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                                                                   Exhibit 10.12

                               Asta Funding, Inc.
                           Form 10-QSB March 31, 2002


         THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of the 21st day of
May, 2002 by and between ASTA FUNDING, INC., a Delaware corporation, with
offices at 210 Sylvan Ave., Englewood Cliffs, NJ 07632 (the "Company") and
ARTHUR STERN, an individual residing at 3333 Henry Hudson Parkway, Riverdale,
New York 10463 (the "Employee")

                               W I T N E S E T H:

         WHEREAS, the parties desire to enter this Agreement to set forth the
terms of the Employee's continued employment by the Company.

         NOW, THEREFORE, in consideration of the mutual premises and covenants
set forth herein and for other good and value consideration, the receipt,
adequacy and legal sufficiency of which are hereby acknowledged, the Company and
the Employee mutually agree as follows:

         1. Employment Duties.

            (a) Employment. The Company agrees to continue to employ the
                Employee, and the Employee agrees to accept continued employment
                with the Company, on the terms and conditions set forth in this
                Agreement.

            (b) Scope of Duties. During the Employment Period (as defined
                herein), the Employee shall devote his business time, attention
                and energy to the business, and to seeking improvement in the
                profitability, of the Company. During the Employment Period, the
                Employee shall serve as Executive Vice President of the Company
                and its subsidiaries and shall have the authority to perform and
                shall perform all of the duties that are customary for the
                office of Executive Vice President of the Company, subject at
                all times to the control and direction of the President and the
                Board of Directors of the Company, and shall perform such
                services as typically are provided by the Executive Vice
                President of a corporation and such other services consistent
                therewith as shall be assigned to him from time to time by the
                President or the Board of Directors of the Company. Employee
                shall also continue to serve as Chairman of the Board of
                Directors of the Company for such period as he continues to be
                duly elected to such position by the shareholders of the
                Company.

            (c) Service. During the Employment Period, the Employee shall
                perform his duties in a diligent manner; shall not engage in
                activities which are or could be detrimental to the existing or
                future business of the Company and its subsidiaries; and shall
                observe and conform to all laws, customs, and standards of
                business ethics and honest business practices. The Employee
                shall be requested, and does hereby agree, to be a full time
                employee of the Company during the Employment Period. During the
                Employment Period, the Employee shall not engage in any other
                business activity which, in the reasonable judgement of the
                Company's Board of Directors, conflicts with the duties of the
                Employee hereunder, whether or not such activity is pursued for
                gain, profit or other pecuniary advantage; provided, however,
                that it is understood that this Section 1(c) shall not preclude
                the Employee from making passive investments in other companies
                or from serving as Vice President of Asta Group, Inc.

            (d) Professional Standards. Recognizing and acknowledging that it is
                essential for the protection and enhancement of the name and
                business of the Company and its subsidiaries and the good will
                pertaining thereto, the Employee shall perform his duties under
                this Agreement professionally and in accordance with the
                standards established by the Company from time to time; and the
                Employee shall not act, and shall refrain from acting, in any
                manner that could harm or tarnish the name, business or income
                of the Company and its subsidiaries or the good will pertaining
                thereto.

         2. Compensation.

            (a) Base Salary. For all services rendered by the Employee during
                the Employment Period, the Company shall pay the Employee a base
                salary ("Base Salary") in the amount of $225,000 on an
                annualized basis, payable in accordance with the Company's
                customary payment policies and periods. The Employee's Base
                Salary may be increased as determined by the Board of Directors
                of the Company in its sole discretion.

            (b) Bonuses. During the Employment Period, the Employee shall be
                eligible to receive bonuses as determined by the Board of
                Directors of the Company in its sole discretion.

            (c) Stock Options. During the Employment Period, the Employee shall
                be eligible to receive stock options as determined by the Board
                of Directors of the Company in its sole discretion.

            (d) Benefits. During the Employment Period, the Employee and/or the
                Employee's dependents, as the case may be, shall be entitled to
                participate (subject to eligibility requirements) in the
                employee benefit plans generally available to other similarly
                situated employees of the Company and the Employee shall be
                entitled to the fringe benefits and perquisites made generally
                available to other similarly situated employees of the Company.
                The Company reserves the right to modify, change or terminate
                its benefit plans, fringe benefits and perquisite plans and
                programs from time to time in the discretion of the Board of
                Directors of the Company.

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            (e) Vacation. During the Employment Period, the Employee shall be
                entitled to an annual vacation of fifteen (15) working days for
                each full calendar year of employment hereunder, which may be
                taken all at once or from time to time; provided, however, that:
                (i) the Employee shall schedule such vacation time so as to
                mitigate the adverse effects to the Company of the Employee's
                absence; (ii) the Employee shall give the Company at least
                thirty days (30) days notice of consecutive vacation days in
                excess of five (5) to be taken by the Employee at any one time;
                and (iii) up to one (1) week unused vacation time during the
                calendar year may be carried over and used by the Employee in
                the following calendar year.

         3. Non-Competition.

            (a) In view of the Employee's knowledge of the trade secrets and
                other proprietary information relating to the business of the
                Company, its subsidiaries and their respective customers which
                the Employee has heretofore obtained and is expected to obtain
                during the period the Employee is employed under this Agreement
                (the "Employment Period"), and in consideration of the
                Employee's employment hereunder, the Employee agrees: (i) that
                he will not during the Employment Period Participate In (as such
                term hereinafter defined) any other business or organization if
                such business or organization now is or shall then be competing
                with or be of a nature similar to the business of the Company or
                its subsidiaries; and (ii) (A) for a period of twelve (12)
                months after the Termination Date (as defined in Section 6) due
                to a termination of this Agreement for Cause (as defined herein)
                or (B) for such period as the Company shall continue to pay to
                the Employee his Base Salary and health insurance benefits in
                accordance with Section 8(b) after a termination of the
                Employee's employment Without Cause (as defined below) or for
                Disability (as defined below), he will not, in any geographic
                area in which the Company or any of its subsidiaries does
                business as of the Termination Date, compete with or be engaged
                in the same business as, or Participate In, any other business
                or organization which competes with or is engaged in the same
                business as the Company or its subsidiaries with respect to any
                service offered or activity engaged in up to the Termination
                Date, except that in each case the provisions of this Section 3
                will not be deemed breached merely because the Employee owns not
                more than 2% of the outstanding common stock of a corporation,
                if, at the time of its acquisition by the Employee, such stock
                is listed on a national securities exchange, is reported on
                NASDAQ, or is regularly traded in the over-the-counter market by
                a member of a national securities exchange.

            (b) The term "Participate In" shall mean: "directly or indirectly,
                for his own benefit or for the benefit of any other enterprise,
                own, manage, operate, control or loan money to (provided that an
                investment in debt instruments issued pursuant to an effective
                registration statement under the Securities Act of 1993, as
                amended shall not be deemed to be a loan), or participate in the
                ownership, management, operation, or control of, or be connected
                as a director, officer, employee, partner, agent, or otherwise
                with, or acquiesce in the use of his name in."

            (c) During the Employment Period and, in the case of the termination
                of the Employee's employment for Cause only, for a period one
                (1) year after the Termination Date, the Employee will not
                directly or indirectly:

                (i) Reveal the name of, solicit, use or interfere with, or
                    endeavor to entice away from the Company (or any of its
                    subsidiaries) any of their customers, vendors, or employees;
                    or

                (ii) Employ or engage any person or entity who or which, at any
                    time up to the Termination Date, was an employee or agent of
                    the Company or its subsidiaries without the prior written
                    consent of the Company.

            (d) The Employee agrees that the provisions of this Section 3 and
                Sections 4 and 5 are necessary and reasonable to protect the
                Company in the conduct of its business. If any restriction
                contained in this Section 3 or in Sections 4 or 5 shall be
                deemed by a court of competent jurisdiction to be invalid,
                illegal, or unenforceable by reason of the extent, duration, or
                geographical scope thereof, or otherwise, then the court making
                such determination shall have the right to reduce such extent,
                duration, geographical scope, or other provisions hereof, and in
                its reduced from such restriction shall then be enforceable in
                the manner contemplated hereby.


         4. Confidential Information. All confidential information which the
Employee may now possess, may obtain during or after the Employment Period, or
may create prior to the end of the Employment Period relating to the business of
the Company or its subsidiaries or of any of their respective customers or
vendors shall not be published, disclosed, or made accessible by him to any
other person, firm, corporation or entity, either during or after the Employment
Period or used by him during or after the Employment Period (except in the
business and for the benefit of the Company or its subsidiaries), without the
prior written consent of the Company. The Employee shall return all tangible
evidence of such confidential information to the Company prior to or at the end
of the Employment Period.

         5. Rights of the Company.

            (a) Any interest in copyrights, copyrightable works, developments,
                discoveries, designs and processes, patents, patent
                applications, inventions and technological innovations
                (collectively, "Inventions") which the Employee (i) owns,
                conceives of or develops, alone or with others, (A) relating to
                the business of the Company or its subsidiaries or any business
                in which the Company (or its subsidiaries) contemplates being
                engaged or (B) which anticipate research or development of the
                Company or its subsidiaries, or (ii) conceives of or develops
                utilizing the time, material, facilities or information of the
                Company or its subsidiaries, in either case during the
                Employment Period, shall belong to the Company.

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            (b) As soon as the Employee owns, conceives of or develops any
                Invention, the Employee shall immediately communicate such fact
                in writing to the Board of Directors of the Company. Upon the
                request of the Company, the Employee shall, without further
                compensation but at the Company's expense (subject to clause (i)
                below) execute all such assignments and other documents
                (including applications for trademarks, copyrights and patents
                and assignments thereof) and take all such other action as the
                Company may reasonably request, including obtaining spousal
                consents or waivers, (i) to vest in the Company all right, title
                and interest of the Employee in and to such Inventions, free and
                clear of all liens, mortgages, security interests, pledges,
                charges and encumbrances ( the Employee to take such action, at
                his expense, as is necessary to remove all such liens) and (ii)
                if patentable or copyrightable, to obtain patents or copyrights
                (including extensions and renewals) therefor in any and all
                jurisdictions in and outside the United States in the name of
                the Company or in such other names(s) as the Company shall
                determine.


         6. Employment Period. The Employment Period shall commence on the date
of this Agreement and shall continue for a three year period ending on May 20,
2005, or such earlier date on which any of the following events occurs (the
"Termination Date"):

            (a) the death of the Employee;

            (b) the voluntary resignation of the Employee;

            (c) the termination by the Board of Directors of the Employee's
                employment for Disability (as hereinafter defined);

            (d) the termination by the Board of Directors of the Employee's
                employment for Cause (as hereinafter defined); or

            (e) the termination by the Board of Directors of the Employee's
                employment Without Cause (as hereafter defined)

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         7. Definitions Relating to Termination

            (a)   Disability

                  The term "Disability" shall mean any physical or mental
                  condition of the Employee which, in the reasonable discretion
                  of the Board of Directors, after consultation with the
                  Employee's physician, materially impairs the Employee's
                  ability to render the services to be performed by him
                  hereunder for a period of 180 consecutive days or for at least
                  240 days in any consecutive 360 day period.

            (b)   Cause

                  The term "Cause" shall mean the good faith finding by the
                  Board Directors of the Company upon resolution adopted by it
                  of the existence of any one of the following:

            (i)   The Employee's failure or refusal to perform specific written
                  directives consistent with his duties and responsibilities as
                  set forth in Section 1 hereof, which lack of performance is
                  not cured within 15 days after written notice thereof or 30
                  days if at the 15th day and thereafter the Employee is
                  diligently attempting to cure;

            (ii)  Conviction of a felony or of any crime involving moral
                  turpitude or fraud;

            (iii) The commission by the Employee of any willful or intentional
                  act which the Employee reasonably should have contemplated
                  would  have the effect of injuring the reputation, financial
                  condition, business or business relationships of the Company
                  (and its subsidiaries, individually or taken as a whole)
                  and/or the Employee; or

            (iv)  Any material breach (not covered by any of the clauses (i)
                  through (iii) hereof) of any of the provisions of this
                  Agreement, if such breach is not cured within 30 days after
                  written notice thereof to by the Board of Directors.

            (c)   Without Cause

                  The term "Without Cause" shall mean a determination of the
                  Board of Directors to terminate the Employee for any reason
                  other than death, Disability or for Cause.

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         8. Effect of Termination

            (a) If the Employee's employment is terminated by the Company for
                Cause or the Employment Period expires, then the Employee shall
                be paid the Employee's Base Salary and other benefits hereunder
                through the Termination Date and the Company shall have no
                further obligations to the Employee.

            (b) If the Employee's employment is terminated Without Cause, for
                Disability or upon the Employee's death, then (i) the Employee
                or his estate, as applicable, shall continue to be paid the
                Employee's Base Salary through May 20, 2005, and (ii) the
                Company shall continue to provide to the Employee and his
                eligible dependents health insurance coverage through May 20,
                2005.

            (c) Irrespective of the basis for the termination of the Employee's
                employment with the Company, all benefits (including fringe
                benefits), if any, due the Employee hereunder shall cease as of
                the Termination Date, other than (i) COBRA rights which shall
                continue to the extent provided thereunder, (ii) Base Salary, if
                applicable, to the extent provided in Section 8(b), (iii) health
                insurance coverage, if applicable, to the extent provided in
                Section 8(b), and (iv) rights under any stock options the
                Employee may have been granted.

         9. Arbitration. Except with respect to the Company's right to seek
injunctive or equitable relief, any controversy, dispute, or claim between the
Employee and the Company arising out of or relating to this Agreement, the
Employee's employment by the Company, the cessation of the Employee's employment
with the Company, or any matter relating to the foregoing, shall be submitted to
and settled by arbitration in the State of New Jersey, in accordance with the
then current rules of the American Arbitration Association or any successor
thereto. Within ten (10) days after a request for arbitration by one party to
the other, the Company and the Employee shall each select one arbitrator. Within
ten (10) days after the second of such arbitrators has been selected, the two
arbitrators thereby selected shall choose a third arbitrator who shall be the
Chairman of the panel. If the first two arbitrators selected cannot agree upon a
third arbitrator, the American Arbitration Association shall name the third
arbitrator. The arbitrators may grant injunctions or other relief in such
dispute or controversy. In the arbitration, the parties shall be entitled to
pre-hearing discovery. The decision of the arbitrators shall be final,
conclusive and binding on the parties to the arbitration. In connection with
such arbitration and the enforcement of any award rendered as a result thereof,
the parties hereto irrevocably consent to the personal jurisdiction of the
federal and state courts located in New Jersey, and further consent that any
process or notice of motion or other application to the said Courts or Judges
thereof may be served inside or outside the State of New Jersey by registered
mail or personal service, provided a time period of at least twenty (20) days
for appearance is allowed. The Company shall not be required to seek injunctive
relief from the arbitrators but may seek such injunctive relief in a court
proceeding. The terms of this Section 9 shall apply to all disputes,
controversies and claims, including, without limitation, any rights or claims
the Employee may have under the Age Discrimination in Employment Act of 1967,
Title VII of the Civil Rights Act of 1954, the Equal Pay Act, or any other
federal, state, or local laws, rules or regulations relating to employment
discrimination or otherwise in any way pertaining to the Employee's employment
or termination thereof. This Section 9 shall survive the termination (by
expiration or otherwise) of this Agreement.

        10. Modification. This Agreement sets forth the entire understanding of
the parties with respect to the subject matter hereof, supersedes all existing
agreements between them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.

        11. Notices. Any notice or communication to be given hereunder by any
party to the other shall be in writing and shall be deemed to have been given
when personally delivered or transmitted by facsimile, or three (3) days after
the date sent by registered or certified mail, postage prepaid, as follows:

                (a) if to the Company, addressed to it at:

                    210 Sylvan Avenue
                    Englewood Cliffs, NJ  07632
                    Attention: Chairman

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                with copies to:

                    Lowenstein Sandler P.C.
                    65 Livingston Avenue
                    Roseland, NJ  07068
                    Attn: John D. Schupper, Esq.

                (b) If to the Employee, addressed to him at:

                    3333 Henry Hudson Parkway
                    Riverdale, New York  10463

                    or to such other persons or addresses as may be designated
                    in writing by the party to receive such notice.

        12. Waiver. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
<PAGE>

        13. Assignment. The Employee's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise. The Company may
assign its rights and obligations hereunder to any of its subsidiaries or
affiliates. The Company will provide notice of such assignment to the Employee.

        14. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure of the benefit of the Employee and his heirs and personal
representatives, and shall be binding upon the Company and inure to the benefit
of the Company, its subsidiaries and affiliates and their respective successors
and assigns.

        16. Headings. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.

        17. Injunctive Relief. As it would be very difficult to measure the
damages, which would result to the Company from a breach of any of the covenants
contained in Section 3, 4 or 5 of this Agreement, in the event of such a breach,
the Company shall have the right to have such covenants specifically enforced by
a court of competent jurisdiction. The Employee hereby recognizes and
acknowledges that irreparable injury or damage shall result to the business of
the Company in the event of a breach or threatened breach by the Employee of the
terms and provisions of Section 3, 4 or 5. Therefore, the Employee agrees that
the Company shall be entitled to an injunction-restraining the Employee from
engaging in any activity constituting such breach or threatened breach. Nothing
contained herein shall be construed as prohibiting the Company from pursuing any
other remedies available to the Company at law or in equity for such breach or
threatened breach, including, but not limited to, recovery of damages from the
Employee and, if the Employee is still employed by the Company, terminating the
employment of Employee in accordance with the terms and provisions hereof.

        18. Governing Law. Any and all claims, controversies or actions
arising out of this Agreement or the Employee's employment with the Company,
including, without limitation, tort claims, shall be governed by and construed
in accordance with the laws of the State of New Jersey, without reference to
choice of law principles thereof.

        19. Attorney's Fees. If a legal action or other proceeding is brought
for enforcement of this Agreement because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorney's fees and cost incurred, in addition to any other relief to
which they may be entitled.

        20. Severability. The provisions of this Agreement are severable and
should any provision hereof be void, voidable or unenforceable under any
applicable law, such void, voidable or unenforceable provision shall not affect
or invalidate any other provision of this Agreement, which shall continue to
govern the relative rights and duties of the parties as though the void,
voidable or unenforceable provision were not a part hereof.

        21. Survival. All warranties, representations, indemnities, covenants
and other agreements of the parties hereto shall survive the execution, delivery
and termination of this Agreement and shall, notwithstanding the execution,
delivery and termination of this Agreement, continue in full force and effect.

        22. Acknowledgment. The Employee specifically acknowledges that: the
Employee has read and understands all of the terms of this Agreement; in
executing this Agreement, the Employee does not rely on any inducements,
agreements, promises or representations of the Company or any agent of the
Company, other than the terms and conditions specifically set forth in this
Agreement; the Employee has had an opportunity to consult with independent
counsel with respect to the execution of this Agreement; and that the Employee
has made such investigation of the facts pertaining to this Agreement and of all
the matters pertaining hereto as he deems necessary.

            IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement on the day and year first above written.


                                           ASTA FUNDING, INC.


                                           By: /S/ Gary Stern
                                               --------------------



                                               /S/ Arthur Stern
                                               --------------------
                                                 Arthur Stern