(From The Debt Collector's Handbook: Collecting Debts, Finding Assets, Enforcing Judgments, and Beating Your Creditors, Chapters 1 and 2)
All cookbooks teach the foundations. What is the temperature of the oven? How do you dice and slice onions? How do you make couscous
without turning it into mush? How do you blanch asparagus? How to slice an expensive cut of meat? What wine should be served with lamb,
salmon, or pasta?
Learning the ropes of unearthing assets that are secreted in bank accounts that are cloaked by newly minted entities requires a course in the
foundations. Some of this information is new, some is old, some is tried, but all is true. Take a seat, grab the coffee, and highlight what you
want in yellow marker. We are going to offer various techniques, lessons of law and business, the rules of the legal and business road, the lingo
of the experts, the rudiments of enforcement, and the deep, dark secrets of hiding money. I will show you the money, Tom.
We are going to expand your lexicon. You are going to talk the talk, do the walk, and ask questions that show that you know your “stuff.” Do
you know why most folks decline to ask questions when they should? Answer: They don't want to look stupid. This section of the book is
going to provide you with a basic education of business, real estate, and law. After your read this section, you will know when to ask the
question. Better yet, you can phrase the question that will generate a meaningful answer, and you will not look like a total dunderhead.
Consider this information the tools in your Craftsman® tool chest. This chapter will provide you with the language of law and business that
enables you to recognize an arrow or “X” on the map. Let's put a name to the face.
We are going to march through the rudiments of law and business. Many of you are lawyers, paralegals, legal secretaries, and businesspeople
experienced in the law; however, we will get reacquainted with these basic principles through the prism of collection and enforcement and
discover what is important and what is a waste of time. Don't get mad if the basics here are too basic, but they are a good starting point.
Genesis starts with “In the beginning, God created the heaven and the earth,” and we start with “In the beginning, someone is going to sue.”
Whatever the injury—broken contract, auto accident, slip and fail, or other claim—the aggrieved party will hire a lawyer who files a lawsuit.
The lawyer will serve the lawsuit. The defendant has about 30 days to respond. If the defendant does not respond, the lawyer will move the court
for a default judgment that spells out compensation due the plaintiff. A judgment is a piece of paper. Although most defendants settle the lawsuit
when served, or pay judgment when entered, some defendants refuse to pay the judgment. A civil judgment is not an order directed to the
defendant to pay money, but a declaration that the judgment creditor is owed the money. Judgments are not self-executing. Bad news: a
judgment will not spring off its hind legs and bite the debtor, no matter how much you'd wish that. The big judgment might be pretty, but
absent money, beauty is skin deep. All those zeroes dazzle.
Enforcement requires that do you do something. Do everything. This is lesson number #1, and this book is lesson #2. This means that a
judgment creditor necessarily must enforce the judgment, which means that the judgment debtor can ignore the judgment until pushed. Call the
recalcitrance of the debtor the middle-finger treatment. Some debtors will pay the judgment because a judgment will damage their credit and
might bar them from a job that requires a good financial history or even a government job that requires a background check or security clearance.
Every so often, the FBI calls us to inquire whether a judgment was paid and to learn the circumstances of the case. Enforcement means that the
judgment creditor can legally, and involuntarily, separate the defendant from property that the sheriff can sell and remit the proceeds of the sale to
the plaintiff. Enforcement means that the judgment creditor can garnish wages, bank accounts, or receivables. Enforcement means that the
judgment creditor can record or file liens that will encumber the defendant's property, which if sold, might produce payment. Enforcement also
means that the defendant, or third parties, are compelled to disclose assets and the identity of person, such as a bank, who holds the assets. This
process can take months, years, or decades. Some states allow an aggrieved party to attach the assets of a defendant before judgment; this legal
process is called an
When faced with a lawsuit, some defendants will hire a lawyer who usually will respond with an answer to the lawsuit. Sometimes the lawyer
might ask the court to change venue (where the lawsuit was filed) to a new venue that is more convenient or advantageous to the defendant.
Typically, the answer denies the allegations of the complaint and sets up affirmative defenses, such as the statute of limitations. Sooner than later
(and depending upon the states), plaintiff and defendant will go to trial. The judge or jury will decide the case. Despite Law and Order, trials
offer parties the opportunity to tell their stories to the trier of fact (a judge or jury). The trier of fact can believe or disbelieve the witnesses,
interpret ambiguous documents in a contorted manner, or just feel sorry, or truly hate, one of the parties. Juries do have evil eyes. Here is the
standard trial pabulum: Juries vote for the party they like most. Here is a better slice of realty: Juries vote for the side that they hate the least.
Trials are tests of legal skills, professional presentations to the jury, and just plain old luck. Details are a big deal. Urban legend suggests that
lawyers should drive Camrys and not Porsches to court, wear Timex watches and not Rolexes, and always shine their shoes. Dump the tasseled
loafers and try the mahogany-hued wingtips. Postmodern claims of discrimination, workplace harassment, credit and bank policies, and
apartment rental, all based upon race, color, creed, national origin, or sexual orientation, launch thousands of lawsuits. Companies with all
white, male managers invite lawsuits, Mr. Wal-Mart. That is true. However, jurors view litigants and their lawyers commensurately through
this same prism, whether good, bad, or horrific.
The aggrieved litigant can appeal; this action might lead to a reversal (unlikely if a jury verdict), but would certainly accrue expenses and fees. If
the defendant loses, and appeals, but does not post a bond, the plaintiff is free to execute on the judgment. The fact of an unbounded judgment is
worrisome to the plaintiff because the fact that the defendant could not post the bond means that the defendant might lack the financial ability to
pay the judgment. Appeal bonds are collateralized, which means that the defendant must deposit cash, stocks, or other collateral equal to the face
of the bond. An appeal bond is one-and-a-half times the face amount of the judgment. If the judgment is in the amount of $1,000,000, the bond
amount is $1,500,000, and hence the collateral demanded by the bonding company. Large companies can post a bond without collateral based
on their net worth. Bonding companies charge a premium anywhere between 0.5 percent and 5 percent, depending upon the defendant and his or
her financial net worth. If the plaintiff won at the trial court, and the defendant posts a bond, you are the creditor, and you should not have
bought this book.
If the claim is an auto accident, slip and fall, or industrial accident, the defendant probably has insurance that pays off the plaintiff. These cases
tend to settle, but not always, as insurance companies find that an aggressive defense to marginal claims sends the message that the plaintiff is
going to huff and puff till blue in the face before seeing any money, if any. Big-time injuries, class actions, employment discrimination, wrongful
deaths, commercial contracts and leases, toxic torts, Ponzi schemes, and financial frauds cycle through this civil process, including megatrials,
which might produce multimillion-dollar judgments.
These big cases are not cheap. Lawyers (or parties) can invest hundreds of thousands in costs and charges, in addition to fees if the lawyer is
working by the hour. In antitrust cases, lawyers can readily invest many millions. If a million-dollars is required to finance the lawsuit and
collection or settlement is not guaranteed, counsel (or the financier) might hesitate before filing suit, no matter how righteous the injury, the
gargantuan size of the judgment, or even the notoriety through the media. Nobody wants to work for free, or worse, go into the hole. At least
Marie Antoinette's subjects ate cake. No matter how the plaintiff got there, if the plaintiff wins the case, but the defendant declines payment, the
parties change their name and status. The plaintiff becomes the judgment creditor, and the defendant becomes the judgment debtor.
Let our games begin.
THE BASIC TERMS OF REAL ESTATE, BANKRUPTCY, ACCOUNTING, AND LAW
The law of enforcement sits tall in the saddle of business, Duke. You cannot be a financial detective without knowing the terms of art, the
language of business and real estate, and basic investigative techniques. Knowledge of law and business enables you to spot the arrows and “Xs”
on the treasure map. Chicken Delight can only rescue you if you have your foot on the gas and fried chicken as your wingman. Let's embrace the
fact that enforcement enables the judgment creditor to reach the assets of the debtor. Successfully wresting the asset out of the hands (or claws) of
the debtor requires a legacy knowledge of personal and real property principles, the rudiments of business and law. If you want to grab patent
royalties, understanding how a patent works amps up your chances of grabbing the patent, or at least frightening the living daylights of the
debtor by the fact that you might succeed. If the debtor believes that you can snare the patents that are the core of the business, the debtor might
affix the pen to the instruments of surrender, which is called a check.
Other challenges confront you. So your debtor owns a valuable trademark? What is the difference between a patent and trademark? What if your
debtor owns a home? Ejecting Mother Hubbard from her shoe is expensive and cumbersome. Figuring out whether the shoe is above or below
water might save you time, money, and effort. This is knowledge that should enter your business wheelhouse, no greater or lesser than the law
of enforcement. If you are going to threaten putting Ms. Hubbard on the street, at least learn the business and legal principles to get it right.
Unrelated to this problem is the definition of a well-done steak: When steak is served to you, and you flip over the meat and see the brand name:
Now if you really want to frighten the bejesus out of your debtor, crank up the machinery to grab the domain name and trademark. This is
delicious. This takes a little knowledge of anticyber-squatting. If you can grab the trademark and succeed in acquiring it, you might need to
engage in the same business as the debtor so that you can grab the domain name because the domain name squats on your newly acquired
trademark. Do you want to put the fear of God in the heart of the debtor? Launch a campaign to seize the trademark, domain name, and patents.
Think Berlin in May 1945 if you succeed. Let's start with the basic terms, buzzwords, key concepts, and the lingo. At least we will sound good.
Reprinted with permission from The Debt Collector's Handbook: Collecting Debts, Finding Assets, Enforcing Judgments, and Beating Your
Creditors, available for purchase from:
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