You can do everything right with your business, working hard to secure contracts, hiring skilled workers who deliver a quality product and establishing your reputation within the market. But if your clients or customers don’t pay you in a timely manner, it can all be for naught. You could retain a collection agency to help you recover unpaid sums, but most collections operations take a percentage of the amount collected, up to half in some instances. There are other more affordable and effective options. You want an experienced lawyer to protect your bottom line.
An advantage that an attorney offers over a collections agency is direct access to the legal process. When your lawyer contacts a debtor, seeking to work out a payment plan, your lawyer can quickly and cost-effectively file legal action for breach of contract, should negotiation efforts fail. If your debtor does not respond to legal action, your attorney can also obtain a judgment and take the necessary steps to enforce and collect on the judgment. A collections agency can only make threats. They may be disinclined to take legal action, as that will cut into any profit they make from collecting on your behalf.
Many debt collection agencies regularly violate the provisions of the Fair Debt Collection Practices Act, subjecting your debtors to repeated calls, threats and harassment. When you work with an attorney, you know that all efforts to collect the debt will be done professionally and in compliance with all laws. In many instances you can use a debt collection attorney to work out a settlement that allows you to maintain your relationship with the customer.
Typically, when you hire a lawyer to help you collect a debt, the process will include:
- You will provide the relevant documentation and proofs to your attorney.
- Your attorney will provide the debtor with a default notice, advising them that they are in breach of their agreement to pay you. A default may appear on a credit report.
- Your attorney will send a letter of demand for payment and may lodge a default with a credit reporting agency.
- Your attorney will file a lawsuit on your behalf, alleging breach of contract.
- The matter will be settled by negotiation or resolved in court, either through a default judgment (the debtor does not respond) or through a trial. The court can include interests and/or court costs in the judgment.
- Your lawyer will take steps to enforce the judgment, either through garnishment, levy or an examination notice, where your lawyer has the opportunity to review the debtor’s financial affairs to determine ability to pay.
- Determine whether joining with other creditors to file an Involuntary Petition in Bankruptcy against the debtor would be helpful.