How to Collect From the Debtor’s Customers

One of the most under-utilized collection tools is the ability to collect from the debtor’s customers.  If a third party owes money to the debtor, the creditor can demand that the third party pay the creditor rather than the debtor.  This tool is ineffective when the debtor receives immediate payment for goods or services (e.g., a restaurant), but can be extremely effective when the debtor bills for its services and gets paid later (e.g., general contractors, attorneys).

To collect from third parties, the creditor must do the following:

  1. Obtain a writ of execution.
  2. Open a file with the sheriff’s office.
  3. Serve the third party with a Notice of Levy, and mail the same Notice of Levy to the debtor.

That’s it.  The third party is then obligated to pay to the creditor any amounts owing to the debtor.

This technique often has an unintended consequence which benefits the creditor.  It is bad for the debtor’s business when its customers are contacted by the debtor’s judgment creditors.  Even if the customer does not currently owe money to the debtor, mere service of the customer can embarrass the debtor and bring it to the table.

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