Considering a Judgement Recovery Business - Seeking Insights

September 10, 2024

by a searcher from United States Naval Academy in Austin, TX, USA

I'm thinking about purchasing a judgement recovery business which is a specialized sector within the broader debt recovery market. It involves the investigation and enforcement of court-awarded judgements. I've been researching the industry and while I can see some potential, there are certainly some risks associated with the complex legal framework of identifying and potentially seizing assets that varies from state to state on top of what appears to be a good deal of variability in collection success making it pretty difficult to forecast with any sort of accuracy.

I'd be interested in hearing from anyone who has experience owning or working in judgement recovery or the broader debt collection industries. Any advice or insights would be greatly appreciated.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

The majority of the debt collection industry is built around buying defaulted loans and then trying to collect as much as one can from them. Because of this the businesses can be capital heavy because you have to buy a bunch of debt up front at steep discounts. Some providers work claims for businesses on an assignment / shared recovery basis. I am not sure if the firms you are looking at are working their own purchased claims, partnering to work claims, or helping other collection agencies and banks. Also the collection processes can take a long time and there may not always be assets at the end of the rainbow. And bankruptcy is always a risk. I think you have to look closely at where business comes from, what their traditional returns are, etc. I hope this helps.

Reply by a searcher
from Humber College in Toronto, ON, Canada

Hey Gerry, the first thing you want to look at is the type of assets that the Judgement recovery business is collecting on. You want to make sure that the judgments are tied to assets. Extremely important. Second, you want to look at the track record of the business, i.e., the cash flow. I can't stress this enough: Cash Flow is king in the collections. Third, for judgments, you will need a network of paralegals and attorneys to file. It can sometimes be cash-heavy, and many businesses have lines of credit available for emergencies. Fourth, the talent. You want to keep the best people in the company you are acquiring and eliminate the bottom feeders. I am speaking from experience. I hope that helps.

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