Collecting past dues: Put payment agreements in writing because it isn't done if it isn't in writing!

Truer words were never spoken. Striking a deal with a debtor who owes you money can be difficult and an absolutely exhausting process. The two parties don’t even have the same goals in mind: the debtor is trying to preserve cash for payment of other bills while your goal is to get your outstanding balance paid off in full. Once the work is done, though, and even if some compromises are made from your perspective, you don’t want to start the whole process over again. You don’t want the debtor to have a “short memory” and come up with something like: “Wasn’t I suppose to pay you $50.00 per month starting March 10th?” when the real deal was $150.00 per month starting February 1st. How could he forget? Because it’s a convenient truth to a debtor struggling to pay other debts.



So, along comes a writing. It doesn’t have to be “legal” – it doesn’t have to be long – it just has to state the terms of the agreement in plain and simple language so both sides understand what the obligations are.


Thinking past the negotiated resolution of the unpaid balance, you are hoping the debtor does honor his or her commitment by making the payments on time. However, a part of you knows that there is a 50/50 chance, at least, that your debtor will default in making payments on this negotiated schedule. You may end up having to file a collection lawsuit and drag the debtor into court.


With this in mind, your goal is not only to arrive at a writing which memorializes the payment agreement, but also to have a clear document signed by the debtor admitting the balance owed and confirming promises to pay it off.


Why would this be important if you’re planning on suing the debtor should defaults in the payment schedule occur? Because the fastest way to obtain a judgment against your debtor is to show the court an admission of the debt and promises to pay it in writing. In other words, courts love to see clear cut writings. Indeed, all of your contracts made with suppliers, customers and other third parties should be clear, concise and contain language that just can’t be misinterpreted. The same reasoning applies: if these matters have to be litigated at some point in the future, you want a slam dunk case to be presented to the judge.


Even after three decades of shoving collection cases under the noses of judges, it is still a real thrill to hear a judge declare, now and then, “Based on what I’ve seen—including written admissions of the debt—it sure seems like the defendant (debtor) owes the money…”


So, we put agreements in writing. The debtor then has a document to refer to should his memory become short and so that, perhaps, a court will make a ruling in your favor if you have to sue to recover your money.


Written agreements have the effect of modifying prior written agreements. If, for example, you have a prior promissory note secured by a mortgage with all sorts of terms allowing for interest, attorney fees, foreclosure rights and the like, you wouldn’t want to replace such an agreement with a weaker (less terms) promissory note or writing having the legal effect of wiping out your remedies under the prior note or agreement. If in doubt, seek professional advise first, before using subsequent written agreements.