The Pennsylvania Debt Collection Process
As the economy fluctuates in Pittsburgh and throughout Pennsylvania, we have seen an increase in consultations concerning Pennsylvania Debt Collections. This article will provide the 5 basic steps to both business owners and individuals in understanding the Pennsylvania Debt Collection process.
Step 1: The Demand Letter
Upon being retained, we will typically first send a demand letter to the debtor. The demand letter sets forth the amount of the debt; the name of the creditor; the basis for the debt being owed; and an opportunity for the debtor to dispute the debt in writing. The Fair Debt Collection Practices Act (FDCPA) allows thirty (30) days for the debt to be disputed. However, upon evidence of money being owed, creditors are not required to wait thirty (30) days in all cases to file suit. We will usually only afford debtors ten (10) days to respond before recommending suit be filed. If a debtor is serious about paying the money owed, ten (10) days is plenty of time to respond.
Step 2: Filing a Collection Lawsuit.
If the debtor fails to respond, then a collection lawsuit is necessary to collect the money owed. The goal of a debt collection lawsuit is to obtain a judgment. However, lawsuits costs money. Prior to filing any debt collection lawsuit, we believe it is important to thoroughly research the assets and collect-ability of the debtors. We routinely order credit reports, and research property, vehicles and other assets of the debtors so that we can properly advise our clients of the chances of collection. Lawsuits need to be properly drafted and prepared before filing and creditors need to to understand the costs, time-frames and expectations of what it means to file a lawsuit.
Step 3: Obtaining a Pennsylvania Judgment.
There are several ways to obtain money judgments in Pennsylvania. First, creditors can obtain judgments by default. If the defendant fails to file a response to the complaint within thirty (30) days of being served, a default judgment may be entered. Second, if the debtor files basic denials, without any real substance as a response to the complaint, then a motion for summary judgment can be filed and a hearing held to obtain judgement. Third, judgment can be entered based upon an award or verdict after a trial or arbitration of the case. There is significant skill in obtaining judgments against debtors, and it is very important that creditors have experienced debt collection attorneys if they want to collect outstanding monies owed fast. Inexperienced collection attorneys could end up in years of litigation.
Step 4: Executing Upon the Judgment.
Judgments act as a lien for all real property in Pennsylvania. What this means is that if you obtain a judgment against a debtor, and that individual owns real property (i.e. a house), then your judgment acts as a lien against their property. This is important because the lien would have to be satisfied before the property could be transferred. If the debtor does not own real property, then creditors are left using the sheriff’s office to conduct levy and sales of any personal assets or garnishing bank or investment accounts. Garnishing bank accounts in Pennsylvania is the fastest way to get paid, but also takes experience and persistence. If debtors know that their bank account is going to be frozen, they will simply withdraw their money. Therefore it is very important that garnishments occur promptly and in accordance with the state law.
Step 5: Contempt of Court May Lead to Jail.
Some debtors are smart and make it very difficult to collect. One technique that can help creditors collect is to require the debtor to appear for a post-judgment deposition. Creditors are allowed to subpoena debtors in an effort to inquire about bank accounts, assets, vehicles and other properties. If a debtor is subpoenaed and still refuses to appear (which many do), then the creditor can petition the court to hold the defendant in contempt of court. If the debtor or defendant still refuses to appear for their deposition, then the court has the ability to issue a bench warrant for the arrest of the defendant. The bottom line is that all legal options must be left open when attempting to collect debt in Pennsylvania.