Almost every business has collection problems from time to time – for some businesses, collecting overdue bills is the single most important problem. Generally, by the time a client calls me about collection, they have already run the gamut of ordinary collection techniques: monthly billing, reminder billing, reminder letters, warning letters, telephone calls, e-mail, etc. Often they have already received multiple promises to pay and been disappointed. As a result, I usually don’t bother very much with ‘lawyer letters’ for collection – if the non-paying customer were going to respond to a sternly-worded letter, they already would have done so.

The comments that follow are oriented around commercial collection involving substantial unpaid bills. Specialized collection agencies and law firms deal with the problems inherent in collecting small sums of money from many consumer-level customers. You can use the district justice procedures discussed below to collect a small bill on your own, but consider whether the time and cost involved are warranted.

Before talking about how to get a civil judgment for money owed, it is helpful to review some (perhaps obvious) basic concepts. There is no debtor’s prison in the United States. If someone owes you money, generally they are not breaking any criminal law. The police won’t arrest them and make them pay, even after you obtain a judgment. Usually (even though clients often tell me differently), a broken promise to make payment is not ‘fraud’ in the legal sense. So what is a civil judgment for money good for – what is the point? A money judgment is really the right to send out a sheriff or constable to attach (take legal possession of) assets of the debtor, up to the value of the judgment. From that precept, some logical consequences follow: if the debtor has no assets, you can be wasting your time. Often judgments must be transferred to the county or state (depending on state legal rules) where the assets are. Assets include bank accounts, real estate (good, because it can’t run away or hide), valuable machinery or equipment, and monies from third parties which are owed to the debtor but still in the hands of the third party. When you are seeking to collect a money judgment, what you want is the value of the asset – the judgment is the means to direct the sheriff to levy on (to attach or ‘freeze’) that asset and sets the limit on how much you can attach. Attaching the checking account of a debtor can have a catastrophic effect (checks start bouncing, with bank fees to boot), so that even if the amount of money in the account is less than your judgment, the very pained and panicky telephone call that follows freezing a checking account is often followed by payment in full.

In Pennsylvania, once a judgment is recorded with the Prothonotary (civil clerk) of the Court of Common Pleas in a particular county, then the judgment also acts as a lien on all real estate held by the debtor in that county. In judgments for large sums of money, lien priority can become important (first in time, first in right is the rule) because judgment liens, like second mortgages, are paid from a mortgage foreclosure if there are sufficient proceeds from the sheriff’s sale, but not otherwise – and the purchase money mortgage lender always comes first.

So how does one get a judgment? If the amount you are seeking is $8,000 or less, then you can go to a local district justice court. The good news is that the filing fees are low, usually under $150 and recoverable in a favorable judgment; you fill out a simple form to start the lawsuit; you can proceed without a lawyer (a corporation should be represented by one of its officers); there are no pre-trial discovery proceedings, which run up legal bills; default judgments (no answer from the defendant) are common; the case is usually heard within a few weeks or months (although continuances are common and can be frustrating); and most district justices take a fairly liberal view on rules of evidence and procedure, to allow the parties to present their cases even without knowledge of the applicable legal rules. Convince the district justice, and you get a judgment, within a few days after the hearing, up to the jurisdictional limit of the court.

The difficulties with district justice proceedings for money debt are: you don’t know what defense the other side will make, if any, before the hearing; the hearing rules are just as liberal for the other side and the outcome of district justice proceedings is often unpredictable; there is no explanation of why the judgment is what it is – the justice simply issues a form which awards money or it doesn’t; your favorable district justice judgment can be appealed with little difficulty and cost by the losing party to the county Court of Common Pleas, which means you have to start again in a forum where you need an attorney to navigate the complex legal rules of civil procedure; the district justice judgment is not a judgment of record which liens real estate unless you wait thirty days for the appeal period to run and then transfer the judgment to the Court of Common Pleas; you can only execute (attach) the tangible personal property of the debtor – you can’t attach bank accounts or other property in the hands of third parties (called garnishment) by virtue of a district court judgment.

If the thirty-day appeal period has run, you can transfer the judgment from a district justice to the Court of Common Pleas by paying a small fee and obtaining a certified copy of the judgment, although there are some rules about entering judgments in the Court of Common Pleas which you may need some assistance with. After that, you have all the various techniques available, including garnishment, to collect on a judgment. Somewhere along this road outlined above, if they have the means, defendants often tire of the litigation ‘dance’ and make arrangements to clear the bill. If they pay the bill, you take whatever steps are necessary to show the judgment satisfied.

If the amount is over $8,000, or the district justice judgment is appealed, or you just decided to skip the district justice step altogether, you can file a complaint in the Court of Common Pleas. Although you can attempt to proceed pro se (without an attorney) it is very difficult to do so successfully – the Pennsylvania Rules of Civil Procedure and local county practices (each county has its own set of local rules) are too complex. Moreover, legal entities such as corporations and limited liability companies must proceed through a licensed attorney in a civil complaint for money at the Common Pleas level.

Any complaint is time-consuming to draft, file with the clerk and serve on the debtor by means of the sheriff, which means legal expenses for you – the amount of the unpaid bill has to make it worthwhile. On the other hand, a complaint compels an answer on a specified schedule, in a very specific format (a defendant has twenty days to answer after sheriff’s service and gets one ten-day warning letter after that). If no answer is filed after the time period for the ten-day letter has run, we enter a default judgment and can begin the asset search. In my experience, where there is no real dispute over the services or goods rendered, just an unwillingness or inability to pay, default judgments are common. Often, about the time an answer is due, we receive a call from the debtor’s attorney, looking to suspend the litigation, negotiate a payment schedule and possibly asking for some concessions back as to timing of payments, rebates or credits for some disputed items, etc. Usually it makes sense to give some concessions to get paid and to conclude the matter. In one case, after we went through the entire process and transferred the resulting judgment to another state for execution, where we garnished a bank account (and hired local counsel to assist), my client collected the money due him (albeit with some losses for attorneys fees). Some time thereafter, my client and the debtor recommenced doing business together, but my client demanded and got full payment up front and the relationship has worked since.

A bankruptcy petition stops the process of collection altogether, pending bankruptcy proceedings. Contractors who are owed money for work done on homes or buildings often have mechanics’ lien rights in addition to the more ordinary steps available to any creditor. The mechanics’ lien law has recently changed in Pennsylvania somewhat for the better, especially for subcontractors, but mechanics’ lien law can be complex as to proper lien notice, timing and filing.