Can a Debtor Get Their Money Back?

An empty wallet to represent a debtor getting their money backAfter finally collecting the monies owed to you through debt collection litigation, the debtor wants their money back. How is that possible? Doesn’t the money belong to you? Can a debtor really get their money back?

Recovering monies owed can be a long and arduous process. First, you have to put the customer into collections. If the demand is not productive, you needed to sue and wait for judgment. Only once the judgment is entered can you collect the monies through judgment enforcement.

It’s unbelievable to think that after all the time and effort you’d have to return the money. However, it can and does happen.

How a Debtor Can Get Their Money Back

There are two scenarios in which you’d have to return monies to a judgment debtor following debt collection litigation. This can happen if the judgment debtor was a no show during the case as well as in scenarios where the judgment debtor appears and defends the case.

When the Judgment Debtor Is a No Show:

The old adage “ everyone is entitled to their day in court” applies here. All individuals, businesses, and entities must receive notice of any lawsuit brought against them. If not, they have not had an opportunity to be heard.

At any stage of litigation, a judgment debtor may claim not to have received notice of the case — even after judgment has been entered as well as after monies have been collected and paid over to the judgment creditor.

The judgment debtor would need to allege they had not been served with the summons and complaint and that they have a meritorious defense to the action.

If the judgment debtor meets their burden of proof, the court will order a hearing to determine whether the service of process was appropriate. If the court finds that service was not proper, then it follows that the judgment debtor never received notice of the lawsuit. Any monies taken through judgment enforcement efforts would need to be returned to the judgment debtor. The case gets dismissed and the creditor needs to begin again.

In this scenario, the key to retaining the money collected is to make certain the underlying service is good. Your collection attorney should be paying attention to the mechanics of the underlying case and using quality third-party vendors especially as it relates to service of process.

When the Judgment Debtor Participates in the Litigation:

This situation is totally different. In this scenario, the judgment debtor defended the case from the beginning. Regardless of how you won your case, the court ordered the debtor to pay the money over to the creditor.

But the debtor can get their money back if they successfully appeal the order directing them to pay you. They can file and prosecute the appeal at any stage. If the debtor files and wins their appeal, the order directing them to pay you would be deemed improper. If the appeal took three years to resolve, and you had the debtor’s money for two or three years, you would need to return the money to the judgment debtor.

In this scenario, the key to retaining your money is making sure the right law is applied to the underlying fact pattern of the case. A good collection attorney should know if the case law is good and if the facts of the case support your case.

Getting paid is more than half the battle. The other half is keeping the money. Make sure when choosing a debt collection attorney you choose one that focuses on debt collection. Your attorney should also have good reviews and a solid client base in your industry. Only by choosing the right collection partner will you be able to collect and not return monies to your non-paying clients.

Frank, Frank, Goldstein and Nager has the experience that pays. Learn more about our services and see how we can help you by contacting us for a free consultation.