PRE & POST JUDGMENT COLLECTION OF MUNICIPAL RECEIVABLES

1. PRE & POST JUDGMENT COLLECTION OF MUNICIPAL RECEIVABLES

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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

8. “Skip Tracing” Moved and Missing Debtors • There are a number of free and fee based resources from which debtor information can be obtained.

9. 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.

10. 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

11. 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.

12. 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)

13. 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.

14. 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.

15. 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.

16. 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)).

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. 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.

24. 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.

25. 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.

26. 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.

27. 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.

28. Questions?