The legal system is an “ineffective vehicle” for collecting unpaid debts for both plaintiffs and defendants, according to research conducted by the Utah Bar Foundation, in conjunction with Pew Charitable Trusts, showing that showing up to defend against a collection lawsuit often leads to more debt while judgments obtained by plaintiffs rarely allow creditors to recover the full balance that is owed.
On average, individuals sued in Utah courts for uncollected debts are sued for owing about $1,200, but the median district court judgment in debt collection cases was 32% higher than the initial amount being sought. Only 4% of defendants in debt collection suits were represented by an attorney, compared with 88% of plaintiffs.
For plaintiffs, 385,000 judgments were issued in Utah between 2013 and 2020, with a total face value of $2 billion. But as of 2022, less than half of those judgments have been paid in full. More than 70% of all debt collection cases in Utah in 2019 ended up with a default judgment.
“Taken together, these findings indicate that financial institutions and landlords are using Utah’s civil courts to collect debts, but the legal system, as it currently operates, is an ineffective vehicle for the task,” according to Erika Rickard, a project director at Pew.
While highlighting some of the steps that have been taking by the court system in Utah to address these inefficiencies, the report makes other recommendations, such as trying to reach settlements before cases make it to court, adjusting attorney-fee awards, and requiring plaintiffs to prove they have legitimate grounds to sue, before a default judgment is rendered.