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Temple University School of Law
Woodward, William J.

Individual Debt Collection

I. Collection Without Courts

A. Nonjudicial Collection methods
1. Leveraging
(i) Creditors think of ways to enhance its leverage w/ the debtor to increase the likelihood of getting paid
(a) Ex: Harassing phone calls. Ad’s in the paper calling them out. Threat of legal action
2. Indirect leverage in the Legal System
(i) Ex: Statutes requiring businesses to halt operations until they pay their employee’s
(ii) Ex: Jail time for ex-spouses failure to pay child support
3. Credit Information Process
(i) Fair Credit Reporting Act

B. Restrictions on Nonjudicial Collection
1. Usury Laws
(i) Laws preventing creditors from charging more than a pre-determined rate of interest
(a) Significant penalties to creditor for violations
2. Federal Statutory Controls on Nonjudicial Collection
(i) Fair Debt Collection Practices Act
(a) Acknowledges the difficulties w/ debt collection and fashions a remedy for debt collection abuses

II. State Law Debt Collection

A. Collection Remedies
1. Introduction to Judgment Collection
(i) Involuntary Liens
(a) Judgment
(1) The judgment will only give you a document suitable for enforcement. You have o interest and no priority in any of the property yet.
(b) Execution
(1) Judgment creditor as only an unsecured interest until execution is obtained on the judgment
i. File execution writ à Requires the sheriff to go look for non-exempt property to seize and sell (levying on the assets)
a. Once levied you’re a judgment lien creditor as to the property you seized
b. Proceeds are paid to the judgment lien creditor until paid in full, and then excess is returned to the debtor
(c) Turnover Orders
(1) Instead of levying on the assets you get a court to order the debtor to turnover property
i. Threat of incarceration for non-complying debtor
(2) Generally can’t get a turnover order unless you’ve gone through execution have exhausted all alternatives
(d) Judgment Liens by Recordation
(1) Allows you to get a judgment lien w/o having to go through the execution process by simply recording the judgment in the county where the property/deeds are filed
i. Gives creditor an interest in all debtor’s real estate in county of recordation
ii. Most states allow the lien to attach to post-judgment property too
iii. NOTE
a. Pretty much ONLY for real estate
(2) Allows creditor to pursue execution at leisure since they’ve already recorded their spot in line
(e) Family Debts
(1) Special rules for spousal and child support payments
i. Generally threat of imprisonment for non-compliance
(ii) Voluntary Liens
(a) Secured Liens
(1) You get the debtor to agree on it
i. Ex: mortgages, loans w/ security interest on property
(b) Generally requires secured party to give public notice of its interest, usually by come recordation in a government office
(1) Once the lien is recorded it’s perfected
(iii) Statutory Liens
(a) Ex: Landlord lien
(b) Ex: Artisan lien
(1) I leave my car at garage for repair à They get to keep it until I pay
(iv) Property Exempt from Collection
(a) Ex: Family Home and Household Goods
(a) Get judgment à Prepare writ of execution à Deliver it to the sheriff so as to get in priority line (you need to give sheriff instructions as to what you want them to do – you want to think about what could go wrong and instruct the sheriff on what you’d want him to do in that situation) à Sheriff levies (most states hold that the priority starts now)

2. Priorities
(i) First in time stands in line
(a) Split view
(1) Some states say that priority doesn’t start until you attach to property.
(2) Other states say that priority starts when you deliver to the sheriff
(ii) Back

How Much?
a. Amex can only step into shoes of the creditor à Can only get the 10/week set forth in the underlying K
b. Once garnishment writ is executed, Epps has to pay Amex. If she pays Jake instead then that’s her own fault.
ii. If Epps defaults?
a. Split View
1. Some say Epps only liable for the debt she owed to Jake (500)
2. Others say Epps liable for entire debt owed by Jake to Amex (10k)
(ii) Restrictions on Wage Garnishment
(a) Federal Garnishment Restrictions set minimal protections to prevent creditors from garnishing all of debtors wages and killing their livelihood
(1) Some states go above and beyond these minimal restrictions. Others don’t
i. Some states ban it altogether except for child support and alimony
(iii) Garnishing “New Property”

4. Pre-Judgment Remedies
(i) NOT done anymore b/c of Due Process restrictions
(a) Seize property first and ask questions later

B. Fraudulent Conveyances and Shielding Debtor Assets
1. Uniform Fraudulent Transfer Act
(i) Protects creditors against debtor who’d obstruct collection efforts by conveying all their property away, usually w/ an intent to have it re-conveyed back at a future date
(ii) How to avoid a Transfer (intent not required)
(a) Fraud (§4.a.1)
(1) Actual intent to hinder, delay, or defraud
i. Factors:
a. Close relationship among the parties to the transaction
b. Secrecy and haste of the sale
c. Inadequacy of the consideration
Transferor’s knowledge of the creditor’s claim and his own inability