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How to Collect Business Debt
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Article 5: Call In The Big Guns
Instead of endlessly chasing a customer who clearly doesn’t intend to pay, you can turn to a collection agency or attorney.
Collection agencies often don’t have lawyers on staff, meaning that although they can get nasty, they can’t sue the customer. On the other hand, they often will accept cases involving lower total debt, and are more likely to work on a contingency basis than a lawyer. Agencies typically take 18 to 35 percent of debt recovered.
Attorneys can file lawsuits, investigate personal assets in addition to business property, get assets seized, garnish the client’s bank account and so forth, points out Darrell Cook of the Dallas law firm of Darrell W. Cook & Associates. Fees can be substantial, but often just knowing a lawyer is involved convinces the customer to pay before fees mount too high.
Whichever route you choose, bring the credit application to help the collections professional locate the client. Even if the customer has moved or changed phone numbers, the application may have other names on it, such as ex-spouses or personal references who might provide current contact information.
A court judgment against the debtor serves as a lien against various real property, in many states. Although it can take awhile to collect, the lien must be paid before the property can be sold or refinanced.
Most states also provide a discovery instrument following favorable judgment to learn about personal as well as business assets that can be seized to satisfy the debt. The customer must provide detailed questions about income, property and assets—and answer to an unhappy judge if he won’t cooperate.
Neither the aggravation of a persistent collections agent nor the threat of legal action are pleasant, so the prospect of either becoming involved may be just what’s needed to make your client pay up.
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