Good news for collection attorneys and others dealing with various forms of "wage" garnishments (periodic garnishments of income). 2012 PA 304 was passed effective Sept. 25, 2012, changing periodic garnishments from 91 days to 182 days.
The length garnishments last varies widely from state to state, and there are always political "pressures" to make changes. Some states have banned garnishments on head of households altogether!
Well, in Michigan, we allow wage garnishments, and for years they were good for 91 days (that is, they had to be renewed every 3 months)....well, that has now been extended to 6 months, effective immediately.
Steve Harms
Monday, October 8, 2012
Thursday, July 19, 2012
Collecting Money: How much time do we have (statute of limitations)?
Most of us are aware that there are limitations on actions, that is, we only have so much time to file a law suit to enforce collection.
For the sale or leasing of goods, from staples to cars, the Uniform Commercial Code (UCC) applies in all states. It imposes a four year statute of limitations.
However, on other contracts, we generally have a longer period of time (in Michigan, for example, we have six years) to bring suit after default or last payment made (that's a discussion in an of itself, for another time).
Well, a Michigan Court has just ruled that a credit card (this is a contract which should fall under the longer statute of limitations because it is NOT the sale or leasing of goods, per the UCC) does fall within the four year statute if it was USED to buy goods....this is not good logic...the court is wrong...none the less, that is the ruling!
The court totally overlooked the fact that a credit card is essentially a banking relationship...one of borrowing money. Regardless of what I use my card for, I'm borrowing money from the credit card company...that's the way I see it.
Anyway, the Michigan court noted that Indiana and other states have adopted the concept that a credit card use to buy goods is governed by the four year statute under the UCC...so here I am...warning you to make a mental note that you may only have four years to bring an action on a credit card debt. I may not agree with it, but I don't control the courts!
For the sale or leasing of goods, from staples to cars, the Uniform Commercial Code (UCC) applies in all states. It imposes a four year statute of limitations.
However, on other contracts, we generally have a longer period of time (in Michigan, for example, we have six years) to bring suit after default or last payment made (that's a discussion in an of itself, for another time).
Well, a Michigan Court has just ruled that a credit card (this is a contract which should fall under the longer statute of limitations because it is NOT the sale or leasing of goods, per the UCC) does fall within the four year statute if it was USED to buy goods....this is not good logic...the court is wrong...none the less, that is the ruling!
The court totally overlooked the fact that a credit card is essentially a banking relationship...one of borrowing money. Regardless of what I use my card for, I'm borrowing money from the credit card company...that's the way I see it.
Anyway, the Michigan court noted that Indiana and other states have adopted the concept that a credit card use to buy goods is governed by the four year statute under the UCC...so here I am...warning you to make a mental note that you may only have four years to bring an action on a credit card debt. I may not agree with it, but I don't control the courts!
Sunday, June 3, 2012
Does "debt collector" include a creditor/loan servicer?
An account was assigned for collection to a loan servicing company. The loan was not in default at the time of the assignment. So, the servicing company can't be a "debt collector" under the Fair Debt Collection Practices Act, right?
Well, if the non-debt originating loan company takes the assignment believing the debt was actually delinquent, and starts an aggressive collection campaign against the debtor and her family, then the assignment is deemed to be that of a delinquent debt, and the loan servicing company is deemed to be a debt collector. Also, since the FDCPA protects any person, the non-debtor family member (her husband) also gets to sue as a plaintiff!
Bridge v Ocwen was just heard in the 6th Circuit Court of Appeals in Ohio, so has national implications as a federal case.
Well, if the non-debt originating loan company takes the assignment believing the debt was actually delinquent, and starts an aggressive collection campaign against the debtor and her family, then the assignment is deemed to be that of a delinquent debt, and the loan servicing company is deemed to be a debt collector. Also, since the FDCPA protects any person, the non-debtor family member (her husband) also gets to sue as a plaintiff!
Bridge v Ocwen was just heard in the 6th Circuit Court of Appeals in Ohio, so has national implications as a federal case.
Monday, April 23, 2012
Contracts: signatures may be done by computer, email, fax!
Sometimes there is a challenge from a customer who refuses to pay a bill that: "You can't collect from me because I didn't properly sign a contract with you." Well, first of all, not all contracts need to be in writing in the first place (millions of dollars of goods are purchased daily on phone call agreements). Further, goods received by a customer, which aren't returned timely are ACCEPTED and the deal has been RATIFIED...which makes for a valid deal even without a contract. On the other hand, perhaps you DO have a valid signed contract: only the customer (debtor) signed electronically!
Electronic signatures, such as confirming emails or click-ons ("I agree") or similar buttons are valid means of entering into contracts which are binding, and which will be upheld in court.
There are two main laws dealing with the topic of electronic signatures, the Electronic Signatures in Global and National Commerce Act (E-SIGN) and the Uniform Electronic Transactions Act (UETA).
E-Sign is a federal act enacted 10/1/2000 providing that no contract be “denied legal” effect solely because it is in electronic form. In other words, an electronic signature may be just as enforceable as a written one.
UETA is a state act enacted in 1999 to create uniformity in state laws pertaining to e-commerce. This act is very similar to E-SIGN in that it establishes that “records, signatures, and contracts may not be denied enforceability solely due to their electronic form.”
The state law, UETA, is a uniform act, which, like the UCC, has been adopted in some form by most states…Michigan has adopted it.
Now, what is important is that both sides agree to the use of electronic signatures and that there be a way to prove the customer/debtor did consent….for example, client should require debtor to email back, or have a click on button “I agree” or something similar. IF information is merely AVAILABLE online, that won’t be adequate.
Most states also have restrictions on what contracts can be made or cancelled with e-sign…for example, insurance companies still have to mail out written cancellations of policies even if the contracts to purchase insurance were done by e-sign.
There are cases at the appeal level which have upheld the validity of e-sign by email and click on agreements.
Then, there is the practical, as opposed to legal, factor: some judges aren’t in the 20th Century!
Electronic signatures, such as confirming emails or click-ons ("I agree") or similar buttons are valid means of entering into contracts which are binding, and which will be upheld in court.
There are two main laws dealing with the topic of electronic signatures, the Electronic Signatures in Global and National Commerce Act (E-SIGN) and the Uniform Electronic Transactions Act (UETA).
E-Sign is a federal act enacted 10/1/2000 providing that no contract be “denied legal” effect solely because it is in electronic form. In other words, an electronic signature may be just as enforceable as a written one.
UETA is a state act enacted in 1999 to create uniformity in state laws pertaining to e-commerce. This act is very similar to E-SIGN in that it establishes that “records, signatures, and contracts may not be denied enforceability solely due to their electronic form.”
The state law, UETA, is a uniform act, which, like the UCC, has been adopted in some form by most states…Michigan has adopted it.
Now, what is important is that both sides agree to the use of electronic signatures and that there be a way to prove the customer/debtor did consent….for example, client should require debtor to email back, or have a click on button “I agree” or something similar. IF information is merely AVAILABLE online, that won’t be adequate.
Most states also have restrictions on what contracts can be made or cancelled with e-sign…for example, insurance companies still have to mail out written cancellations of policies even if the contracts to purchase insurance were done by e-sign.
There are cases at the appeal level which have upheld the validity of e-sign by email and click on agreements.
Then, there is the practical, as opposed to legal, factor: some judges aren’t in the 20th Century!
Tuesday, March 6, 2012
COLLECTING FROM BUSINESS ENTITIES: When is the owner personally liable for the debt?
Collection of commercial account can be tricky from the standpoint of WHO you can actually demand the money FROM…in other words, when is there PERSONAL LIABILITY FOR THE ACCOUNT.
A proprietorship is a simple form of business involving a single owner who has the business in his own name. An example is John Jones dba Jones Bike Shop. This form of business may not even be registered. Occasionally, you find the business is registered under the assumed name or fictitious name county filings in the county where the business is operated.
A partnership is a little bit more complicated but similar to a proprietorship with more people. The general partners are the owners, and, like a proprietorship, they are personally responsible for all debts incurred by the business. An example would be John Smith and Mary Smith dba Smith’s Bike Shop. A fictitious or assumed name certificate may be filed in the county. A certificate of a partnership may be filed in the county or even with the state in some states. Some states have lookup documents where you can lookup to see if a business is registered as a partnership.
A partnership can get a little bit more technical if you get into the concept of limited partnership. In this instance, there are two different kinds of partners: a general partner and a limited partner. The general partner is personally responsible for all debts and the limited partner is like a shareholder of a corporation; that person has invested money and is only liable to creditors for the amount of his investment. For example, if the limited partner invests $10,000.00 and that $10,000.00 is fully paid in, then the limited partner is not exposed for any other liability. Limited partners generally are not active in the business and are really prevented from being active in the business. The general partners are generally active in the business, responsible for day to day activities, and, again, are liable for contracts the business enters into. There must be at least one general partner and one limited partner. Partnerships can even consist of corporations, which form partnerships. Sometimes these are also formed as joint ventures. A joint venture is different because it is formed for just one limited purpose such as to run an event for a weekend or something like that.
Corporations of course are very familiar to all of us. There are formalities. They must be filed and they must be maintained. If they are not maintained, corporations are dissolved automatically by the state they are in generally after three years.
The whole point of a corporation is that there is no personal liability for their owners. However, there can be personal liability if they sign personal guarantees or if there is a theory for piercing the corporate veil.
Corporations are on file with the state. They can generally be confirmed through a telephone number or on line access.
Each state has its own corporation law, partnership law but most states have adopted the Uniform Partnership Act so partnership enforcement is consistent and also most states, or at least 75% of the states, have adopted the Model Business Corporation Law which is also uniform.
Like the Uniform Commercial Code, these are all laws adopted in individual states. None of these are federal laws. However, there is remarkable uniformity throughout the country.
Question: Who is liable with regard to these legal entities and who can we cask to pay us when we make our demand?
Answer: This is a very good question and probably should be broken down as follows: those legal entities which we call and can remind the owners that they are personally obligated and those business debtors we call knowing that there is only business liability.
First, the entities with personal liability:
1. Proprietorship. If the business is John Jones dba Jones Bike Shop or anything similar, John Jones is personally liable. The bike shop could have folded but Jones’ personal assets are still exposed to you, the creditor. You can threaten to sue him personally. You can threaten to sue him and take his personal assets as part of that process (this should all be done professionally as you know). There is full personal liability and a sole proprietor cannot escape that.
2. General Partners of a Partnership are personally liable the same way sold proprietors are. You can remind them when you make your collection calls that they will be held personally liable for contracts and that their personal assets are “on he line”. Of course, this is not true with regard to limited partners.
3. Corporations involved no personal liability with a few exceptions: check your client’s documents carefully to see if there are any personal guarantees which would make those individuals (generally top officers) personally liable for business debts. The guarantees may even contain some restrictive provisions such as a limitation in dollar amount or a limitation of time.
There are a few other ways that corporate officers or directors could be personally liable for debts but when making demand over the phone, I would not go into it. In other words, you may be considering a theory of piercing the corporation veil because there was some fraud or concealment or whatever. After checking with an attorney experienced in that area, you could probably make such a demand but otherwise, I would stay away from it.
A corporation, which has expired, and the debt was incurred after the expiration date is a potential basis for personal liability. I use the word “potential” because the corporation can re-file itself and erase the personal liability. That can happen any time up until the entry of judgment in most states. Let'’ take an example so that this concept is clear; Fred Jones owns Jones Corporation. He files the corporation but fails to file annual reports. After three years, Jones Corporation is dissolved. The disillusion (that is what it is called) occurs for purposes of this example on August 1, 2001. On September 1, 2001, he buys $10,000.00 worth of product from your client. At the time the produce is purchased, the corporation is technically defunct, dissolved, does not exist legally. He can use some theory such as “de facto” or “de jure” if he knows the lingo but you can also remind him that your client is prepared to litigate on the basis of personal liability since the corporation was dissolved at the time the purchases were made. There was no corporate entity at that time.
Likewise, some debt can be incurred prior to the corporation being formed. This is called “promoter liability”. If for example, John Jones owned a Jones Corporation but he incurred some debt from your client prior to the corporation actually being formed with the state (it is very easy to determine the incorporation date by calling the state) then he is personally liable to you as a promoter of the corporation.
A proprietorship is a simple form of business involving a single owner who has the business in his own name. An example is John Jones dba Jones Bike Shop. This form of business may not even be registered. Occasionally, you find the business is registered under the assumed name or fictitious name county filings in the county where the business is operated.
A partnership is a little bit more complicated but similar to a proprietorship with more people. The general partners are the owners, and, like a proprietorship, they are personally responsible for all debts incurred by the business. An example would be John Smith and Mary Smith dba Smith’s Bike Shop. A fictitious or assumed name certificate may be filed in the county. A certificate of a partnership may be filed in the county or even with the state in some states. Some states have lookup documents where you can lookup to see if a business is registered as a partnership.
A partnership can get a little bit more technical if you get into the concept of limited partnership. In this instance, there are two different kinds of partners: a general partner and a limited partner. The general partner is personally responsible for all debts and the limited partner is like a shareholder of a corporation; that person has invested money and is only liable to creditors for the amount of his investment. For example, if the limited partner invests $10,000.00 and that $10,000.00 is fully paid in, then the limited partner is not exposed for any other liability. Limited partners generally are not active in the business and are really prevented from being active in the business. The general partners are generally active in the business, responsible for day to day activities, and, again, are liable for contracts the business enters into. There must be at least one general partner and one limited partner. Partnerships can even consist of corporations, which form partnerships. Sometimes these are also formed as joint ventures. A joint venture is different because it is formed for just one limited purpose such as to run an event for a weekend or something like that.
Corporations of course are very familiar to all of us. There are formalities. They must be filed and they must be maintained. If they are not maintained, corporations are dissolved automatically by the state they are in generally after three years.
The whole point of a corporation is that there is no personal liability for their owners. However, there can be personal liability if they sign personal guarantees or if there is a theory for piercing the corporate veil.
Corporations are on file with the state. They can generally be confirmed through a telephone number or on line access.
Each state has its own corporation law, partnership law but most states have adopted the Uniform Partnership Act so partnership enforcement is consistent and also most states, or at least 75% of the states, have adopted the Model Business Corporation Law which is also uniform.
Like the Uniform Commercial Code, these are all laws adopted in individual states. None of these are federal laws. However, there is remarkable uniformity throughout the country.
Question: Who is liable with regard to these legal entities and who can we cask to pay us when we make our demand?
Answer: This is a very good question and probably should be broken down as follows: those legal entities which we call and can remind the owners that they are personally obligated and those business debtors we call knowing that there is only business liability.
First, the entities with personal liability:
1. Proprietorship. If the business is John Jones dba Jones Bike Shop or anything similar, John Jones is personally liable. The bike shop could have folded but Jones’ personal assets are still exposed to you, the creditor. You can threaten to sue him personally. You can threaten to sue him and take his personal assets as part of that process (this should all be done professionally as you know). There is full personal liability and a sole proprietor cannot escape that.
2. General Partners of a Partnership are personally liable the same way sold proprietors are. You can remind them when you make your collection calls that they will be held personally liable for contracts and that their personal assets are “on he line”. Of course, this is not true with regard to limited partners.
3. Corporations involved no personal liability with a few exceptions: check your client’s documents carefully to see if there are any personal guarantees which would make those individuals (generally top officers) personally liable for business debts. The guarantees may even contain some restrictive provisions such as a limitation in dollar amount or a limitation of time.
There are a few other ways that corporate officers or directors could be personally liable for debts but when making demand over the phone, I would not go into it. In other words, you may be considering a theory of piercing the corporation veil because there was some fraud or concealment or whatever. After checking with an attorney experienced in that area, you could probably make such a demand but otherwise, I would stay away from it.
A corporation, which has expired, and the debt was incurred after the expiration date is a potential basis for personal liability. I use the word “potential” because the corporation can re-file itself and erase the personal liability. That can happen any time up until the entry of judgment in most states. Let'’ take an example so that this concept is clear; Fred Jones owns Jones Corporation. He files the corporation but fails to file annual reports. After three years, Jones Corporation is dissolved. The disillusion (that is what it is called) occurs for purposes of this example on August 1, 2001. On September 1, 2001, he buys $10,000.00 worth of product from your client. At the time the produce is purchased, the corporation is technically defunct, dissolved, does not exist legally. He can use some theory such as “de facto” or “de jure” if he knows the lingo but you can also remind him that your client is prepared to litigate on the basis of personal liability since the corporation was dissolved at the time the purchases were made. There was no corporate entity at that time.
Likewise, some debt can be incurred prior to the corporation being formed. This is called “promoter liability”. If for example, John Jones owned a Jones Corporation but he incurred some debt from your client prior to the corporation actually being formed with the state (it is very easy to determine the incorporation date by calling the state) then he is personally liable to you as a promoter of the corporation.
Monday, March 5, 2012
Collection Scam Artists...they're even contacting consumers on fake debts!
The Federal Trade Commission governs much of our industry, and handles numerous complaints from consumers on such matters as Fair Debt Collection Practices Act violations. The newest scam appears to be the hiring or creation of call centers made up of fake debt collectors to make strong-arm collection calls on fake debts!
Yes, scam artists have figured out that if you harass someone enough, they might just pay a debt that doesn't even exist...just to get the "debt collector" off their back! The FTC offices are referring to this scam as phantom debt.
A number of consumers have already admitted to paying hundreds of dollars by check and even credit cards, to get rid of "collectors." These consumers paid these fake debts as they were worried the fake collectors really would follow up with threats to have them fired, garnished, arrested at work, or, they thought they may really owe the money from some pay check advance or similar situation they simply forgot about.
For those of us who are involved in legitimate collections, knowing that intentional violators of the FDCPA exist is bad enough. Now we find that scam artists have invaded our industry and are making collection demands on debts that don't exist to get money from innocent people.
According to a recent article in the Detroit Free Press (freepress.com), some callers are demanding as much as $2,000 from consumers, under threats of wage garnishments, having the consumer arrested at work and the like. The scam artists seem to have quite a bit of information on the people they are calling. Since one crooked debt collection firm took in $5 million, the scam obviously works.
I firmly believe anyone reading this blog is an honest debt collector just trying to collect on legit debts using legal means....however, we can't put our collective heads in the sand...we have to be aware of these illegal practices.
Yes, scam artists have figured out that if you harass someone enough, they might just pay a debt that doesn't even exist...just to get the "debt collector" off their back! The FTC offices are referring to this scam as phantom debt.
A number of consumers have already admitted to paying hundreds of dollars by check and even credit cards, to get rid of "collectors." These consumers paid these fake debts as they were worried the fake collectors really would follow up with threats to have them fired, garnished, arrested at work, or, they thought they may really owe the money from some pay check advance or similar situation they simply forgot about.
For those of us who are involved in legitimate collections, knowing that intentional violators of the FDCPA exist is bad enough. Now we find that scam artists have invaded our industry and are making collection demands on debts that don't exist to get money from innocent people.
According to a recent article in the Detroit Free Press (freepress.com), some callers are demanding as much as $2,000 from consumers, under threats of wage garnishments, having the consumer arrested at work and the like. The scam artists seem to have quite a bit of information on the people they are calling. Since one crooked debt collection firm took in $5 million, the scam obviously works.
I firmly believe anyone reading this blog is an honest debt collector just trying to collect on legit debts using legal means....however, we can't put our collective heads in the sand...we have to be aware of these illegal practices.
Thursday, February 9, 2012
Collections of student loans: are we facing a debt bomb?
Student loans amount to about $1 trillion in outstanding debt, and many students are finding they just can't afford to pay them off! A number of sources (just Google "student loan debt bomb") are reporting the default rate on student loans could be the next debt bomb, like mortgage defaults and foreclosures.
Although collectors have take solice in the fact that most student loans are not discharged in bankruptcy of the student, there is a hardship exception, which may be used. Will bankruptcies with hardhip applications be the norm rather than the occasional exception to the rule? That is the talk on the street.
There is talk of federal legislation to allow for a discharge of student loan debt following a five year "good faith" window of opportunity, but that is not likely to pass right now. (H.R. 2028 and S. 1102 are proposed changes to private loan discharges, but neither restore discharge for federal student loans).
Although collectors have take solice in the fact that most student loans are not discharged in bankruptcy of the student, there is a hardship exception, which may be used. Will bankruptcies with hardhip applications be the norm rather than the occasional exception to the rule? That is the talk on the street.
There is talk of federal legislation to allow for a discharge of student loan debt following a five year "good faith" window of opportunity, but that is not likely to pass right now. (H.R. 2028 and S. 1102 are proposed changes to private loan discharges, but neither restore discharge for federal student loans).
Tuesday, January 31, 2012
Collecting Accounts Beyond the Statute of Limitations
A cautionary note: I suggest you Google or otherwise read about the $2.5 million dollar fine imposed on a Michigan debt buyer for failing to tell consumers that on debt past the statute of limitations, the debt is revived by a payment.
Clearly, payment on debts beyond the statute of limitations can be demanded as the money is still due. However, these debts can't be sued on, because each state imposes a statute of limitations, which is simply a "drop dead date" for bringing a collection suit in the courts.
Apparently, and the upshot as of this minute is a bit unclear, collectors CAN demand payment on old debt as long as the consumer paying it is told the debt is beyond the statute of limitations in that state, that a payment will revive that statute, and suit can be brought if a payment is made. Also, some of the articles today on the Internet suggest the debt collector may be limited in reporting the debt to credit reporting agencies.
If you collect past due accounts, which are beyond the statute of limitations, check this out and comply with any new/existing requirements to avoid being charged by the Federal Trade Commission.
By the way, the Michigan debt buyer settled without any admissions of the FTC claims according to articles on the topic....the point of this blog is NOT to toss any stones at this business (which is why I didn't even name the company mentioned in the article), but rather to educate readers of the potential issue the FTC may raise with collections on older accounts, typically consumer accounts.
Clearly, payment on debts beyond the statute of limitations can be demanded as the money is still due. However, these debts can't be sued on, because each state imposes a statute of limitations, which is simply a "drop dead date" for bringing a collection suit in the courts.
Apparently, and the upshot as of this minute is a bit unclear, collectors CAN demand payment on old debt as long as the consumer paying it is told the debt is beyond the statute of limitations in that state, that a payment will revive that statute, and suit can be brought if a payment is made. Also, some of the articles today on the Internet suggest the debt collector may be limited in reporting the debt to credit reporting agencies.
If you collect past due accounts, which are beyond the statute of limitations, check this out and comply with any new/existing requirements to avoid being charged by the Federal Trade Commission.
By the way, the Michigan debt buyer settled without any admissions of the FTC claims according to articles on the topic....the point of this blog is NOT to toss any stones at this business (which is why I didn't even name the company mentioned in the article), but rather to educate readers of the potential issue the FTC may raise with collections on older accounts, typically consumer accounts.
Monday, January 30, 2012
Collections: MERS update
On Tuesday, May 3rd of 2011 I posted a blog discussion on MERS, the mortgagee created to quickly file mortgages, but not the holder of the note (the debt). The discussion was to the effect that the Court of Appeals held the mortgage foreclosures by advertisement had to stop and that there were serious issues to be dealt with because the note holder and mortgage holder were different entities.
Well, getting right to the bottom line, and not getting caught up in the many technicalities on this whole issue, the Michigan Supreme Court has now ruled that the Court of Appeals was wrong. So, we are back to business as usual here in Michigan in terms of foreclosures, and there apparently is no legal problem with the MERS filing system and the mortgage foreclosures....I suppose good news for the banks and perhaps bad news for the home owners.
If you are a legal beagle and want to read more about the case, check out or Google Saurman at 805 NW2nd (that's Northwestern Reporter, 2nd) at page 183.
Well, getting right to the bottom line, and not getting caught up in the many technicalities on this whole issue, the Michigan Supreme Court has now ruled that the Court of Appeals was wrong. So, we are back to business as usual here in Michigan in terms of foreclosures, and there apparently is no legal problem with the MERS filing system and the mortgage foreclosures....I suppose good news for the banks and perhaps bad news for the home owners.
If you are a legal beagle and want to read more about the case, check out or Google Saurman at 805 NW2nd (that's Northwestern Reporter, 2nd) at page 183.
Tuesday, January 24, 2012
Collecting Money: Avoiding Stall Tactics
Debtors (people or companies which owe money to creditors) love to stall payment, anyway they can! The more they stall, the longer they can hold on to their money, or, the longer they can use YOUR money to pay for other things.
One strategy to avoid the stall tactic is to try to find out what portion of the debt is allegedly disputed (the stall tactic). Then, get the debtor to pay the undisputed portion of the claim. Your logic to the debtor is simple: “show your good faith to our client by paying the undisputed portion of this account, that way our client will take your claims/objections more seriously and we can actually resolve them”.
Keep in mind that the debtor wants to make the matter as complicated as possible. This is an excellent stall tactic used to confuse many debt collectors. If the debtor can convince the collector that this is a complicated, fuzzy, hugely disputed matter, the creditor is more likely to let the debtor get away with a stall. The collector might even let the debtor go an additional 30 or 45 days after the last communication, not wanting to deal with these stalling tactics!
Again, make the file as clear as possible by defining the undisputed portion, and then focusing in on the actual issues as to the disputed portion of the claim including information such as the invoice numbers, or the description of the goods which are disputed.
Once you know exactly what is in dispute, obtain the necessary documents to "prove" your case (invoices and the like).
Documents will include invoices and delivery receipts but also call notes made by in-house credit people, scraps of paper written in handwriting, e-mails, faxes, etc. Obviously, if you can find a piece of paper where the debtor admitted that they were going to pay all or even a portion of the account, you have struck gold! The best clients for collection attorneys like me are those clients who keep things in writing, particularly when an account is disputed.
A good credit manager, even on a disputed account, would write something to the debtor like “per our conversation today, we agreed to work on invoice #123 for $1,000.00 but you agreed, in the meanwhile, to pay off the remaining balance of $1,500.00 on the other invoices which are not disputed”. Obviously, a document like that is a piece of gold to you and to your attorney if the case actually goes on to be sued. Any written admission of the debt is a very, very substantial piece of evidence in your favor!!
If the case does go on to suit, please note that all documents should be sent onto the attorney particularly “key” documents such as personal guarantees, contracts, credit applications, invoices, delivery receipts and related documents. Yes, even a credit application is extremely important. It can tell you and the attorney where the debtor banks and other very helpful information. Sometimes there is a question that you might not even anticipate such as what the legal composition of the debtor is. The credit application should clear that up.
One strategy to avoid the stall tactic is to try to find out what portion of the debt is allegedly disputed (the stall tactic). Then, get the debtor to pay the undisputed portion of the claim. Your logic to the debtor is simple: “show your good faith to our client by paying the undisputed portion of this account, that way our client will take your claims/objections more seriously and we can actually resolve them”.
Keep in mind that the debtor wants to make the matter as complicated as possible. This is an excellent stall tactic used to confuse many debt collectors. If the debtor can convince the collector that this is a complicated, fuzzy, hugely disputed matter, the creditor is more likely to let the debtor get away with a stall. The collector might even let the debtor go an additional 30 or 45 days after the last communication, not wanting to deal with these stalling tactics!
Again, make the file as clear as possible by defining the undisputed portion, and then focusing in on the actual issues as to the disputed portion of the claim including information such as the invoice numbers, or the description of the goods which are disputed.
Once you know exactly what is in dispute, obtain the necessary documents to "prove" your case (invoices and the like).
Documents will include invoices and delivery receipts but also call notes made by in-house credit people, scraps of paper written in handwriting, e-mails, faxes, etc. Obviously, if you can find a piece of paper where the debtor admitted that they were going to pay all or even a portion of the account, you have struck gold! The best clients for collection attorneys like me are those clients who keep things in writing, particularly when an account is disputed.
A good credit manager, even on a disputed account, would write something to the debtor like “per our conversation today, we agreed to work on invoice #123 for $1,000.00 but you agreed, in the meanwhile, to pay off the remaining balance of $1,500.00 on the other invoices which are not disputed”. Obviously, a document like that is a piece of gold to you and to your attorney if the case actually goes on to be sued. Any written admission of the debt is a very, very substantial piece of evidence in your favor!!
If the case does go on to suit, please note that all documents should be sent onto the attorney particularly “key” documents such as personal guarantees, contracts, credit applications, invoices, delivery receipts and related documents. Yes, even a credit application is extremely important. It can tell you and the attorney where the debtor banks and other very helpful information. Sometimes there is a question that you might not even anticipate such as what the legal composition of the debtor is. The credit application should clear that up.
Subscribe to:
Posts (Atom)