Successful commercial debt collections can be the difference between succeeding in today’s competitive market, and your business succumbing to unpaid invoices.
There are three commercial debt collection practices commonly used by debt collection attorneys that can help your business collect on past due debt and ensure your business’s financial security:
1. Research and Assessment
The best defense against unpaid accounts is to have a contract. Before lending, check the debtor’s credit references.
Gathering information allows you to be as prepared as possible should a past due account continue to go unpaid. Keeping documentation of your contact with the debtor—letters, notices, phone calls, etc.—will also help your chances of winning should you have to pursue legal action.
Debt collection attorneys have access to professional databases that give them access to documents lay people cannot find. Collecting credit score information, public records, and any other available information about your debtor’s financials helps your attorney assess the likelihood that your debtor will be able to pay you back.
This step assigns value to your debtor’s business and the potential to collect money for repayment. Your debt collection attorney will gather records of payment histories, tax liens on the business, and other collections against the business to decide whether they might default during the debt collection process.
If a debtor is at high risk for default, you may need to move very quickly. Debtors often owe money to more than one business. The more money they owe, the more likely they are to declare bankruptcy or try to hide valuable assets.
2. Contact the Debtor
An experienced debt collection attorney will use a strategic and professional approach to secure your payment without alienating your client base. They will call or send letters to your debtor, informing them of their past due accounts and asking for payment or establishment of a payment plan.
Often, the weight of having an attorney behind the request can speed up the debt collection process—most everyone wants to avoid going to court. If this is the case, your attorney may encourage you to make a settlement. It is tempting to refuse a lesser amount than you are owed, but if your debtor simply does not have the money to pay you back in full, partial payment is better than the risk of getting nothing.
If there is no response or if the debtor will not settle, your debt collection attorney can take legal action to place liens or holds on any assets found during their research, until they can be put towards recouping your losses.
3. Litigation
Litigation is usually a last resort in debt collection practices. If you need to pursue legal action, hire an experienced debt collection attorney who will seek an efficient and effective resolution. Ask a prospective debt collection firm about their payment structure before you hire them. Get these details worked out in the forefront so there is no question when your customers start paying their invoices and the money finally starts coming in the door.
The first step is filing the suit against the debtor. You have options in where to file, but your attorney will know which court is the best one either for your specific case or for plaintiffs in general. After the debtor is served with the court documents, a response is required. The debtor can either fight the case in court or contact you to settle. If there is no response from the debtor, a default judgment may be ordered against them, in which the court will then order the debtor to repay the debts owed to you.
Obviously, the litigation process is one that involves many steps and a strong legal background. However, if your overdue accounts receivable are mounting, it’s the most effective way to collect from debtors.
If you need help collecting on your business’s past due accounts, contact The McHughes Law Firm at 887-750-6173 to schedule a free consultation with one of our experienced debt collection attorneys.
