Collecting in California from Out of State Accounts

USA Map - Collecting Debts in CA from Out of State Accounts

If the debtor is out of state, should you sue here or hire a lawyer in their state?  We generally recommend that California creditors start where they are located.  The legal rules of where you can sue (subject to exceptions) usually make courts where 1) the contract was formed, or 2) where the contract was to be performed are the proper place.  Contracts are performed where the money is payable.  If you sell goods to an out of state debtor or do work for an out of state debtor, their duty is to pay you where you are, namely in California.

So basically you can sue in California.  Since most cases pay or settle,  its’ worth starting in California.   This is especially true if your debtor does any other business in California, has accounts in California who owe it money or  doesn’t want a judgment against it.  

If your debtor doesn’t pay, doesn’t respond or doesn’t acknowledge, it’s doubtful they will hire a California attorney to defend a case.  The result is that the creditor will generally win a judgment without opposition.  This avoids difficulty of trying to prove your case out of state.  You won’t have to hire a lawyer out of state.  You won’t have to send witnesses out of state, You won’t have to risk being “hometowned.

If the debtor doesn’t pay even after a Judgment is entered, the solution is transferring your California Judgment to the state where the debtor has operations or assets.   This is called a “Sister State Judgment”.   You can take your California Judgment to any of the other 50 states and it will be recognized as a judgment there.  No need to start a new case or offer proof or witnesses. 

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