power bill. Every dime I have goes back to paying these debts. What exactly would you like someone like me to to? I am currently looking at taking a job waiting tables to just cover getting some food for my children. Garnish my wages too?!? I guess I could go the chicken shit route and declare bankruptcy like so many others are doing. I would think in this current state of the economy, more vendors, creditors would be more than willing to take whatever payment that they could get instead of paying a debt collection agency or attorney over half of whatever it is that they could possibly recover from someone in my situation. I came on here trying to find some type of help for my situation and all I came up with is more reason to claim bankruptcy soon since it is obvious that there is obviously no compasion left for so many of us that were stupid enough to beleive in the American dream of owning our own business and not excepting the huge lines of credit the banks were so eager to give only a year ago. Had I done so, I would have a nice little payment and no pissed off vendors.

Anonymous said...

Great strong arm tactics for a bottom feeder lawyer

Anonymous said...

You represent the worst that this society has to offer. I hope you rot in hell, scumbag

Anonymous said...

Well i am in a debt settlement program do=ue to how the credit card companies increased my rates after one missed payment, others followed suit, making it unable for me to even THINK of paying off any extra previous balances only getting further behind. now i have a law firm taking me to court to get a judgement, so far mst creditors are cooperating, unfortunately one is pushing for a settlement, with that going to hapen i have no other recourse but file for bankruptcy, then the remaining creditors will get nothing after the dissolutionment of the business, so im hoping the people pushing me to court are going to be happy with less than 5 cents on the dollar., oh BTW thats IF theyre lucky. I tried to get everyone something but all it takes is one asshole to ruin the whole thing. Lawyers! LOL well this lawyer wil get a good suprise from me

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Anonymous said...

I don't understand all the negative comments. If you own a business, have a credit card, or just use electricity, you OWE that money to the provider! They are in business too and expect to get paid for what they provide to you! Why is it so hard to understand that they want their money! I do agree that in hard times the person or company owed the money should try to work out a payment plan that leaves something for the debtor to live on, but alot of people in this world seem to think that credit means free...

Anonymous said...

I completely agree with the fact that the offensive people here seem to have some warped sense of entitlement to their debts... the world owes you nothing, people. You can't rack up debts and then not pay them, or society as we know it would completely crash down on our heads. Subprime mortgage crisis caused by people not repaying debts, anyone? It only caused the worst global recession since the Great Depression, losing millions of jobs, trashing the economy, and generally increasing worldwide suffering by a pretty hefty amount.

I've been a debtor due to some awful communication skills between my health insurance company, the hospitals, and their debt collectors, and I absolutely support your blog, including the options that debt collectors can take to collect.

Anyone who gives everyone a more informed view of debt collecting is helping us debtors more than debt collectors because we have never been trained or informed of the laws. I guarantee that we get more knowledge from each post, helping to even the playing field where it's been unevenly skewed due to a lack of knowledge about the law, and I thank you for that.

Anonymous said...

I wonder how you can live with yourself at night? So, you paid probably thousands of dollars to go to college to essentially persecute the middle-class community who you think are idiots anyway and try to take what little money they earn. When the middle class can't take care of their kids or pay their medical bills, you suck every dime out of them and make their children go hungry so you can live in luxury. What kind of a job is that? How can you live with yourself, knowing kids will go hungry or not get the medical attention they need? What kind of a career is that?

Here is a perfect example of what goes down at your job: A parent looses their job due to the economy. The other parent is trying to make ends-meet. Their child got sick and needed to go into the hospital. You think their an idiot because they couldn't pay their hospital bill or they put some of the doctor's bill on a credit card. Hence, in your mind, you want their money and are determined to get it, even though it could leave a hardship on them. So you try to suck every last dime out of them so they can live in a homeless shelter. You ought to be ashamed of yourself.

Anonymous said...

I read the article here in which i found some usefel information. I also read all of the comments. It is obvious that some people are trying to pay their debts as best they can and if they can't I assume that they will be forced to bankruptcy, but at least they will be obligated to pay any new debts they run up. Then there are the ones that think they are just entitled to not pay their bills and gyp people. I don't think that a debt. collector lawyer is a bottom feeder. He is doing legitimate work. Bankruptcy is an out for people who absolutely have nothing to pay with, otherwise people should be paying their bills. Student loans are a problem, because people normally can not get rid of them with a bankruptcy, but I think they can in hardship cases, so there you have it. Pay your bills if you can. One thing though that I have noticed is that credit card companies are indeed raising people's rates to 30% if they miss a payment, which in turn makes it impossible to pay the bill off unless the company agrees to a settlement and it does just take one jerky company to to force someone to bankruptcy with that kind of interest rate. The credit card companies are so crazy to raise interest rates that I have gotten the interest rates on my cards raised to 23%, 22% and 18% and I pay off my bill every month. Of course since I do that I end up with 0 interest, but the point is if they are doing that to people who are paying their bills even something crazy is going on out there with credit card interest rates and we will be seeing a lot more bankruptcys. I don't feel sorry for the credit card companies who don't get paid because of what they do with interest rates, but what about just regular business and self-employed people who need their money. They will be gyped more also if the credit card companies keep forcing people into bankruptcy with their exhorbitant interest rates and fees (overlimit fees, late payment fees, ect.)

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Jonathan said...

hahahha fuunny you'll have no luck with me.. i too am self-employed and have a huge income and but i never worry about my personal debt, i have my lawyer to deal with your kind of people... i really don't give a backside what you want or need, have a nice life. hahaha

Anonymous said...

THANK YOU for such an excellent and informative post!

I'm a law student working at a legal aid clinic and I will put this information to good use!

Anonymous said...

If you're self employed and these tactics are used against you, fire yourself and put everything in your spouse's name...the business, personal assets, everything. Of course this is assuming your debts are in your name only. Just wait out the statue of limitations on the garnishment.

Also, if that fails, bankrupcy is not the end of the world, and you get to keep your business, money, property and assets. Yeah, your credit takes a huge hit, but you can come back from that by getting a secured credit card from your bank and rebuilding your credit within' a few years. Besides, IMO, credit is only good for letting you buy things you can't really afford in the first place.

It comes down to this, are you willing to "out asshole" the collectors?

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Anonymous said...

As a small business owner I feel as though this post states that all small business owners are deadbeats. How many major corporations operate in debt every day? You don't see sheriffs running into GM demanding the cash from the registers or all the cars on the lot for auction.
You should be ashamed of these inflammatory comments.

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Anonymous said...

Eat shit and die, scumbag... You are everything wrong with society.

Car Loan Guy said...

What do you do if the self employed person's business is an LLC or Corp? Is it the same or is there corporate protection? I have a tenant that is refusing to pay rent for the last month or so of his lease (or until he decides to move). He has the money, but is choosing not to pay, and to move out when he feels like it. He has always paid his rent with checks from one of his LLC's or another. I have started the eviction process, but I am thinking about how I will collect. Any insight would be great.

Landlord in WA said...

What do you do if the self employed person's business is an LLC or Corp? Is it the same or is there corporate protection? I have a tenant that is refusing to pay rent for the last month or so of his lease (or until he decides to move). He has the money, but is choosing not to pay, and to move out when he feels like it. He has always paid his rent with checks from one of his LLC's or another. I have started the eviction process, but I am thinking about how I will collect. Any insight would be great.

Anonymous said...

can someone please post an example of both writs? It's a public record, if NOT the PDFs then just a case # where one can look it up in the court system and see the scanned papers?

Thanks

Anonymous said...

WOW! Guess those who are cursing are the debtors who should have made other arrangements to pay their bills. If we were all as focused on making ends meet and living within our means instead of jumping into stuff we can't afford there wouldn't be so much debt -- look at the government for a prime example. Quit whining about everyone being harsh because you owe money. If you have to flip burgers to pay your bills, do it. Selfish pride is the worst evil there is. Nobody owes you anything. Why should honest tax paying and bill paying citizens have to bail out the slackers all the time anyway? Debt is inevitable in this society, how to manage it is your choice.

Anonymous said...

I agree with everyone who says you are an asshole. No offense. The banks do nothing but rape people on interest all day long, and then when these people are forced to choose between eating or paying minimum balances, they choose to eat. Then some fucker like you comes along and tries to take away the lunch money in their pocket. Fuck you, and everyone like you.

Anonymous said...

Lawyers of this ilk are bottom feeders. What a waste of an education.

Anonymous said...

The one thing you fail to let all of these people know is BANKRUPTCY will wipe all your hopes of ever collecting away and the person you have wasted all your efforts on gets to keep everything. Lawyers do nothing but waste your time and thousands of dollars. Great advice is go to the persons house knock on there door every week. People hate it and usually it will place more stress on them and there families. THEY WILL PAY!

Val8rie said...

Exactly, and those deadbeats, those big corporations, got big bailouts from the government. Yet my rent, food, gas, utilities all go up while my income goes down.

Robert Brady said...

I was served with a Citation to discover assets on a car in my garage that they refuse to come get. Now they want to freeze my business account at my bank when its under my TAX NUMBER. CAN THEY DO THAT. BOUGHT THE CAR UNDER MY SS NUMBER.

Anonymous said...

Most Sheriff Dept. don't have time for this kind of krap. If you don't tell them exactly what they need to take, they won't mess around.

Anonymous said...

Thank you for posting this advice. As per the rude comments of angry people who are losers who cant pay their bills- I am not surprised of their rude comments and low IQ. No one is entitled to get things for free from someone else who actually works for their money. If you have not payments to someone that you owe money then dont complain if they want their money back. If you are so socialist/ communist why dont you to Cuba. Lets see how well that works fo you. Even russia is not communist anymore. You are not a child or an idiot to not know that you cannot pay your bills. Dont leave beyond your means and expect someone else to support your loser self. Get a better job, dont borrow money that you cannot pay and move to cuba if you feel entitled to someone elses money.

Anonymous said...

landlord- ask the court that tenant pays rent to the court directly until the matter is resolved. Protective order I believe that its called. Maybe you are able to proof the relation between the renter and the LLC who pays the rent. Do an interrogatory . try to include the LLC in the suit so the LLC will have to be represented by an attorney. Even if the judge throws out the LlC as a defendant if you dont have a lease with the LLC . they will still have to get counsel to represent the LLC so they might settle instead of paying an attorney.

Anonymous said...

Thanks for this great info!! For those of you angry at the truth stated here, you're obviously a person who owes someone or some company their money back. Pay up! Something is better than nothing, make an attempt at a payment plan.
As for bankruptcy on the Judgement, possible... But You CANNOT file bankruptcy on a Child Support Judgement .(News for you self employed dead-beat ( dads and moms) out there!