Creditors: know your options to collect unpaid debt

You have rights as a creditor. When individuals or businesses fail to pay back debt owed to you, what are your options? Your options primarily depend on whether the debt is secured by collateral or is an unsecured debt.

You can first try to collect unpaid debts without court intervention. This typically involves making a demand on the debtor for payment or, in the case of secured debts, for turnover of the collateral. A secured creditor takes priority over unsecured creditors with regards to their collateral, or the sale proceeds from sale of their collateral. Many secured transactions allow the creditor to take possession of collateral to credit it toward the debt owed, however foreclosing on real property in New Mexico can only be done through judicial foreclosure.

An unsecured or under-secured creditor may first make demand for payment of a debt. If such demand is not met, the creditor can resort to filing a law suit to collect on the debt. If the creditor proves their case, they will receive an enforceable judgment against the debtor. It is important to note that a statute of limitations may apply, limiting the time in which the creditor can file a law suit to collect a debt.

Once a judgment is obtained, creditors have the following options to collect on the judgment:

  • Wage garnishment: Creditors can obtain a garnishment of the debtor's wages to help recover debt.
  • Liens: Judgment creditors can obtain a Transcript of Judgment, which gives them a judgment lien on any real property that the debtor owns. The creditor can foreclose this lien to sell the debtor's real property to satisfy the judgment.
  • Execution: Creditors can, after providing the debtor with a notice of right to claim certain property as exempt, serve a writ of execution that allows a sheriff to seize non-exempt assets to sell to pay toward the debt.

Several other options may be available to help creditors collect unpaid debt. Working with an experienced creditor's rights attorney can protect your rights and interests.

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