In debt collection, speed matters. To ensure quick success in obtaining a debt collection judgment, all settlement agreements should have a default provision.
A judgment clerk can enter judgment on default, without obtaining a court order, when the creditor has set forth and supported with documentary evidence a claim for a liquidated amount. The claim for the liquidated amount or sum certain should be in the initial pleadings filed with the court. You can submit the documentation to the court when submitting the judgment.
But, what happens after you settle a claim and all parties sign an “agreement” that provides for, among other things, the payment of monies? These agreements should contemplate “what if” the monies are not paid. This type of nonpayment is a situation our client was recently faced with.
The Importance of a Default Provision
Our client and their counsel created a settlement agreement that provided for the payment of a lump sum of monies by a certain date. Unfortunately, the client never received the payment and turned to us for help.
The demand for payment was ignored and we filed suit on the agreement for the amount that should have been paid. Because the debtor failed to respond, we submitted the judgment to the judgment clerk for entry. However, the original agreement did not have a default provision: a clause that would provide what would happen if and when the debtor failed to make the promised payment.
An example of a default provision is:
In the event of default in payment herein, [Debtor] agrees that [Creditor] will be entitled to a judgment in the amount of [amount] plus interest from [date], the payment should be made together with the cost of collection equal to 25% of the outstanding principal balance owed.
Since our client’s agreement did not have a default provision, the clerk was not able to liquidate the amount owed and therefore bounced the judgment. We needed to make a motion to the court for an order directing the entry of judgment. While we will obtain the court order, the process of making a motion to the court will delay the case for at least six months.
All settlement agreements should have default provisions for quick debt collection success. A default judgment is the fastest way to obtain a money judgment in a debt collection action.
The clock starts running once the summons and complaint is served and the requisite additional mailing is sent. In most cases, if served properly, if there isn’t an answer, appearance, or settlement after a fixed number of days, you may proceed to judgment. And, if you’ve submitted sufficient documentation to prove your case, the judgment clerk should be able to enter a money judgment.
If you have a debt collection matter you need to resolve, contact Frank, Frank, Goldstein and Nager. We have the experience that pays.
