Recovering Debts As A Sole Proprietor

By: Mark D. Shapiro | Posted: 11th January 2013

Certain states, for example California, do not currently require one to be a lawyer or have a license to be a collection agency to collect the majority of debts or to collect judgments they own. Can an average (non-attorney) individual start a business recovering debts which are not judgments yet? Yes, however it's much more difficult to make a profit doing that than many folks would believe.

My articles are my opinions and are not, legal advice. I'm a judgment broker, and not an attorney. When you need a strategy to use or legal advice, you should retain a lawyer. Sole debt collectors usually have debt owners assign debts to them having a signed contract first, and then they either try to convince their debtors to make payment using the phone or letters, or the collector will sue them to get their judgment based on the debt claim.

There is a website selling a service to help folks learn to be their own collection agency, using only their web site. A problem with that concept and product is most judgment debtors and debtors do not respond to letters sent to them. Debts which aren't yet judgments can't be enforced with a court. Without a judgment, you can't have the Sheriff garnish the available assets of their debtor.

Be aware that when collect non-judgment debts you purchase on a future-payment basis or outright, you're collecting debts, not judgments; and you'll be a 3rd-party collector subject to the FDCPA statues, and the Rosenthal restrictions in California.

If you are not a lawyer, you can't represent others in any court matters, unless you're a collection agency; which means that you represent just someone's rights to attempt to collect that single judgment or debt. Although California does not currently require a collection agency license, many states require folks to be bonded and licensed to collect judgments and/or debts.

Whether a state requires any licensing and/or bonding or not, every debtor situation must be screened and scrutinized, to get a chance to make a profit. Not having judgment, you won't be legally allowed to pull a debtor's credit report, and a debtor might apply for bankruptcy at any time. You could use professional databases to screen the debtors of the potential creditor customers, to help reduce the financial risks.

If your debtor does not respond to telephone calls or letters, the solution might be to sue them to try to turn them into a judgment debtor. The expense and hassle of suing a debtor only makes sense when they appear to own assets. In most states, for example California, that cannot be done in small claims court, so this could be costly.

While a small percentage of debtors may pay you without suing them, you may have to sue most of the debtors. In California, this usually costs between $275 to $500 to sue someone in civil court, including serving the debtor notice of your lawsuit, and a lot more if you retain a lawyer. If your lawsuit isn't contested, there won't be any more lawsuit costs; however if they contest the lawsuit, the costs can be enough to make you want to dismiss the lawsuit. Could you earn money recovering debts? The answer is perhaps.


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One stop shopping judgment recovery: http://www.JudgmentBuy.com - Judgment Recovery. The free, easiest, best and fastest way to begin getting some money back from recoverable judgments. (Mark D. Shapiro 408-840-4610) Free, no obligation judgment evaluations.
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Tags: legal advice, lawyer, assets, judgments, debtor, debt collectors, statues