How New York Budget Cuts Will Affect Debt Collection

Gavel to represent New York budget cuts affecting debt collection.Without aid from the federal government, New York state will see budget cuts of 10 billion in 2021 followed by budget cuts of 30 billion in 2022. Some of the anticipated cuts will affect our judicial system. The budget cuts will affect New York debt collection cases. Here’s how.

Governor Cuomo’s 2021 budget calls for a decrease in funding of the New York judiciary system. According to Chief Administrative Judge Lawrence Marks, “New York’s Unified Court System will see a $300 million cut to its annual budget of $3 billion, forcing the judiciary to “implement a range of painful measures.”

A Reduction of Judges

In order to avoid layoffs, the administrative board of the Unified Court System decided to forego renewing the applications of 46 out of a total of 49 state Supreme Court judges. The 46 judges represent approximately 3.5 percent of the state court system’s nearly 1,400 paid judges. The judges were up for recertification on January 1, 2021. Judges need to be recertified every two years. By not renewing the applications of the 46 judges, the New York judiciary system anticipates a savings of 55 million dollars, over the next two years.

Of the 46 judges who will no longer serve effective January 1, 2021, approximately half handle civil actions. The other half preside over criminal actions.

The mission of New York’s Unified Court System is to promote the rule of law and serve the public by achieving just and timely resolution of all matters before the courts. But how is that possible given the fact that the courts are still recovering from the voluminous caseload from the recession of 2008 and 2011 budget cut of 170 million dollars?  Now, with fewer judges, what can you expect?

How the Budget Cuts Will Affect Debt Collection

Here’s how we predict the 3.5% decrease in judges due to budget cuts will affect New York debt collection cases:

First, fewer judges mean longer delays in adjudicating your case. As judges face an increased caseload, more judges will retire. This means courts will lose more than the anticipated 3.5%. Most judges debating an early retirement will wait to see what happens with the election and whether the federal government will fund New York.

Despite the increased use of technology in the court, the system will slow down. The court won’t just lose judges, it will lose support staff including law secretaries, administrative clerks, motion clerks, judgment clerks, and more.

Second, there will be an increase in court-administered mediations with the bill to be footed by the parties.  We previously wrote about court mediation. Mediators are private parties.  Currently, the court offers the first three hours for free. After that, the parties share the cost. With more participation in the program, we expect an increase in the wait for trials.

Lastly, we predict an increase in the shelf life of a case. More cases being filed in an already overloaded system means longer delays to adjudicate your debt collection case. Given the above, how will you collect your collection cases using the court system?

How to Protect Yourself Going Foward

You will need to be strategic about negotiating the underlying transaction with your customer. You will also need to adjust your credit policy based upon your tolerance for risk. You’ll want to secure your position as a lender since you are selling on terms.

Negotiating with a client would include the use of an affidavit of confession of judgment so that in the event of non-payment you can go right to judgment and bypass litigation.

Your underlying contract should include the right fee dispute clause given the balance owed. Litigation, mediation, and arbitration are not all created equally and therefore should not be used for all claims.

You should use a collection partner who is familiar with the local court system and handles only debt collection cases to achieve the best result. With decades of experience and a history of recovering debts for clients during difficult financial times, Frank, Frank, Goldstein and Nager is well prepared to navigate the future of debt collection. Contact us today for a free consultation.

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