Successfully Collect Your Debts

Author: Nina Kaufman

Copyright (c) 2010 Ask The Business Lawyer

Jenny's problem is one shared by many business owners. She has just spent a whole day chasing after clients who owe her money. Despite sending emails, letters, and even conducting face-to-face meetings, these clients stubbornly refuse to pay. Unfortunately, Jenny, like other business owners, did not have written agreements with any of them. Should she enlist a lawyer's help? Is it even worth it?

Unfortunately for Jenny, she had a better chance of getting paid when her customer relationship was active than when she has finished the work and the client is already showing signs of slow - or no - payment. But unless you're prepared to take the hit as a matter of regular policy, you may well need or want to sue for the debt. What can you expect from the process?

Phase 1: "Setting Expectations" In short, keep your expectations low. There are several reasons. One is that attorney fees can sometimes surpass the size of the debt you would like to recover, especially if the amount in question is less than $10,000-$20,000. You can work with a lawyer on a contingency basis, but the attorney usually takes a handsome 1/3rd cut. Further, do you have a strong case, which can be supported by documents such as a contract, unpaid billings and demand letters? Do the provisions in your contract address interest payable on amounts owing, or even for attorney or debt collector fees? You need to consider if the time and costs involved are worth the amount you recover. Remember too, that many cases settle, so be prepared to compromise.

Phase 2: "Hiring the Attack Dogs". If you're ready to move forward, leave this to the professionals -- collection agents and lawyers. Why? They know what they're doing. They have arts of persuasion . . . and a familiarity with debt collections laws that are part of their core business. Also, by hiring someone else to step in, you get this matter off your plate so that you can return to your core business. And, because deadbeats bank on your not having the guts to take them to court, hiring others sends a strong signal that you're willing to fight.

Phase 3: "Locating the Paper Trail". While debt collection ostensibly appears straightforward, you need to come up with documentary evidence to show that you have a case. Such legal proofs include billing sent, demand letters and any correspondence or written disputes from the client. By showing a well-documented trail of paper, you increase the credibility of your case. Correspondence from another party adds greater weight to your claim.

Phase 4: "Hurry Up and Wait". Bear in mind a lawsuit can last any length of time from 3 months to 2 years. Further, many commercial cases settle for less than the full amount of the claim. However, settlement ensures you receive your money (this may be in doubt if you proceed to trial.)

Phase 5: "Laying Your Hands on the Money". This does not happen automatically after you get a court judgment in your favor. You or your lawyer will have next to track the client down, find his bank account, and one which has funds in it. If your client is a schemer, you may be in for a wild chase. If the client declares bankruptcy, you could end up with zero.

Rather than getting caught in collections nightmares, work out ways to avoid them. Having a written agreement that includes your payment policies can substantially cut the time and cost you spend in the "rabbit hole" of collections.

Article Source: http://www.articlesbase.com/law-articles/successfully-collect-your-debts-2123531.html

About the Author
Fed up with convoluted legal issues in your small business? Check out Nina Kaufman, Esq's resources at GreatBusinessLawResources.com. An award-winning business attorney and online columnist/blogger for Entrepreneur Magazine, she demystifies legal mumbo-jumbo to save time, money and aggravation. Get your free copy of her Contracts & Collections Info Kit now!