Because I am a judgment broker, I witness a vast quantity of judgment sales and many more attempted judgment sales. It seems every week, the amount of cash anyone is willing to pay for any judgment is declining.
The value of a judgment depends solely on the status of the judgment debtor. With the economy shrinking, almost everything and everyone’s assets are downsizing or losing value. Wages are down, home prices are down, employment and opportunities are reduced, saving rates are down. When a debtor has nothing, a judgment is worth nothing.
Even if your judgment was for fraud, where the debtor stole a lot of money from you, most frauds do not do very well in the long run. Many people that were rich a few years ago are no longer rich. Most people are not doing so well now, and most debtors are doing even worse.
Buying a judgment is always a risk. In an upward economy the risk was smaller, because most debtors (or their families) often made more money in the future. In a growing economy, buying a judgment would be a moderate risk.
Now, buying judgments is much more risky. Here are my top ten reasons selling judgments for cash up-front, brings much lower cash prices now, because of the increased risks:
1) Job loss and business failures. Debtors may find work under the table, for instance selling drugs or being an unlicensed contractor, etc. Such income sources are very difficult to verify or recover.
2) With home prices going down, liens are much less likely to pay off.
3) Debtors are now more likely to file for bankruptcy protection. In the overwhelming majority of cases, bankruptcy wipes out most judgments. Note that even if your judgment was for fraud, it takes a lot of time and money in bankruptcy court to bring this to the court’s attention. Also, if the debtor is poor, you still will not get paid, or recover your extra costs to make your judgment non-dischargeable.
4) Debtors are now more likely to try to appeal or to set-aside/vacate judgments. If you buy a judgment outright and the debtor wins a motion to vacate, your judgment is gone.
5) Recovery costs are always rising. Courts and sheriff often raise their fees.
6) Laws are changing to better protect debtors, protecting their privacy and increasing their exemptions from a creditor’s levy.
7) Every year it becomes more difficult to recover a judgment against debtors better than 65 years old.
8) Because asset values (vehicles, property, etc.) are declining, the economics of sheriff auction sales are making less sense.
9) As the economy slides, more and more people want cash now for their judgments, which drives cash up-front pricing for average judgments down.
10) The same risks that have always kept cash up-front prices low still remain. If the debtor dies, becomes disabled, poor, moves far away, or goes “underground”, the judgment becomes worthless.
Sometimes good things happen to debtors, for instance they might inherit property or win the lotto. Cash up-front buyers cannot count on such rare potential luck.
However, future pay recovery specialists can take advantage of such lucky breaks, and then share the luck of the judgment debtor with you. Unless your debtor is rich, you are always better off with a future-pay judgment enforcer or a contingency collections lawyer.