Information: The Creditor's Best Weapon

A better result is obtained when the credit manager or creditor gets involved in the enforcement process.

By Harold Stotland, JD

It is no accident that every nation with an army has that armed force supported by an intelligence network. Military leaders know that knowledge of the enemy's weaponry and tactics will increase the chance of defeating that enemy.

This analogy to enforcing judgments is not missed by any attorney whose job it is to collect judgments. While it may not always be easy to obtain a judgment for a creditor, it is almost always difficult to satisfy that judgment. In fact, most collection judgments are entered by default – even the large ones.

What can the creditor do to assist the attorney in collecting a judgment? Our experience is that a better result is obtained when the credit manager or creditor gets involved in the enforcement process.

The creditor should never assume that the attorney handling judgment enforcement is knowledgeable and competent. The creditor or collection agency always should review the entire file and make certain that the attorney has access to all the credit reports and credit applications that could assist in locating and levying on assets. If this documentation already was supplied to counsel, then the creditor should remind the attorney of this fact.

I recall a case in which I had a substantial business judgment and no credit information on the judgment debtor. I asked the credit manager to talk to the sales representative. It turned out that the sales rep played golf with the debtor and was privy to personal information that helped me to collect the judgment.

In almost every substantial collection matter, someone in the creditor corporation has helpful information or documentation that would assist in obtaining satisfaction of a judgment. If the attorney handling the case is not a “live wire,” it is the creditor's responsibility to get the information to that attorney and to make certain that the attorney acts on that information.

I recall another matter in which I talked to the creditor's sales representative. As a result, I obtained the name of the debtor's largest customer. In that circumstance, we were able to issue a garnishment against that customer and satisfy the judgment quickly.

To assist in collecting a judgment, our office uses the Internet to obtain information on almost every judgment debtor – information also available to the general public. In addition, many business debtors have their own Web site that often contains information helpful to a judgment creditor. Remember, however, that the Internet does not replace interviewing people in the creditor's organization who may have personal knowledge of the debtor. Only by using old-fashioned methods combined with technology will the creditor's attorney be able to maximize the recovery on a judgment.

Information is vital, not just for the enforcement of judgment, but in every stage of the collection process. No creditors' rights attorney can operate without spending thousands of dollars each year for unlimited access to databases, such as LexisNexis or Westlaw. For example, we need to be able to search a database for legal compositions, limited liability companies, limited partnerships and assumed names. We also need to refer to the Uniform Commercial Code filings for liens in addition to reviewing any litigation that has been brought against a debtor by other creditors.

This kind of information assists the attorney in advising the client whether to sue, whom to sue and how to satisfy the judgment. On the other hand, it is just as important to help the attorney determine when and whether to abandon a collection claim. If we knew everything about our commercial debtor, we would not open up half the files we do. The ultimate skill is to separate those matters worth pursuing from those the creditor should abandon.

From the standpoint of economic efficiency, information drives the collection process. All cases come to an end and good information helps the collection attorney come to that end sooner rather than later. From the standpoint of all parties to the collection process, this idea can be summarized as follows: the object is to close the file sooner rather than later. The longer the matter stays open, the more it costs the creditor, the collection agency and the attorney.

It is up to the creditor or collection agency to make certain that the attorney has gone through all the necessary procedures to develop information. If that attorney does not have the time to interact with the creditor for that purpose, the creditor should get a new attorney.

ABOUT THE AUTHORM

Harold Stotland is a principal with Teller, Levit & Silvertrust, P.C. in Chicago, Ill., where he directs and supervises the firm's Commercial Collection Division. Contact him at hstotland@tellerlevit.com.