Legal Definitions - collectability

Collectability refers to the practical likelihood that a person or entity who owes money due to a court order (a judgment) will actually be able to pay that debt. It assesses the ability of the winning party (the judgment creditor) to successfully recover the money awarded by the court from the losing party (the judgment debtor).

Here are some examples to illustrate this concept:

• Example 1: High Collectability

  A small software company wins a lawsuit against a large, multinational technology corporation for patent infringement, resulting in a $10 million judgment. The technology corporation has billions in assets, a strong financial history, and readily available funds.

  This judgment has high collectability because the defendant corporation possesses ample financial resources and a clear ability to pay the awarded amount. The winning software company is very likely to recover the full $10 million without significant difficulty.

• Example 2: Low Collectability

  An individual wins a defamation lawsuit against a defendant who is currently unemployed, has no significant assets (such as real estate or a substantial bank account), and is already facing personal bankruptcy proceedings. The court awards a $50,000 judgment.

  Despite the court's order, this judgment has low collectability. The defendant lacks the financial means to satisfy the debt, and their existing financial distress makes it highly improbable that the winning individual will be able to recover any substantial portion of the awarded money.

• Example 3: Partial Collectability

  A contractor obtains a judgment for $25,000 against a homeowner for unpaid renovation work. The homeowner has a stable job with a moderate income and owns a house with some equity, but does not have $25,000 in liquid savings.

  In this scenario, the judgment has partial collectability. While the homeowner cannot immediately pay the full amount, their steady employment might allow for wage garnishment over time, and the equity in their home could potentially be leveraged, though this might involve more complex legal steps. The contractor is likely to recover some, but perhaps not all, of the judgment, and it may take considerable effort and time.