PRE & POST JUDGMENT COLLECTION OF MUNICIPAL RECEIVABLES

Referral Timeline

• If using a third-party collection agency/firm, establish a fee agreement. (contingent, flat, hourly, etc.)

• Identify type of claim referred.• Obtain and retain comprehensive debtor information.• Utilize effective Pre-suit collection strategies and

techniques.• File Suit if necessary.• Litigate disputed matters.• Utilize post-judgment remedies.• Be aware of bankruptcy issues/concerns.

Accounts/Issues Particular To Municipal Collections

• Property Damage Claims– Typical referrals concern damaged traffic signals, light poles,

police and fire vehicles, and fire hydrants, but can include any damage or destruction to municipal property.

• Personal Injury Claims– Worker’s Compensation Claims

• Demolition/Razing Costs– Procedure delineated in Wis. Stat. § 66.0413.– “In Personam” actions authorized by Wis. Stat. § 74.53.– Most important factor is the proper recording and service of the

Raze Order as it severely limits the owner’s defenses in a subsequent collection action.

Municipal Collections (cont.)

• Municipal Fines/Judgments– Types of referrals can vary greatly, but can include

sanctions, fines and judgments assessed, levied or awarded by a municipal, circuit or federal court.

• Wage Claims– Accidental overpayments to a municipal employee.

• Transmission Facilities– Damage to a municipality’s electrical cables,

water/gas or other pipelines, etc.

Municipal Collections (cont.)

• Real and Personal Property Taxes– “In Personam” actions authorized by Wis. Stat.

§74.53.– Levy and collection controlled by Chapters 70 and

74.– “In Rem” actions authorized, controlled by

Chapter 75.

Collection Procedures and Techniques

• Act Quickly!– There is a wealth of statistics correlating the

collectability/liquidation of an account to the age of the account. As an account ages:• The debtor may move, sometimes out of jurisdiction;• The debtor may retire, become disabled, or pass away;• Physical evidence of the debt gets lost/destroyed;• Memories fade, or witnesses move on, resulting in

testimony that is unreliable or unavailable altogether.

Locating the Debtor

• It is of paramount importance that creditors obtain and retain comprehensive debtor information.-- Full name -- Address-- Driver’s license number -- Spouse’s name-- Telephone numbers -- Spousal

employment-- Place of employment -- Relatives-- Date of Birth -- Other references

“Skip Tracing” Moved and Missing Debtors

• There are a number of free and fee based resources from which debtor information can be obtained.

Free Fee Based

Argali (Skip Tracing Agencies) Accurint (Lexis/Nexis)

Telephone Books/Directories Credit Bureau Report*

Tax Assessor/Landlord Deceased Database Search

Division of Motor Vehicles Bankruptcy Database Search

Secretary of State Employment Searches (The Work Number, One-Click Data)

CCAP Westlaw People Search

Pre-Suit Efforts and Techniques,The Function and Effectiveness of Demand Letters

• Usually the first communication the debtor will receive regarding the debt. – The sooner it is sent from the date of the event

triggering the receivable, the more likely it is to be paid.

– Debtor may research the name of the collection firm and simply pay it to avoid further issue.

– They are extremely cost effective.– May be required by statute or ordinance anyway.

The Necessity of Telephone Calls

• A “Right Party Contact” is by far the most important variable in getting a file collected.

• However, it is essential that the phone call go well once contact is made.– Be familiar with the information you already have

and be prepared to get more.– The art of negotiation

Documentation Is Essential

• Comprehensive, accurate records:– Keep you or your collection firm from repeating

work unnecessarily;– Allow expedited “skipping” and collection for

multiple or future accounts for the same debtor;– Protect you or your collection firm in the event of

a complaint or claim.

Filing Suit

• Determining the Proper Party (Beyond the Principal Debtor)– Non-Incurring spouse (various forms of marital debt– see

Wis. Stat. § 766.55)– Personal guarantor (small business commercial

obligations)– Custodial parent or guardian (medical and automobile

claims)– Beneficial property owner (various municipal debts)– Employer (various tort and negligence collection actions)

Filing Suit (cont.)

• Venue– If it is a consumer credit transaction, Wis. Stat. §

421.401 and 15 U.S.C. 1692j effectively limit the venue to the county where:• The consumer resides; or• The consumer signed the contract sued upon.

– In all other cases, Wis. Stat. § 801.50 controls, which allows for venue in the manner described above, as well as several other options.

Filing Suit (cont.)

• Jurisdiction– Service of Process is delineated in Wis. Stat. §

799.12 for Small Claims and in Wis. Stat. § 801.11 for Large Claims.

• The Complaint– Most municipal collection actions are non-

consumer transactions, so standard civil pleading requirements apply. (Notice Pleadings)

– For consumer transactions, enhanced pleading requirements under Wis. Stat. § 425.109 apply.

Filing Suit (cont.)

• Small Claims vs. Large Claims– There are several advantages to filing suit in small claims court:

• Significantly reduced filing fees;• Service by mail now allowed in most counties;• Much quicker calendar and resolution;• Informal discovery and hearing rules procedures.

– However, there are certain disadvantages as well.• Some small claims require personal appearance at the initial return

date.• Incorporated defendants are usually allowed to represent themselves.• There is an easy right to a “trial de novo” in cases heard by a court

commissioner.

Litigating Contested Matters

• Small Claims Hearings– Wis. Stat. § 799.207 provides for adjudication

before and by a court commissioner.– They are informal, and generally done “off the

record,” though the level of formality varies greatly by county.

– The common law and statutory rules of evidence do not apply (Wis. Stat. 799.209(2)).

Litigation (cont.)

• Trial De Novo (Small Claims)– Either Party has 10 days to make a written

demand for a formal trial before a court of record. – Though it is nice for the creditor to have this

“insurance,” unfortunately, is usually results in the creditor having to prove its case twice.

• Large Claims Trials– Collection trials are not much different than any

other type of civil trial.

Litigation (cont.)

• Judgments By Motion– Motion for Default Judgment• Very common in collection lawsuits, which involve a

high percentage of undisputed matters.• Most courts do not require a formal “motion” in this

regard.

Litigation (cont.)

• Motion for Judgment on the Pleadings– Courts will require when a pro se debtor/defendant submits

one of commonly recurring set of responses, such as: • “Admit I owe, but can’t afford to pay”• “Ex-spouse was ordered to pay”• “Insurance should’ve paid”

– Create and save a form affidavit for your signature that explains: • Defendant has filed an answer;• It fails to deny or join issue with material facts of suit; and • Plaintiff is entitled to judgment based solely on the pleadings of

the matter.

Litigation (cont.)

• Motion for Summary Judgment (MSJ)– There is another set of pro se Answers that are

common, but rise to the level of actually joining issue to a degree that an MSJ is required, such as:• “Balance is incorrect”• General Denial (often filed to buy time to pay the claim)• Militia-type responses (found on the internet, etc.)

– Basis for MSJ’s often obtainable in pro se matters by utilizing a form set of Requests for Admission.

Litigation (cont.)

• Motion to Strike Answer and Motion for Default Judgment– In collection matters, the high occurrence of pro se

defendants leads to a high occurrence of failures to appear at scheduling conferences, pre-trial conferences, or abide by other pre-trial orders.

– A form motion to strike the Answer and enter default judgment is a handy tool. See Gaertner v. 880 Corp., 131 Wis.2d 492 (Ct. App. 1986), Wis. Stats. § § § 805.03, 804.12(2)(a)(3) and 806.02.

Post-Judgment Remedies

• Post-Judgment Asset Investigation– Financial disclosure forms are sent by courts upon the entry of

judgment.– Creditors may also conduct a Supplementary Examination of the

debtor’s assets. (Wis. Stat. § 816.)– As debtors are ordered by a court to appear at a Supplementary

Examination, if they fail to do so, they can be held in Contempt of Court.

– Body Attachment• Courts have the authority to issue a Body Attachment (Arrest Warrant),

resulting in the debtor’s incarceration until required financial information is provided.

• Some clients do not utilize this remedy to avoid possible negative publicity.

Post-Judgment Remedies (cont.)

• Post-Judgment Remedies– Wage garnishment (Wis. Stat. § 814, Subchapter

II)• Up to 20% of a debtor’s wages can be garnished, unless

a valid exemption is proven.

– Non-Earning Garnishments (Subchapter I)• Allows creditors to garnish funds that do not constitute

“wages.” • The two most common forms are garnishment of a

debtor’s bank account(s) and rental income.

Post-Judgment Remedies (cont.)

• Sheriff’s Sale (Wis. Stat. § 815)– Where docketed, judgments act as a lien on any

real property owned by a defendant.– Creditors may attempt to satisfy the lien by selling

real estate owned by a debtor.• I highly advise you to seek the advice of counsel before

exercising this remedy, as it is strictly regulated and there are several exemptions.• Few clients exercise this remedy to avoid possible

negative publicity.

Post-Judgment Remedies (cont.)

• Sheriff’s Execution (Wis. Stat § 815)– Where docketed, judgments act as a lien on

certain personal property of the defendant.– Creditors must enlist the aid of a county sheriff to

seize the debtor’s property and conduct a sale.– Executions also authorize the sheriff to go to a

debtor’s business and seize the contents of a cash register to apply toward the judgment.

Bankruptcy Concerns• Dischargeability

– Most debts are dischargeable through bankruptcy.• Notable exceptions are intentional torts, debts for personal injury or death for

operating vehicle while intoxicated, and debts incurred through a fraudulent act.

– Chapter 7 • Generally, in a “no asset” case, debts are discharged, even if the creditor does not

receive notice, or if it is not included in the bankruptcy filing. • To receive a discharge for taxes, a debtor must wait one year from the last date the

taxes were last payable without penalty.

– Chapter 13• Creditors or their counsel should file a proof of claim to ensure payment.

– Chapter 128• Remedy is unique to Wisconsin.• Allows creditors to take judgment even after it is filed. • Gives debtor 3 years to pay the debts included in the petition. • If not included in petition, creditor can proceed normally.

Caveat: Creditor Liability

• If the creditor acts improperly, it may be subject to liability under:– The Fair Debt Collection Practices Act

• $1,000 per lawsuit, plus reasonable attorney fees;

– The Wisconsin Consumer Act• $1,000 per violation, plus reasonable attorneys fees;

– The Fair Credit Reporting Act• Credit reports cannot be requested for certain types of debt.

Penalties is up to $1,000 per violation;

– The Telephone Consumer Protection Act• $500 to $1,500 and other damages per violation.

Questions?