The collection process can be one of the most challenging aspects of any construction business’s operations. If a customer is refusing to pay, and you have protected your payment rights, you can most likely file a mechanics lien to recover the debt. But what if you don’t have lien rights, or you are simply pursuing other avenues to collect at the same time? You need to find out what assets the contractor has available to pay their debt. Doing an asset search is an important step in the collection process or in the event of a lawsuit.
Asset search: The basics
Prior to the start of any lawsuit, you should take the time to search for any assets the person or business actually has that can be used to repay the debt. Contrary to what I believed early on in my career, it does you no good to spend time and money pursuing someone only to find out they don’t have a pot or a window to throw it out of. Doing a pre-legal or post-judgment assessment can save time and money.
The internet has made it easy to take advantage of a wealth of information out there on just about everyone or any company. In the past, while the information may have always been available, it was not always easy or convenient to get to.
Back in the day (before the internet), any information was gathered by tracking on foot from courthouse to courthouse, and searching records with endless phone calls. Searching took time and resources, not to mention cost — which was steep, since it was a manual, labor-intensive process.
Now, anyone with a computer, common sense, and some time can do it at a fraction of the cost. You just have to know how to use it.
Understanding the data trail
Every time you register for a grocery discount card or sign up for anything on the internet, you are in someone’s database. What happens to all those databases? A large number get sold, often many times over. Pretty soon you are in many databases and you can never figure out how you got there. If I had a dollar for every timeshare company, Viagra special, or boob enhancement offer I received, I would be a retired woman.
People are in and out of databases all the time. Logging in and out of those databases, updating information, filling out subscriptions, entering sweepstakes, and of course, updating their social media — Facebook, LinkedIn, Twitter, Snapchat, and Instagram, to name a few.
The data trail being left behind is like Hansel and Gretel dropping bread crumbs in the forest — if you have the patience and knowledge to know where and how to look.
There are some things to keep in mind when you are searching, whether you are asset searching or skip tracing. Courts do not report judgments to credit reporting agencies, but they are public record. A public record search will net results, but if the judgment holder does not record it with the county clerk’s office, the judgments may not show up.
If the judgment was not reported to any agency by the judgment creditor, and you are not signed up to pull from a subscription database or commercial credit reporting agency, you would still be able to locate the judgment by looking in the court records in the county in which the judgment was recorded.
This means you would have to search in every county clerk recording office that you believed the debtor may have property or done business in, which I did when I first started searching. It was exhausting. I had to figure out what each county called its recorder’s office. “Clerk of the Court,” “County Recorder,” “Court Records,” the list goes on and on.
The more I did it, the better I became at connecting the dots, and eventually, I stumbled onto subscription databases. Every search comes at a price. Whether it is in cash or time, you will pay for it.
Subscription databases can be hit-or-miss
Subscription databases are websites that have searched available public data and miscellaneous other bits of information available on the web through other databases and bring them together for you for a price. Using one could considerably cut down on the amount of time I used to spend searching for customer assets. Ultimately, you have to pay for what you want.
Early on in this process, I worked with a private investigator that did my research on large debts. They were pretty guarded and not very willing to share secrets with a client, who frankly was looking to learn the how-to’s. When I asked what resources they used to search for the information, I was told they used databases that were only available to certain professions: attorneys, private investigators, banks, etc.
This proved to be both a bit true and a bit false. There are a small number of sites that are restricted to certain industries, but most are available to anyone — with some requirements. You must be able to prove you have a legitimate business reason for searching, and you must actually be a business with a business address. The “home office” from the basement of your Mama’s house, or cyber-stalking an ex or celebrities is not considered legit.
I started doing random searches with search engines. Putting in names and various bits of information and seeing what the web had to offer. Search engines were helpful in leading me to other avenues. Up popped organizations, personal web pages, and sites for address and phone information.
I spent a lot of time on public record searches. The most common search engine result to pop up was the one with someone’s phone number or address, and another search site comes up and offers you selections: a basic name and part address — teaser information, which is free — followed by selections for more information for more money. Those search sites that pop up with more information for purchase are your subscription databases.
There are a huge number of subscription databases, and the ways they operate differ as well. On some, you can purchase information a la carte with no membership. Some require you to apply, submit information, and be approved before you can purchase.
Over the years, I have tried numerous sites, some with great results, and some that worked for specific information. Others — a total waste of time and money.
My suggestion is to figure out what information you are looking for and start doing some basic searches to see what comes up for your needs. I use everything from PACER (Public Access to Court Electronic Records) to a simple Google search.
Starting an asset search
The key to starting an asset search is to identify who or what you are searching for. It is easy to get bogged down in your pursuit.
Are you researching an individual or company? As you are tracking, watch for some signs. If the company has lots of names that seem similar, but just slightly different, you may have some corporate shell games going on. This makes it hard to know exactly who is holding the assets. If the names vary ever so slightly, they can tie you up in court for a long time without you ever getting next to an asset.
Start with the legal name of the company, or the legal name of the individual. This is why, at the onset of doing business with any individual or company, you must have the correct information upfront. When it gets to the collection stage, your non-payer is not likely to have a tinge of conscience or start a tell-all coffee klatch with you.
So, ask yourself, what am I looking for? What types of things am I looking for?
4 groups of assets & liabilities to search for
You are searching for assets, but also liabilities. They are broken down into four groups:
1. Company assets
Company assets include real property, vehicles, equipment, personal property, investments, trusts (financial assets), aircraft, intellectual property (patents and trademarks), subsidiaries, and affiliates. These are things that are listed specifically in a company’s name.
2. Company liabilities
Liabilities will include IRS tax liens, state tax liens, workers compensation liens, lawsuits, judgments, Better Business Bureau complaints, employee lawsuits, loans, mechanics liens, bond claims, security interests, and Uniform Commercial Code filings (UCC —find out who has “dibs” on them prior to you).
3. Personal assets (individuals)
Personal assets differ from company assets in that they are registered to a specific person, not a business entity. These could include real property, vehicles, equipment, boats, personal watercraft, airplanes, ATVs, personal property (collectibles, hobby items, jewelry, art, animals — not the family dog, but specifically trained animals, like a guard dog), investments, 401Ks, trusts, shares, life insurance policies, bank accounts, and savings bonds.
Getting bank account information without a writ of execution is almost impossible. Cash, offshore accounts, bank accounts in other people’s names, etc. are all virtually impossible to trace. But keep in mind that hard-to-locate items often become public information in a divorce proceeding or community property settlement. They are worth being aware of and checking out.
4. Personal liabilities
Personal liabilities are debts held by the individual, not the company. These include IRS tax liens, state property tax liens, personal or company lawsuits, number and amount of loans, credit card/debt ratio, mechanics liens, security interests, co-signer on loans, mortgages, vehicle loans/payments, boat loans/payments, and toy payments- ATVs, jet skis, motorcycles, golf carts, trailers.
Don’t forget to search for liabilities
If I have come to the portion of our program where my non-payer has all but ceased communication, and I am trying to decide how I am going to proceed, I want to know exactly what I am up against. I want to know how many judgment liens are in front of me — on judgment liens, it is the old rule “first in time, first in line” — so it is important.
Even if you have a valid mechanics lien claim, your lien may not have first priority when it comes time to payment.
If there are five judgment liens ahead of me, I am going to have a hard time collecting my payment. I also want to know how much they are for, if they are state or/and federal tax liens, and so on. Just knowing the assets doesn’t help; you have to have a full picture of what you are dealing with to make a well-informed decision.
I take all the information I gather through credit reports and database searches to review the account file and make my determination from there in regards to how I am going to proceed. Before spending any additional time or money, I want to know exactly what I am dealing with — and whether it’s even worth pursuing a lawsuit or lien foreclosure. If the company or individual I’m going after also owes a bunch of other people who are in line ahead of me, I may be in for a long, expensive fight just to get a few cents on the dollar.
Thea Dudley teaches credit & collections
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