A civil judgment resulting in a monetary award for one party is known as a money judgment. Enforcing a money judgment is up to the winning party (the judgment creditor) and his representatives. In some cases, creditors choose to sell their judgments to collection agencies. But is that a smart idea?

Selling Judgments Like Assets

It turns out that legally recognized debts are considered assets under the law. That is why they can be bought and sold. If nothing else, a civil judgment recognizes the existence of a legal debt and the debtor’s obligation to pay it. That makes a judgment an asset with resale value.

To the original creditor, a judgment has monetary value. Its value could be a combination of the original judgment amount plus legal fees and interest. But depending on the case in question, its value could also include additional monies for lost income, pain and suffering, and more.

These are all things that a judgment creditor needs to consider before selling. There are times when selling is a smart move. There are other times when it is not.

The Pros of Selling

Among all the advantages of selling a judgment to a collection agency is the ability to quickly rid oneself of the responsibilities. Bear in mind that courts do not get involved in enforcement efforts. Collecting a money judgment is left entirely up to the creditor and its representatives. There is tremendous responsibility that comes with collection.

Some of the other pros of selling include:

• Being able to walk away and move on.
• Being able to concentrate on more important things.
• Minimizing the reputational damage often associated with collection efforts.
• Completely eliminating the risk of running afoul of the law while collecting.

Selling a judgment to a collection agency is a legitimate option. But it is not all sunshine in roses. There are some disadvantages as well.

The Cons of Selling

At the very top of the list of cons is the sale price. Collection agencies determine how much they are willing to pay based on a variety of factors including their risk, the debtor’s income and assets, and even the amount of time that has elapsed since the judgment was originally rendered.

Unfortunately, the riskiest judgments command the lowest prices. According to Judgment Collectors, a Salt Lake City, UT, it is not unheard of for collection agencies to offer pennies on the dollar.

The Alternative

Although there are other cons associated with selling a judgment, low sale prices are the big issue for many creditors. But what can a creditor do without enough time and resources to pursue collection in-house? The only alternative other than walking away is hiring a collection agency. The agency works on behalf of the creditor in exchange for a flat fee for a percentage of the amount collected.

Incidentally, Judgment Collectors does not buy judgments. They work on consignment. Clients hire them in exchange for a percentage of the amount they manage to collect. If they collect zero, they get paid zero.

From my perspective, the consignment model is the best way to go. Consignment offers the advantages of selling without the disadvantages. It also eliminates any risk on the creditor’s part. If things do not work out, all the creditor has lost is time.

None of this is to say that it is never appropriate to sell a judgment to a collection agency. Just the opposite is true. But when selling is not in a creditor’s best interests, there are other options. Hiring a collection agency willing to work on consignment is at the top of my list.