What do you do when you have a judgment and need to collect? Well, for many creditors and collection agencies, the man to call is John Halpern, a 40-year veteran of commercial collections in the Twin Cities.
Minnesota Litigator sat down for an interview where he gave some of his strategies for stopping debtors from declaring bankruptcy, talked about how to track down uncooperative debtors, what he thinks about creditors rights legislation, and also talked about his involvement in politics and he gives a surprise endorsement for a future political figure in Minnesota.
How long have you been practicing commercial collections?
40 years.
What got you interested in commercial collections?
My father was a commercial collection litigation attorney for a number of years and I joined him in practice in 1971. He had a practice specializing in commercial collections, to a large extent, and to a lesser extent, consumer collections, and that has turned out to be my practice’s mix.
Describe your practice.
My law firm consists of three lawyers and we handle claims and litigation against debtors all over the State of Minnesota and also North Dakota. About 90% of what we do is commercial collection lawsuits to collect money against businesses; sometimes we’re able to collect money without having to start a lawsuit – usually we have to start a lawsuit to get dollar one. The other 10% of what we do is collect claims and delinquent accounts of consumers.
How did you get started?
After law school, I worked in Washington D.C. for a year then I had an opportunity to join my father in the spring of 1971. We had our own law firm Halpern & Halpern. In 1977, I decided to go out on my own, I took another attorney with me and have been doing the same thing since.
Some lawyers change their area of focus over the course of their careers, what has kept you in commercial collections?
For the most part, I enjoy the thrill of the hunt, the idea that my law firm is going to be compensated if I bring home some money to my clients. I also enjoy learning and performing in the field of creditors remedies, I like to study the changes that come from the legislature, and I’m on some Minnesota State Bar Association committees so I can stay up to date with what’s happening and occasionally have input on some legislation.
Who do you generally represent?
I represent local businesses that have accounts receivable that can’t collect them in 3-6 months and are tired of getting promises of payment, I get some referrals from attorneys who know what I specialize in and may have heard me at a seminar focused on creditors remedies, and then there are collection agencies that specialize in consumer and commercial delinquent accounts – we’ve had some collection agencies patronize us for several decades.
How many claims do you have going on at one time?
Several hundred.
Do you have a pre-court ritual?
I don’t have anything special other than trying to discipline myself to be on time. The last thing judges want to have is counsel walking in late to a hearing.
Has collections work increased because of the economic downturn?
It has not. Credit by small and medium size businesses has been constricting for at least a half dozen years, and so the number of claims put in the commercial collections pipeline is actually down. There are also more attorneys doing commercial collections now than 15 or 20 years ago, which means there are more law firms for credit grantors and collection agencies to pick from. So, there is more competition for fewer claims.
How do you and your firm maintain an edge on the competition?
We try to keep up with the law by providing consistent and regular reporting to our clients on pending cases. Most of all, we try to be effective at what we do, using creditors remedies allowed by Minnesota statutes to get at the money as soon as possible and put our clients in a position of collecting dollars before a judgment creditor thinks about filing for bankruptcy.
When a there is a big money judgment entered against a debtor, is it common for some to threaten filing for bankruptcy so that the judgment would go away?
Many debtors, and their counsel, threaten bankruptcy after a judgment of a substantial dollar amount has been entered against a debtor. Most of those threats are empty; bankruptcy is one option they’re thinking of and they’re using it as a negotiation device, but we know that most of those threats do not result in a follow-through.
It costs more money to file for bankruptcy, and, as we know from celebrated cases in the media, a bankruptcy trustee has the right to go into all sorts of past history of financial dealing, and when a debtor is going to make a decision about going public with his or its financial position, there’s often a second thought given.
What if you really believe that a debtor is going to file for bankruptcy, what do you do?
If we believe that a debtor is legitimately a candidate for bankruptcy based on a large number of judgments entered against them, ours being one of them, we may encourage a discounted payment arrangement that will allow a debtor to pay a percentage or to pay over time as a condition to settling the case so that we don’t have to take depositions or levy on bank accounts.
What are some of your common strategies for collecting debt?
The arrows in our quiver are primarily based on communication. Once we get a judgment, we send a letter, we call the judgment debtor’s officer or the judgment debtor, if it’s an individual, and we try to negotiate a realistic response on their part to try to settle this debt in some logical way. For example, if the cash flow of the enterprise that owes our client money is challenged, we may work out a multi-month payment arrangement that appears to be the most feasible way that our client will get money and collect the judgment.
Where we have an uncooperative debtor, we keep the paper flowing. We serve an Order for Disclosure, we follow up with a post-judgment deposition, and we put the burden on the party that won’t cooperate that they appear with all sorts of data.
How do you track down people who are uncooperative in the collection process?
Persistence is a quality that is required. You need the resources, such as a skip tracing service – it’s an internet service where you can open up accounts with vendors who charge you monthly to give you data on people who are hard to find. Through LexisNexis, we also have the ability to find out a person’s residential history for 20 years, vehicle ownership for 20 years, judgments of record, tax liens, data from driver’s licenses applied for and issued, and UCC-1 filings against a business or individual. We can develop a whole lot of data in a hurry about an individual who wants to avoid our process server.
What are some tips that you give to your clients to make the collection process easier?
For business debtors, we encourage our clients to have debtors fill out credit applications before the credit granting decision is made. We also encourage provisions in credit applications that have mandatory attorneys’ fees and higher interest than the statutory 6%. Encouraging them to do a careful evaluation of the creditworthiness of a customer is important.
You have been practicing in the same area for over 40 years, what is one of the biggest changes that you have seen in the field?
The time it took for entry of an administrative default judgment by the Hennepin County, then Clerk of Court, before the District Court Administrator designation, was a matter of days, now it takes 6-8 weeks to have a default judgment processed through the Hennepin Country District Court system. There simply isn’t enough money in the judicial system to keep enough employees over there handling the heavy paper load.
Talk a little about the change in debtor protection legislation and how it has affected your practice.
The Fair Debt Collection Practices Act in the consumer area has brought protections to consumer debtors that prevent, or are designed to prevent, oppressive collection tactics that are not only unethical but are, as some would say, inhumane. A debt collector harassing a consumer debtor and threatening that debtor with incarceration or immediate levy on a bank account for not paying will usually result in sanctions in a high enough dollar amount to discourage that practice.
I would say in a consumer collections practice, the FDCPA has done a lot of wonderful things to put a price on abusive collection practices and, as a collection attorney, I think it’s a good thing. Now, Congressional bodies are investigating robo-signing and massive doctoring of documents and fictitious affidavits signed by people who are not knowledgeable of the files they are attesting to. I think that’s a good thing and that will discourage collection mills and the offices of some of these larger financial institutions that are allegedly involved in that practice. I think that shining a spotlight of Congress and of journalistic exposure to violators of common sense collection process is a good thing for all citizens.
Were there any people that you looked up to who made you want to be a lawyer?
I worked for a Congressman Odin Langen, from northwest Minnesota in the Red River Valley, for two and a half years as his legislative assistant. He gave me the opportunity to draft legislation and to interact with lawyers on staffs of members of the House of Representatives, and I thought it was a neat thing to do because, in my own small way, I was, perhaps, influencing what a member of Congress might do or say on a particular topic.
You’re very interested in politics, do you think that political activism and the practice of law can coexist or does it get in the way sometimes?
I try to compartmentalize the two areas. I’m interested in helping to elect, in a small way, both idealistic and pragmatic people whom I admire and that I’d like to give a boost to and encourage to get run for state office. I believe in government by people who are not only honest and want to be competent but also who have strong moral fiber and will make the right decisions under pressure for the greater good of the citizenry.
Although I’ve never personally thought of running for office, I like to encourage others to if they have that political bent and are thinking of higher office.
Are there any politicians that you admire?
There are a lot of present and former office holders whom I respect. In Minnesota, although he doesn’t hold a political position, someone who is knowledgeable about all aspects of government, law enforcement issues, and the best interests of the citizens would be the Sheriff of Hennepin County, the incumbent Richard Stanek. I would expect that some time he would be somebody who would be encouraged by many other people, as well as myself, to think of running for office.
I admire and respect several Republican Congressmen who I’ve gotten to know in recent years; by the same token, a lot of my friends are Democrats, so friendship crosses party-lines, and I may meet from time to time with Democratic officeholders who appear to have all the elements of leadership and integrity that you’d like to see in office. You can have respect for somebody’s integrity and leadership but still disagree with their policy decisions and their political philosophy – that’s what makes for a democracy and a healthy competition of ideas.
Recently, there has been discussion among the State’s GOP about endorsement of judges, do you have an opinion on that?
I would be in favor of the status quo and not for any change to the legal fabric of the selection and election of judges.
I think that Minnesota is blessed with an excellent judiciary, and the governor generally picks candidates from Judicial Commission’s recommendations. One of the things that I admired most about Jesse Ventura, when he was governor, was that all his selections for judges came from recommendations of the Judicial Commission and there were no crony appointments.
Do you have any advice for new attorneys?
I don’t presume to be in a position to advise my younger colleagues of what they should do or not do. I encourage young lawyers to observe the positive and negative aspects of counsel around them – emulate those they respect and avert their eyes and direct their action away from the ones they don’t respect.