Let’s Talk About Income

MONEY: Dough. Moolah. Bucks. Clams. Cheddar. Benjamins. Greenbacks.

I’d like to start by stating the obvious: you wouldn’t be interested in judgment recovery if you weren’t looking for a way to make money, or improve your quality of life – that much is clear. But if you’re looking for some kind of pie in the sky promise of riches and an elevation to lifestyles of the rich and famous overnight, I’m sorry to inform you that this isn’t it.

A judgment recovery business is most definitely not a get-rich-quick scheme and I will never promise that you’ll be wealthy overnight. I’m not going to try to lure you with any false expectations, or by posing in front of my mansion and sports car and promising this will be you in two weeks. If you’re looking for easy money, you should probably look somewhere else, and I sincerely hope you find it.

So let’s be reasonable. The truth is that any legitimate business requires hard work, research, expense and plain old elbow grease. Judgment recovery is no exception. But if you’re willing to invest the time and effort, a judgment recovery business can provide a decent and sustainable income of about $80,000 a year, for a very low cost investment.

In this newsletter I’ve outlined some examples and scenarios to explain how money is earned with a judgment recovery business, so you can have a better idea about what kind of income you’ll generate and how that happens.

While there are hundreds of ways to collect a judgment, there are just two basic ways to take assignment of them. Both methods transfer all right, title and interest from the judgment holder to the assignee (you). That’s important because it allows you to collect the judgment on your own behalf (an article for another day). It’s also worth noting that
judgments accrue simple interest from day one, which means two to three years down the road they are worth significantly more than they were when first awarded.

The first method is to purchase the judgment with the agreement that you’ll make payment when – or if – the judgment is collected, paying half of what you’ve collected minus any expenses.

Example 1:

  • A judgment was awarded two years ago for $5,257.00.
  • The judgment holder assigns the judgment to you for enforcement.
  • With a post-judgment interest rate of 10%, the judgment is now worth $6,209.84.
  • You will collect the judgment, keeping 50% of what you are able to collect.
  • Your income for a few hours’ worth of work is $3,154.92.

This is by far the most commonly used assignment method in our industry. If you are unable to collect the judgment, you’re not on the hook for anything other than your time and some minor expense you incurred in an attempt to locate assets. Further, there’s no ‘expiration date’ on an assignment. You can continue to check back every few months to see if anything has changed with the debtor’s financial situation. You can also record a judgment lien so that if the debtor owns property, or acquires it in the future, your judgment lien will have to be paid before a clear title can be achieved.

The second commonly used method is to purchase the judgment outright, paying the judgment holder $0.05 to $0.10 on the dollar up front. The obvious benefit to this is that your potential profit is much higher than it would be if you were just keeping half of what you collect. The only drawback is that you could end up throwing good money after bad, unless you prescreen the case before purchase and only opt for those cases where you know assets are sufficient enough to satisfy the judgment.

Example 2:

  • A judgment was awarded five years ago for $4,194.00.
  • Because you have determined that the debtor has significant assets, you purchase the judgment outright for $335.52 ($0.08 on the dollar).
  • With a post-judgment interest rate of 10%, the judgment is now worth $6,292.15.
  • You will collect the judgment, keeping 100% of what you collect.
  • Your income for a few hours’ worth of work is $5,956.63.

Now that I’ve covered the basic types of agreements, let’s talk about some enforcement scenarios. But before I do that, it’s time for a reality check. I think you’ll agree that the first method described is the easiest way to start making money with a minimal investment of time and cost, however, be aware that these are judgments. In most
circumstances you’re only going to be able to find assets and actually collect about 45% – 50% of these judgments. It’s nothing to freak out about – it’s just the nature of the type of debt we’re collecting – but it has to figure in to your expectations to keep them realistic.

Moving forward, there are more scenarios for collecting than there are fish in the sea, or any combination of them to ultimately get the job done – but here are some common ones, so that you’ll get an idea about how you actually get from Point A to Point B.

Wage Garnishment:
In most states (but not all) you can garnish a judgment debtor’s wages. The law typically allows you to intercept 25% of the disposable income, to be submitted by the employer every time the debtor gets paid. The employer receives a court order to withhold the money each pay period and turn it over to the court or levying officer, who in turn sends it to you. This results in basically maintenance free residual income.

Voluntary Payment:
Much the same as a garnishment in regard to residual income, however, a debtor submits payments voluntarily and these payments are not routed through the court.

Seizure of Bank Account:
The court will act on your direction to seize funds in checking, savings or even mutual fund accounts. Anything in the account(s) at the time the bank is notified must be frozen and then turned over to the court or levying officer, who in turn will send it to
you.

Settlement:
As the judgment creditor, you have the authority to accept a settlement in lieu of collecting the full judgment amount. This is very useful as a means of working with judgment debtors – particularly commercial/business debtors – toward a reasonable solution everyone can live with. You can even structure settlements that are half money and half barter for goods or services – or all barter. The sky’s the limit here.

Lien:
As I wrote earlier, a judgment lien attaches to property and clouds the title until the judgment is paid.

Foreclosure:
While you would be completely within legal boundaries by foreclosing on property to satisfy a judgment, I wouldn’t necessarily recommend this route just to satisfy a measly $5,000 debt (that’s pretty cold-hearted). But if you’re talking about a judgment against a
business for a couple hundred thousand, then by all means, this might be the way to go!

I could go on with these scenarios all day, but there are just too many of them. Some other potential assets include business income or equipment, rental income, annuities,
automobiles, recreational vehicles, boats, planes – I even know a gal who seized and sold a buffalo! I’m confident that you can clearly see how and why an income of $80,000 a year is average for one person operating full time. Anyway, the idea is to give you some grasp of how and where the income generates from, since I really am asked this question pretty often.

As always, if there are any topics or subjects you’d like to see discussed in the newsletter, please feel free to Contact Us and let me know. To get started today earning $80,000 a year today, click here to Join SJR.

Warm Regards,

Christina

Sierra Judgment Recovery

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