THINGS YOUR COLLECTION ATTORNEY SHOULD TELL YOU BEFORE YOU SUE You earned your money and your customer/debtor does not want to pay. You are entitled to your money and of course, you want it now. You should absolutely pursue the debt. However, before you file suit, there are some things that you should know: Think about negotiating a payment plan or a lump sum payment with a discount Litigation can drag on and on. In the end, you may not get paid if the debtor is a corporation that goes out of business. The sooner you get your money or some money out of the debtor, the better off you are. Usually, as soon as the debtor is served with the lawsuit, your attorney will receive a telephone call from the other attorney. Your attorney and you should have, by that time, put a collection strategy together. This should include a payment plan over a period of months or a lump sum payment with a discount. What happens if you are counter-sued? When professionals seek payments on their fees, a common defense tactic is to file a counterclaim for malpractice. If you have malpractice insurance, you probably have a duty [...]

SMALL CLAIMS COURT - IS IT REALLY WORTH THE TROUBLE? Small Claims Court - sounds like a good idea, right? Well, maybe. Consider this: You can only get a judgment if you know where the debtor lives or works After all, either you or the court bailiff must serve the debtor with a copy of the complaint that you file with the court. If the debtor moves, you may not have any way of finding out where the debtor moved. We are a very transient society. People move daily. Your debtor may be on the move. Once you file a complaint with the court, the court clerk signs the complaint and the summons. These documents are only good for 90 days. If the summons expires, you just threw out good money after bad. If you do get a judgment, you can only collect on it if you know where your debtor works or if he owns assets In order to collect on your judgment, you have to know something about your debtor’s assets. You have to know either where he works or banks. If you have this information you can fill out a garnishment to take some of his wages [...]

COLLECTION AGENCY V COLLECTION LAW FIRM - WHERE SHOULD YOU PLACE YOUR DEBT? As a business owner or manger, you are responsible for managing your company’s receivables. When you need help collecting on your receivables, you have two basic choices: you can turn the receivables over to a collection agency or you can turn them over to an attorney. There are a few factors that one should consider before making this kind of a decision. Size of Balances Typically, collection law firms will not work on anything less than $1,000 while collection agencies will. Many collection agencies have “small balance collectors” who will make telephone calls to debtors for balances as small as $25. A collection law firm usually has a staff of collectors. This department is very similar to a collection agency. The Debt Collection Arsenal Collection agencies can write letters and make telephone calls to the debtors. A collection law firm can do these things plus far more. The collection law firm can file suit, obtain a judgment and then reduce that judgment to cash. Fees One pays a premium to use a collection agency as the agency has to make money on the account as well as [...]

TELLTALE SIGNS THAT YOUR CUSTOMER IS NOT GOING TO PAY YOU The economy has not been good to us the past several years. Your customers are taking longer to pay. How do you know when its time to turn a supplier/customer relationship into a creditor/debtor one? Here are some things to look for when deciding when its time to actively pursue your customer for a debt: “The check is in the mail.” or “Send me the invoices again.” These are responses that one frequently gets when one inquires about an outstanding invoice. When you hear either of these responses from your customer, it is unlikely that you are going to get paid without professional help. This may sound cynical. This author has no empirical proof that this is true other than his own experience. The last check bounces This is an excellent indication that professional help is needed to collect your debt, especially when the debtor gives you an excuse such as “the bank screwed up.” While this does happen once in a blue moon, it is not likely to be that phase of moon when it happens to you. The last check is for only a part of what [...]

PITFALLS FOR BUSINESS OWNERS TO AVOID As a business owner or a business manager there are several pitfalls that frequently get a person in your position into trouble. While these are easily avoidable, the consequences of falling victim to these pitfalls can be expensive. Read on and avoid becoming a victim. Don’t Ignore that Garnishment served on your business If you have been served with a garnishment on your employee’s wages, DO NOT IGNORE IT. You must respond to the garnishment within 14 days or a judgment will be entered against your business. The garnishment is a lawsuit by the creditor against the business or business owner. Take a moment and fill out the enclosed response form and follow the instructions. If you have questions about what you are supposed to do, call your lawyer and she can help you. Your failure to file a response will subject you to a judgment for the full amount that your employee owes the creditor. Don’t fire the employee that is being garnished Be aware that you may not fire your employee because his wages were garnished. If he can prove that you terminated his employment because of the wage garnishment, he can [...]

HOW TO COLLECT YOUR JUDGMENT One of the best and ironically, worst things that ever happened to our legal system was a television program called The People’s Court. On this television show, people agreed to dismiss their lawsuits in the California Small Claims Court in exchange for arguing their case on television program. The litigants would each argue their side of the case passionately. Judge Wapner would then render a verdict in favor of one of the parties. The winner would claim and collect his “verdict” after gloating with Doug Llewellyn, the show’s on air personality. Small Claims Court, in reality, is not like that at all. While one has a right to represent one’s self in Small Claims Court, there is a large misconception that once one obtains a judgment, that the defendant is going to be magically convinced to pay it. In reality, defendants rarely pay judgments unless they are pressured to do so. After your judgment is 21 days old, you can go collect it. The law allows the defendant three weeks from the date the judge gave you a verdict, to voluntarily pay the debt. If the defendant decides not to pay, then you can have [...]

AVOIDING COLLECTION PROBLEMS In the past several years, the cash flow of many, if not most businesses have suffered. Indeed, many companies have closed or have been forced into bankruptcy. Few, if any businesses, have been able to avoid feeling the financial ripple effects of the struggling economy. If your business has been adversely affected, you may be receiving telephone calls from creditors, their attorneys or collection agencies. Your problems with your own customers may be causing your payables to become over due. Perhaps, business has simply slowed down for your company as it has for many others. When talking with creditors, their attorneys or collectors, your objective is to secure their cooperation to make a mutually agreeable payment arrangement. You accomplish this by being candid but firm with the collector. You are candid by admitting that business and/or cash flow has been poor. You are firm when you refuse to commitment to a payment plan that you are uncertain that you can honor. By being candid and firm, a professional collector will likely adopt your view of your business. He is thus far more likely to be cooperative with you in creating a payment plan. In order to convince [...]

TO SUE OR NOT TO SUE - THAT IS THE QUESTION For some companies, selecting accounts to place into collection may be as simple as turning over all accounts that are over 60 days old. For the rest of us, however, if we are to make intelligent decisions about filing suit to collect debts, there are several important considerations to analyze before turning a debt over to a collection attorney. Before placing your receivable with a collection professional, you should consider the following factors: IS THE DEBTOR COLLECTIBLE? This is probably the most important consideration to examine before pursuing the debt. After all, if the debtor is not collectible, there is no point in pursuing it. An uncollectible judgment is simply the result of good money thrown after bad. In making this determination, your collection professional should examine the debtor as follows: Is it still in business? Does the debtor still answer its telephone? Does the debtor have assets in its name including a car or real estate? Is there a personal guaranty on the debt? If so, does the guarantor have assets? Are there any tax liens placed on the debtor? Does the debtor have any judgments against it? [...]