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Business Debt Collections: How an Attorney Can Help You

Blog Business Debt Collections How An Attorney Can Help You

As a business owner, you have most likely encountered customers/clients who have failed to pay for products, labor, and/or services that you provided for their benefit. You may have also experienced the difficulties involved in collecting those outstanding debts yourself.

The insecurity caused by not knowing the collection measures you are legally allowed to utilize and the lack of responsive communications with these types of customers/clients often lead small business owners to give up collecting their past due accounts. Having an experienced, commercial debt collections attorney on retainer can be an extremely effective way to collect these past due accounts.

Blog Business Debt Collections How An Attorney Can Help You

Advantages of Utilizing a Business Debt Collections Attorney

As an attorney who works in commercial collections, I believe every business should have an internal process for making initial attempts to collect outstanding accounts. A key element of those processes, however, is knowing when to hand over collection efforts to a collections attorney. Once the initial attempts prove to be ineffective with a particular debt, there are several reasons why it is a good idea to pursue professional, legal help.

First and foremost, there are Federal and state laws that provide protection to consumers by regulating the efforts that can be made in collecting debts. Attorneys are in the business of knowing the law and the consequences for violating it.

It is far more efficient to rely on a professional who is familiar with the laws related to debt collection than to use the time that should be spent focused on growing and bettering your business than figuring out which laws could affect your collection attempts. It will also give you peace of mind to know that you won’t be unintentionally violating the law and opening yourself up to potential claims from debtors.

Additionally, experienced collections attorneys have knowledge and access to tools that the average small business owner does not possess. This knowledge allows them to evaluate each business debt collections issue you have, determine the assets available to secure collection, and develop a plan for the most effective options for recovery.

For example, they know how to trace assets that the debtor may have hidden. A collections attorney will be able to communicate to a debtor all of the pre-suit and post-judgment options available to your business to secure payment from them, convincing the debtor that it is in their own best interest to pay their debt. In situations where the debtor is not convinced, the attorney will be able to follow through with utilizing those options.

Finally, collection attorneys are usually able to get your money more quickly than when you use self-help methods. When a letter appears bearing the name of an attorney, most people become afraid that they will encounter legal action, and that fear leads to you getting paid more quickly.

Why an Attorney and Not a Business Debt Collections Agency?

The foremost concern of most small business owners when considering ways to effectively collect their past-due accounts is cost. This is why so many attempt collections on their own. Most collection agencies work on a contingency basis, meaning they keep a portion of the debt they collect, regardless of the amount of time and effort they expend in collecting that debt.

While this approach may seem appealing to business owners because of the lack of up-front investment, this model can cause businesses to unnecessarily give up a significant portion of the amounts they are attempting to collect. Collection agencies are limited in the options they have for collection: usually they will only send letters and make phone calls.

If they are successful in collecting a debt, they receive the agreed percentage even if they put in minimal effort. Using an attorney, however gives the client has more control over the cost they are willing to expend to collect each specific debt they are owed. If the attorney is successful in collecting a debt with minimal effort, the business will retain more of the funds it is owed.

As mentioned above, collection agencies are very limited in the actions they can take on your behalf, which makes their collection efforts less effective. By the time you are seeking assistance to collect a debt, you have likely already sent several letters and made multiple telephone calls to the debtor. The likelihood that a collection agency will be more effective with letters and phone calls than you were, is not high.

Additionally, the more ineffective attempts at collection are made, the longer the debtor has to potentially restructure or hide assets. Debtors tend to take communications from attorneys more seriously, because they come with the possibility of legal action and the ability to follow-through with bringing a suit if necessary.

In conclusion, it is critically important for small business owners to choose the right course of action for collecting each debt they are owed. Hiring an attorney that is knowledgeable and experienced in all facets of debt collection can prevent a business from making the wrong choices could lead to the unnecessary expenditure of resources, including valuable time that should be spend managing and growing their business.

If you have a related legal matter and would like to find out how The Cromeens Law Firm, PLLC, can assist you, contact us today.

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney.

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