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Friday, November 16, 2007


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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