Debt Collection and Judgment Collection: What’s the Difference?

Running a business saddled with a heavy load of outstanding debt is no fun. Outstanding debt interrupts cash flow. It inhibits a company’s abilities to pay its bills. It can even leave a company being unable to stay financially afloat. The good news is that professional debt collection and its companion, judgment collection, are readily available.

Despite what you may have heard, debt collection and judgment collection are two distinct practices. One is more general while the other is very specific. In either case, knowledge and experience win the day. A collection agency with a proven track record can mean the difference between collecting on bad debts and having to write them off.

General Debt Collection

As you might have guessed, debt collection is the more generalized of the two practices. For the remainder of this post, it will be referred to as ‘general debt collection’. It involves everything from chasing down late credit card payments to working out payment plans with customers who seem to have fallen behind.

The primary characteristic of general debt collection that separates it from judgment collection is the absence of court intervention. Let’s say you have an auto repair shop trying to get one of its late paying customers to catch up. After repeated collection efforts, the repair shop turns to a general collection agency.

That collection agency may or may not buy the debt from the auto shop. Either way, the agency takes on the responsibility of collecting. It sends letters to the customer; it contacts the customer via phone. If and when the customer decides to pay, money is sent to the collection agency.

Judgment Collection

Judgment collection is a more specified form of debt collection. There are two things that distinguish it from general debt collection. The first is the judgment itself.

A judgment is essentially a court order recognizing the existence of a legal debt and compelling the debtor to pay. In the previous example of the auto shop, we were not dealing with a judgment because civil litigation was never utilized. However, the auto shop owner could have chosen to take his customer to court in order to procure judgment.

The other thing that separates judgment collection from general debt collection is attorney involvement. Given that judgments are the result of legal proceedings, debtors are almost always represented by attorneys. Even after the court proceeding, defendants may try to refer collection efforts to their attorneys.

A Variety of Collection Tools

According to Utah-based Judgment Collectors, debt collection agencies of both types have a variety of collection tools at their disposal. Judgment collection agencies have a few tools that general agencies do not have access to. For example, a debtor’s wages cannot be garnished without a judgment in place. With a judgment, wages can be garnished for as long as it takes to pay what is owed.

The downside to all of this is that courts rarely intervene when it comes to enforcing judgments. They are happy to rule on cases and enter those judgments into the record, but they leave it to creditors and their attorneys to collect payment. A lack of court involvement allows debtors to avoid paying, should they choose to do so.

Avoiding payment is the very reason companies like Judgment Collectors exist. Sometimes, debtors need to face the possibility of wage garnishment or asset seizure to motivate them to pay. Rarely do things go this far in general debt collection.

Now you know the difference between general debt collection and judgment collection. Though similar, the two are distinctly different practices.