I am not a lawyer, I am a judgment referral expert (Judgment Broker). This article is my opinion about recovering what is owed. This article is based on my experience in California. Laws vary in each state, and nothing in any of my articles should ever be considered legal advice.

There are many types of debt, and it usually boils down to the debtor(s) did not pay. Maybe a loan was not repaid, or they did not pay for a product or service.

As a judgment broker, I talk to many business owners with a bundle of unpaid accounts, asking me for advice. First off, I am discussing debts that have not yet been turned into judgments by winning a lawsuit. If you already have a judgment, you “just” need to get it enforced.

If you do not yet have a judgment, you have to decide what to do. Each debt or judgment stands alone, matched to a particular debtor. In fact, if you do not really know who your debtor is, collection might be very difficult. If you cannot find your debtor, and do not know their actual name; or address, email, phone number, or anything else about them, the game is over, and it may be best to write off the debt.

The first step to recovering some of your money is to gather up what you know about the debtor for each unpaid account. If there are hints, reasonably follow up on them to find out what you can about the debtor. Then you have 4 choices, none which is ideal, but sometimes you must decide on one choice: settle, sue, hire a collection agency, or give up.

1) Settling. It costs time and/or money to turn a debt into a judgment, and then to get a judgment or debt recovered. In most places, even small claims court costs money to start a lawsuit. Even if you get a judgment, to get any money back, you must give up a lot – an average of half, of what is recovered. For this reason, settling might be a good option.

One must spend hundreds to sue, and then give up between one-fourth and one-half of what is recovered, to end up with (usually) one-half. Because of this, a good starting settlement offer might be half. If your debtor is poor, it is probably a good idea to settle for much less, perhaps 25%. The reason is, if the debtor is, and remains poor, it is going to be tough and expensive to recover money from them.

2) Sue them. Especially if the amount owed is large and/or the debtor is wealthy, suing is probably a good option to consider. When you win a lawsuit, you get a judgment, which earns interest and is much stronger than any debt. Of course, the judgment must be recovered, they do not recover themselves.

If you sue a debtor, make sure to have them personally served by a S heriff or a registered process server. Making sure that service of the lawsuit is perfect, making it harder for the debtor to vacate the judgment later. After you get a judgment, find a judgment broker, a judgment enforcer, or a collection lawyer.

3) Hire a collection agency. This makes sense when you do not want to go to court, and/or have a bunch of small debts. A collection agency usually makes calls, writes letters, and often puts the debt on the debtor’s credit report.

Sometimes that is all a collection agency does. When the amount owed is large and the debtors appear to have assets, collection agencies often use a lawyer to sue the debtor to get a judgment. Read the fine print, some collection agencies charge you extra if they have to sue. The best collection agencies charge more but have no upfront or litigation fees.

4) Give up. Especially if the debtor cannot be found. It is not cost-effective to sue for tiny amounts. Of course, if money is of no concern to you, you could spend $500 on a PI to find them, $200-$600 to serve and sue them, then give up 50% to a judgment enforcer to get (at most) $250 back.

If your debtor is poor, giving up might be a smart move. Knowing when to hold them, and when to fold them, is good advice.

Usually small debts do not interest collection agencies.