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  • Writer's pictureSamuel Doncaster

Coronavirus Preparation: Collect your debts

Don’t wait to get your money back if you’ve been cheated in a business or real estate deal.

The Coronavirus crises has sparked market uncertainty. The stock market dropped precipitously. Real estate deals are getting delayed or cancelled. And many businesses are shutting down.

For people who’ve been cheated in business and real estate deals, that creates an imperative to act promptly. It’s always sensible to act as soon as possible to collect money; in fact, speed of collection is one of the top rules of profitability in business. But this pandemic creates a special incentive to act promptly. Here’s why:

1) Asset values may fluctuate. Collecting early bears special gravity when asset values may decline. At the end of a lawsuit, the winner gets a piece of paper, signed by a judge, that says the loser owes him some money. Then, it’s time to collect. The best method of collecting is to get a court order allowing property to be sold and the proceeds used to pay a debt. But when asset values decline, it becomes more difficult to obtain enough money to satisfy a judgment. So, it’s better to act fast, before the value declines, to collect the debt.

2) Homestead Exemption. Relatedly, it’s wise to collect while people likely have non-exempt equity in their home. In Arizona for instance, the homestead exemption is limited to $150,000. That means that if someone’s home has less than $150,000 in equity, the property cannot be sold to satisfy a judgment. Over the past decade, real estate prices have increased so substantially that many homes have over $150,000 in equity. But that equity can vanish if you wait too long to collect.

3) Intervening liens are a threat. Real estate is often the best asset class to go after for large judgments. The reason is simple, a single parcel of real estate can easily be worth six, seven, or even eight figures. One valuable parcel can often make a collection effort easy. But every day that passes is a chance for someone to attach a lien to the property. If someone else perfects a lien first, he can take priority over you. In plain English, that means that if someone else acts first, they get paid, and you get the scraps. If there are any.

4) Asset dissipation may occur. People who have money now may not in a few months. Some of the people who owe you money are going to go out of business. If they do, they simply won’t have money to pay you, and despite your best efforts, you’ll never squeeze blood from a rock. Better to act fast while there’s money to collect.

The old kindergarten lesson applies here: the early bird gets the worm. There’s every reason to act promptly and collect money that’s owed to you. Especially with the uncertainty of the Coronavirus.

Call the firm now to book an appointment and discuss how we can help you. 480-616-9377

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