Legal Steps In Collections
( Originally Published 1918 )
No other motive except the question, "Will it pay?" should induce a creditor to legally enforce payment. A mere feeling of retaliation or of getting satisfaction has no place in business.
Before resorting to the power of law it is well to ask the following questions:
1. Have all reasonable and peaceable efforts been made to induce the debtor to make payment? ,
2. Is the amount sufficient to warrant the expense involved in the legal process?
3. Has the debtor more property than the law allows him by way of exemption?
4. What does the law exempt? (See Exemption Table, page 172.) When all peaceable means have been exhausted and the debt is not paid, it then becomes necessary to collect it, if possible, by legal process.
If satisfied that the debt can be collected, then the account should be placed in the hands of a justice of the peace, unless it is larger than comes within his jurisdiction. The Judgment
If at the time set for trial both parties appear and are ready for the same, the justice proceeds with it and determines the matter in controversy. His determination is called the judgment. The judgment can be rendered if the defendant does not appear at the trial.
Demanding a Jury
Either party in a trial before a justice of the peace may demand a jury, and the justice is bound to grant the demand upon the deposit with him of the jury fees by the party making the demand. The jury may consist of either six or twelve men.
The judgment being obtained, the plaintiff may now enforce payment. This process is called execution. It consists in a writ commanding the constable to seize sufficient of the property of the defendant, "which is not exempted by law," to satisfy the claim and costs and to sell the same and bring the money into the court to be paid to the plaintiff. The constable then proceeds to do this and if he succeeds in finding such property seizes it, sells it at auction, and brings the money into court.
While the causes for which an attachment writ will issue vary somewhat, in the different states, the following grounds are almost universal:
Where the debtor is a non-resident or a foreign corporation; where the debtor is about to remove from the state; where the debtor conceals himself so that process cannot be served upon him; where the debtor has removed or is about to re-move his effects from the state to the injury of creditors; where the debtor has fraudulently conveyed, concealed or disposed of his property so as to hinder and delay creditors, or is about to do so; where the debt was fraudulently contracted and the statement constituting the fraud reduced to writing.
The creditor must file with the clerk of the court an affidavit, stating the nature and amount of his indebtedness and any one of the preceding causes and the place of residence of the debtor if known, or that upon due inquiry he has not been able to ascertain the same.
Usually the attachment is not issued until the debt is due, but in some states it is issued before if it can be shown that the debt would probably be lost unless an attachment is secured at once.
The Creditor's Bond.—In order to secure the costs and the debtor against all damages in case the attachment is improperly issued the creditor securing the same must give a bond, usually double the amount claimed.
The Writ makes it the duty of the officer to at once seize sufficient property of the debtor to satisfy the claim (excepting such as is exempt from execution) and to hold the same until the plaintiff can get judgment and seize it upon execution. Property of the debtor in the hands of a third party may also be seized.
The Real Object of the Attachment is to hold sufficient property of the debtor to satisfy the debt until the creditor can get judgment. When the property has been seized the summons is served, and if the case is properly proved judgment is obtained in the ordinary way. After this the creditor takes out his execution, makes a levy upon the property attached, and out of the proceeds satisfies his debt.
Each state has its own attachment laws, and since officers of the law must be engaged to obtain the attachment there need be no difficulty in the details of the procedure.
Garnishment or Suing the Garnishee.—In the course of collection of debts it sometimes hap-pens that while the defendant himself may have no property in his possession upon which an attachment can be made, some other person may have in his possession property belonging to the debtor or may be indebted to him. In such cases the plaintiff can proceed against this third party, who is called the garnishee, just as against the original debtor, although in some states a certain amount of money is exempt and cannot be garnisheed.
Attaching the Body
If under an attachment the officer returns "no property found," but the plaintiff is convinced that the defendant has property concealed, with the intention of defrauding him, and believes he is in danger of losing his claim unless the debtor is held to bail, several states empower the justice to issue a capias for the arrest of the debtor. A capias is issued usually only as a last resort, when it appears that the claim can only be collected by arresting the defendant.
Persons Who Cannot Be Arrested
The Constitution of the United States prohibits the arrest of members of Congress and electors while on duty, except for treason, felony and breach of peace. In many states the militia, while attending musters or while on a journey; so also attorneys and counselors at law, judges, sheriffs and all other officers of the several courts, also witnesses and other persons necessarily at-tending court are exempt from arrest except for felony, etc.
Real Estate Held for Debt
When under an execution no personal property can be found with which to pay the debt and it is known that the debtor possesses real estate enough to meet the claim, then certain states al-low the justice to certify to the clerk of the circuit court a transcript of the judgment. This, when filed by the clerk, becomes a lien upon the real estate of the debtor. The court can then issue an execution and the property be sold for payment of the debt and costs.
Right to Appeal
If all legal steps have been properly taken in a trial before a justice or jury and the decision is that the debtor must pay the claim, he can then appeal to the next higher tribunal, which is the circuit court, district court, court of common pleas or other.
Before an appeal is allowed the defendant must give a bond, signed by one or more responsible persons, to a sum twice the amount of the claim, to cover the debt and all costs in case he is beaten.
If the defendant loses his case also in this court then he can carry it to the supreme court of the state, where the matter generally ends, though the way remains open for him to appeal to the Supreme Court of the United States. A bond twice the amount of the debt and the costs ac-cumulated by the successive trials up to this time is required before an appeal from one court to another is granted, as from the first.
When an Amount Beyond the Jurisdiction of a Justice is to be collected the case must be brought before the circuit court, district court, court of common pleas, or a court of similar character. There the clerk issues the summons, the sheriff or his deputy serves it and the case is usually tried before a jury of twelve men at the next term of court.
Delay in Forced Collections
Since the defendant can promptly defend his case and if beaten appeal to a higher court, he can thereby delay payment of the original debt for one or more years. But as each appeal in-creases the costs they soon become heavy and but few persons are able or willing to bear them. A debtor will generally pay the debt in the earlier part of the prosecution, unless he believes himself wronged or for other reasons refuses to do so.
Cost of Collection by :Law
The first questions that should properly be asked, before resorting to or submitting to collections by law, are: What will it cost? Will it pay? The actual cost cannot be definitely but only approximately foretold, and only in so far as the amount of the fees are fixed by law.
If the amount and the intricacies of the case are such that it is thought best to employ a lawyer a day or two, his charges will properly range from ten to twenty dollars.
If the plaintiff gains the case the debtor must pay all the costs. If the justice or jury decides against the plaintiff, declaring no cause for action, then the plaintiff must pay the cost of the suit.
The Time in Which Debts are Outlawed
1. It is found necessary in all commercial countries to fix a limit of time in which debts hold good. It would not tend to sound business practices or fairness for a creditor to be allowed unlimited time in which to enforce the collection of a debt.
2. Statutes of limitation have therefore been enacted, the period of time varying, there being no natural boundary line.
3. The range of time is from one year to twenty years.
4. In accounts it generally begins from the purchase of the last item, and is renewed by every partial payment.
5. In case the debtor makes a written acknowledgment in a note, or papers of that character, the claim is renewed.
On This Subject, see table of interest laws and statutes of limitation, page 41.