How to Collect a Business Debt – Howe & Associates

Small business owners know how difficult debt collection can be. Collecting debts is one of the main failing points many businesses throughout the country experience. One of the main hurdles that small businesses go through is learning how to get money from non-paying clients. However, with a little practice and courage, you may be able to lessen the amount of late payments clients owe your business. Furthermore, it can even help you develop an understanding of when to expect non-payment from a client. And with some planning, you can reduce late payments and come up with a business plan that lets you know the right time to go for a collection.

Effective communication with clients who owe you money can help you settle the debt amicably. However, after five invoices have been sent, phone calls have been made, and emails sent, what more can a small business do to get money from non-paying clients? Do you seek the help of a debt collection law firm?

Fortunately, there are several tools a small business can utilize to collect debt. The following are three ways small businesses can collect debt.

Mediation to Get Money from Non-Paying Clients

First of all, both parties can bring in a neutral third party to assist in reaching an agreement on when the debt will be paid and how. This form of resolving the issue is for parties hoping to remain on good terms. Hence, mediation is a private process. The mediator encourages both parties to be as creative as possible to reach a form of agreement away from the courts. If both parties reach an agreement, the mediator seals the agreement with a written document, which is irrevocable and binding. Both sides often use attorneys to fulfill this role.

Local County and Hot Check Division

Additionally, a business can receive a hot check with non-sufficient funds. This can be devastating; but remember when this occurs that all is not lost. Fortunately, most counties in Atlanta have a hot check division in the local county attorney department. Its job is to return money that non-paying clients owe that they previously refused to pay. This service will help you to get your money. Bring the check to the hot check division after you have contacted the hot check writer and he/she has refused to cooperate. However, you must accurately identify the person who issues you a check by writing the person’s driver license number and state of issuance on the face of the check. Finally, the court will issue a warrant of arrest.

Using The Legal System

It may be necessary to use the court system to get money from non-paying clients. A debt collection lawyer in Atlanta can file your case in court. A court will assist you in establishing a method to retrieve what is owed to you. This route of collection requires you to obtain a judgment from either a district court or the county court with the help of a debt collection firm. The judgment can give you a writ of garnishment. The writ then gives you the authority to collect the sum owed to you from the debtor’s bank account. In addition, a judgment can also give you a writ of execution on personal property, which lets you use a court official to confiscate some kind of property from the debtor.

Each method gives you the ability to collect the debt owed to you and can be rewarding. But there must be a balance between costs and the amount of debt recovered. Perform credit checks and background checks early on to prevent these problems from arising. For more help with getting money from non-paying clients, contact Georgia Debt Collection today.

Many businesses have concerns about the bad debt collection process. It is imperative that businesses know when to begin collection on a bad debt. This can be challenging. Each customer’s debt is unique. Business owners in the Atlanta area can seek a debt collection attorney to advise them on collection laws in Georgia.

Some companies have internal collection policies in place. The policy may initiate the collection process after a debt is older than 60, 90, or 120 days. In most cases, the customer has not responded to previous attempts to collect the debt. Typically, a company should look out for three areas that should prompt them to begin collection on a bad debt.

When to Begin Collection on a Bad Debt

Slow or no pay – Typically after the customer has been late for a significant amount of time, the business should begin collection on a bad debt with additional internal collection activity.
Broken payment arrangements – Usually, when a customer’s account is in a delinquent status, the company may make special payment arrangements to accommodate the customer’s specific situation. This normally includes lower payments with a longer period of time to pay off the debt. When the debtor does not maintain this arrangement, the business should begin additional internal alternatives to secure the debt.
Non-responsiveness – When a customer does not respond to attempts to collect the debt, the business should send demand letters and make additional calls. But if the customer does not respond to any of the methods above, the business should seek outside help from a reputable collection agency.

What are the Next Steps to Collecting on a Bad Debt?

When a customer does not respond to collection attempts, the business can write off a likely bad debt. The business can also send it to a qualified debt collection law firm. However, in a normal debt collection situation, the proper time to begin collection on a bad debt is usually after the company has internally made several attempts and has not gotten a favorable response from the customer.

There are situations when a business retains a debt collection law firm rather than a debt collection agency. A debt collection attorney in Atlanta can enforce the debt collection laws in Georgia when they begin collection on a bad debt. According to the Georgia state laws, collection efforts can include bank and wage garnishments and sheriff levees or judgments. These methods may result in seizing the debtors real or personal property. An attorney could advise and oversee this process.

The Debt Collection Method Guidelines

The Fair Debt Collection Practices Act (FDCPA) governs the debt collection process. This law states that collection methods can be carried out, but the methods must be restricted. Additionally the ACA International has a mandatory requirement that its members abide by all laws and regulations with respect to code of ethics concerning collection methods.

The ARA of Georgia has secured attorney Richard Howe, managing partner of Howe & Associates since 1994, which focuses their practice on debt collection. The firm represents small businesses throughout the state of Georgia and has managed over 80,000 debt collection cases.

http://howeassociates.wistia.com/medias/nmwargrmt2?embedType=seo&videoFoam=true&videoWidth=601

Founded in 1985
Handled Over 80,000 Debt Collection Cases / Very Experienced Collection Team
Coverage – Entire State of Georgia
Litigate in all Courts in the State:

Magistrate Court ($15,000 limit)
State Court
Superior Court
Federal Court (Northern, Middle and Southern Districts)
Georgia Court of Appeals
Georgia Supreme Court

Memberships:

State Bar of Georgia
Georgia Trial Lawyers Association
Commercial Law League of America
American Lawyers Quarterly
National List of Attorneys

Types of Creditors represented

Insurance Premium Collection – Travelers, AIG
Suppliers – Building Supplies, Commercial and Retail Rental, Concrete
Contractors – All types including Grading, to Roofing (* The Firm handles more Mechanic’s Lien and Bond Cases than any other law firm in the State of Georgia)
Advertisers – Billboard, Television, Radio
Law Firms – Considered the “Lawyer’s Lawyer”
All Other Types of Debt Collection Cases

Richard Howe, Member of Georgia State Bar Since 1994 – Managing Partner for 19 years, Lead Attorney in over 10,000 Debt Collection Litigation Cases, Litigated Cases in Most Every Court of Each County in the State, Achieved an “AV Preeminent” Rating from Martindale Hubbell

Fee Structure – Contingency, “No Collection, No Fee”

DEBT COLLECTION IN GEORGIA

Georgia is a “Better than Average” State for Creditors – Favorable Statutory Scheme

Bank and Wage Garnishments / Sheriff Levies / Judgments Attach as Liens against Real Property Owned / Liberal Post Judgment Enforcement Statutes including Contempt for failure to respond to discovery / Favorable Mechanic’s Lien Statutes / Favorable Replevin Statutes

THE “DEBT COLLECTION PROCESS” – Starts Before the Debt Becomes Due

Should begin with a Comprehensive Credit Application, which includes:

Determination of the Exact Legal Entity to whom you are extending credit – (Sole Proprietorship, Partnership, Corporation, or LLC)
Tax Identification Number
Trade name(s)
Location of all offices
Banking Information
Names and addresses of all officers
Personal Guaranty and/or Guaranties
Venue Provision: “It is agreed that venue and jurisdiction will lie in Georgia regarding this transaction”
Stated Rate of Interest – Typical is 1.5% per month
Attorney Fee Provision – O.C.G.A. 13-1-11 states that this must be in writing. If “reasonable attorneys fees” listed, then 15% of the first $500 and 10% of the balance. If “15% attorneys fees or greater, then 15% of principal and interest. Suggested Language: “Any account placed with an attorney for collection will incur 15% Attorney Fees.” “Interest will accrue at a rate of 1.5% on any past due balance.” (* If not in the credit application, then on invoices)
NOTE: * Avoid Credit Limits, as they can arguably release guarantors if exceeded.

When should a claim be placed with our law office? – “when it is determined that your client has become a debtor – * in any case, be aware of the 90 day deadline from “last delivery of goods” to file a Mechanic’s Lien.

LIEN CONSIDERATIONS

Mechanic’s Liens – Liens on Real Property
UCC Liens – Liens on Personal Property

MECHANICS LIEN STATUTES IN GEORGIA – Comprehensive Changes in 2009:

Still Must be Filed within 90 days of Last Delivery
**If Sub to Sub – Must File a Notice to Contractor within 30 days of first work on the job. NOTE: Should always determine if you client is the General Contractor or a Sub to the GC.
Public Jobs – Cannot File a Lien. Must depend on a payment bond (Georgia follow Little Miller Act)
Must “Perfect” the lien within one-year from the date the lien was filed by filing suit and recording a notice of lien in superior court.
When approaching the 90 day deadline, contact our office and we will guide you on the lien filing process.
NOTE: * For Rental Goods, must keep accurate records as to the specific location of goods.

UCC LIENS STATUTES IN GEORGIA

Obtain a Security Agreement and File a UCC-1 Financing Statement in order to perfect the lien. (UCC is an abbreviation for The Uniform Commercial Code.) This code governs commercial transactions between parties. File the UCC-1 in the Superior Court of the county in which the debtor resides. That information is then transmitted within 24 hours to the Georgia Superior Court Clerk’s Authority (www.gscccca.org) who then has 24 hours to add the filing to the Statewide Index. NOTE: You will only need to file your UCC-1 in one county in order to receive statewide notification of your lien position.

THE DEBT COLLECTION PROCESS – With Howe & Associates

Simple Placement Process

Completed Placement Form
Copies of the Invoices (or Statement of Account)
Copy of any Mechanic’s Liens.

Set up the claim in Collection Master Software, investigators will begin an asset investigators will begin asset investigation and initial demand to debtor. No action taken without client approval. Payment plan or litigation to be determined for every case.
Litigation Process

Determine Statute of Limitations – 4 years for Commercial Account or Oral Contract, 6 years for Written Contract from the date the debt “became due”
Determine Legal Entity of Defendant, Parties, Guarantors
Determine Venue (County) and Jurisdiction (Court)
File Complaint and Perfect Lien (30 Day Notice of Filing in Superior Court)
Debtor is served with summons and complaint (by sheriff or special process server)
45 days to file an “answer” with the court
If answer filed, discovery period for 6 months, litigate toward “judgment” (Discovery, motions, trial, etc.)
If no answer, file for default judgment
Counterclaim Considerations
Appeal Considerations

Judgment Collection

Garnishment and Property Attachment
Bank Account Location – (Credit App, Copies of Checks, Bank Locator)
Sheriff Levy Demands
Written Post Judgment Discovery
Post Judgment Deposition with Subpoena to Discover Assets
Compel and Contempt Motions for failure to respond to discovery

Other Debt Collection Considerations

Bankruptcy – Chapters 7, 11, 13 – Liens remain in effect, active collection must cease, motion to lift stay to replevin on goods.
Replevin (aka Writ of Possession) Lawsuits – “Tack and Mail Service”

ACCELERATION OF RENT PROVISIONS – Proceed, but with caution

Article 2A of the UCC Governs. Georgia’s code section 11-2A adopts the UCC. In the event of default of the contract, Article 2A of the UCC and Georgia law allows for Acceleration Clauses if classified as liquidated as opposed to a penalty.

“Liquidated Damages” – where the parties “agree” in advance as to what the damages will be in the event of default. Article 2A provides default and remedy provisions in case the parties to a lease neglect to include a liquidated damages clause.

Sample Clause upheld by the Court:

“1. Any accrued, unpaid rent at the time of the breach, plus 2. The present value of the rent for the remainder of the lease term, plus 3. The residual value of the equipment, minus 4. The present value of the net proceeds resulting from the disposition of the equipment.”

Rule of Thumb: