The Law Offices of Shane McClelland helps businesses explore commercial debt collection options and pursue debtors.
Every business faces the difficult and sometimes uncomfortable task of collecting debts. Your business may be faced with the difficult economic decision of writing off bad debts or incurring more expenses by hiring a lawyer to pursue that debt for you.
Are you throwing good money after bad? Or, even worse, are you leaving money on the table by not pursuing a debtor who has the ability to pay his debts? As a business owner that is owed money on a debt you have a legal right to seek payment, and there are various methods by which to do so.
Creating the Debt
Many commercial transactions are a one-time occurrence between businesses. Some transactions, however, create an on-going credit relationship between the parties. This relationship may be created by contract, through a credit agreement, through an installment sale or a revolving credit agreement. Regardless of the type of deal or the form it takes, most states require full disclosure of the terms of the agreement. A lawyer familiar with this area of practice can help a business prepare and understand these contracts and agreements. The goal, of course, is to make sure that, in the event your debtor chooses not to pay his bill, your contract will be legally binding and sufficient to support a judgment, should you need a court to intervene. Additionally, contracts can be drafted, when appropriate, to make sure that your debts are easier and cheaper collect.
For most Texas businesses, a contract is still an instrument to be honored. These businesses pay their debts in a timely manner. Sometimes, however, it is necessary for the commercial creditor, the party extending the credit or who has already delivered a service, to seek payment that is past due from a debtor. Some businesses, of course, choose not to pay their bills timely or at all. Still other businesses teetering on the verge of insolvency will preferentially treat some creditors but ignore others.
The first step in collecting a debt is locating and identifying the proper entity responsible for the debt. It is not uncommon for a debtor to transfer all or portions of its contracts and liabilities to a different entity. If this happens and your original debtor closes up shop with no forwarding address, it becomes imperative to begin the process of tracking down the original debtor or another entity that is now responsible for the debt. Determining the exact legal description of the debtor and its relationship to the original debtor can be a frustrating and daunting experience for a small business that is owed money. The legal status of the debtor may affect who is liable for the debt, and a lawyer’s job is to find this information.
It is very important to determine the nature of the debt and proceed, accordingly. A debt may be secured or unsecured. A debt is secured when the debtor has assigned a collateral interest covering the debt. In the case of a secured debt, the next step is to foreclose on any real property or take possession of the personal property which has been pledged. Foreclosing and taking possession of property may be done in Texas with or without the intervention of the courts, depending on the type of transaction and the contracts by which collateral is pledged.
Most commercial debts, however, are unsecured. As a creditor, you should keep all documentation available to prove the debt is valid, due and owing. This documentation may include sales or credit agreements, contracts or agreements between the parties, past payment records, correspondence with the debtor, as well all billings and invoices provided to the debtor. Finally, a business needs to keep a complete accounting of all sums owed and paid for each consumer debt account, even partial payments. A full and complete payment history supported by documentation will help your debt collection case.
A variety of collection techniques are available to creditors, from direct contact with the debtor to using a collection agency to bringing a lawsuit. In choosing which course of action is most appropriate to pursue, a creditor should consider the relative costs associated with the different methods, the value of the debt, the creditor’s business history with the debtor and general good business practices.
It sometimes is necessary, however, for a creditor to bring a lawsuit against a debtor. Prior to beginning the suit, the creditor should ensure that he or she has sufficient documentation to conclusively establish the validity of the claim. Once a lawsuit has been filed, a creditor may have several options available to ensure that the debtor does not sell or dispose of any assets or otherwise try to limit the amount of money that will be available if the creditor prevails.
A creditor may seek to attach the debtor’s property. Attachment is a legal process that puts the property under the custody of the court until a judgment is reached. A creditor also may seek a temporary restraining order to keep the debtor from selling or otherwise disposing of goods to which the creditor may be entitled. Despite these options, a creditor still may seek to negotiate and settle the debt prior to or during trial. Any settlement that is quick and fair and is based on the resolution of any dispute regarding the validity of the debt and a candid disclosure of the debtor’s ability to pay is desirable, because it avoids the inevitable delay and expense of litigation.
If a debtor fails to respond to a lawsuit, a creditor may seek a default judgment against the debtor. The court may hold a hearing to determine whether entry of a default judgment is appropriate and what the correct amount of the judgment should be. If a creditor succeeds at trial and gets a judgment from the court establishing the debtor’s liability and the amount of the debt, he or she is a “judgment creditor” and may seek to enforce that judgment.
Other procedures for collecting the judgment debt are then available, such as formal execution on the judgment, which entitles the creditor to use legal process to seize the money or property of the debtor. A Judgment creditor in Texas may also seek the appointment of a receiver, who will be entitled to recover property and money owing under the judgment.
The lawyers at The Law Offices of Shane McClelland can explain your options and help you make an appropriate decision on how best to proceed in collecting your debt. Our firm handles commercial debt collection for a variety of Texas businesses. We have handled collection matters typically based on an hourly fee arrangement, where the client pays an hourly rate and also agrees to pay expenses incurred. In some instances, however, our firm is willing to handle commercial debt collections on a contingency basis or an a blended basis, where an upfront fee is paid and the remainder of the case is handled on a contingency basis, with the final fees and expenses paid out of the client’s recovery from the debtor, if any, at the conclusion of the case.
If your business has debts that need to be collected, please contact the Law Firm of The Law Offices of Shane McClelland.
A Houston Commercial Debt Collection Attorney may be able to help your company. Call an aggressive business debt collection lawyer at The Law Offices of Shane McClelland at 713-987-7107 or email us at firstname.lastname@example.org