Commercial Collections FAQs
COMMERCIAL COLLECTIONS QUESTIONS
- What is commercial collections?
- Is the only type of collections work your firm handles commercial collections?
- What is the difference between commercial collections done by a collection agency and by an attorney?
- What are the stages of commercial collections?
- What tools are available to a collections attorney to seek to enforce a judgment?
- What is the likelihood of recovery on my claim turned over for commercial collections?
COMMERCIAL COLLECTIONS QUESTIONS
Commercial collections involves the collection of past-due receivables owed to a business by another business, or an individual for a business related debt. It can be distinguished from consumer collections which involves collection of debts owed by individuals that were incurred primarily for a personal, family or household purpose.
Our collections practice is generally focused on representation of business creditors that are owed money by other businesses or individuals. We routinely handle claims where the debtor is an individual where the basis of the claim is business related, such as a personal guaranty, or some other basis for personal liability of an individual in connection with a business debt. We do not currently accept volume retail collections (such as defaulted credit card debt) involving consumer debtors. We will accept non-commercial claims where the debtor is an individual depending on the nature of the claim, the documentation or other evidence supporting the claim, the age of the claim, its value, and our evaluation of its collectibility. Please contact us for a free initial consultation to evaluate your claim.
A collection agency sends a series of dunning letters to a debtor and usually combines its mail campaign with a series of phone calls. Many collection agencies operate on a high volume basis and handle all claims that are referred to them using a "cookie cutter" or "assembly line" approach where each claim is handled the same way (regardless of the circumstances of the debt or debtor involved). An attorney uses the law courts and legal process to collect the debt. Depending upon the specifics of the case the legal strategy can be tailored accordingly.
For each claim that is accepted for collections, the first stage in the collection process is to investigate the debtor and its financial situation (assets and liabilities). This is done by accessing a variety of public records and private data sources available to us, including private subscription only data bases to which we subscribe. Based on the results of the initial investigation, a final demand letter may be sent to the debtor. We may combine this with a phone call to the debtor or personal visit to the debtor's business premises. In some circumstances this step may be skipped entirely and a law suit will be commenced immediately.
The second stage of the collections process is to file a lawsuit. This is a litigation to collect the past due receivable. The goal of commercial collections litigation is to obtain a judgment or settlement. A collections case is not undertaken in the anticipation of contested litigation. A collections case is one the debtor is not anticipated to raise any substantial defenses, and typically is the type of case where creditor could obtain summary judgment (judgment by motion prior to trial) based on the underlying documents and a supporting affidavit. See the FAQs regarding commercial and civil litigation below for more information about litigation generally. In appropriate instances the collections attorney will seek to obtain a pre-judgment remedy against the debtor, such as an attachment against assets of the debtor, or an injunction to preserve the status quo or prevent fraudulent transfers of assets.
Once a judgment has been obtained the third stage of the collections process is judgment enforcement. The collections attorney seeks to enforce the judgment against assets of the judgment debtor and turn it into cash using a variety of judgment enforcement tools permitted by law.
There are a variety of legal tools that a collections attorney can use to seek to enforce a judgment on behalf of a judgment creditor. In New York a collections attorney can serve restraining notices and information subpoenas upon banks holding or believed to hold accounts of the judgment debtor, and upon third parties that owe the debtor money (such as the debtor's customers or clients). In New York a judgment debtor can be compelled to answer written questions under oath or to participate in an oral examination under oath regarding the identity and location of the debtor's assets. The sheriff or marshal can be instructed to seize the debtor's bank accounts and execute and sell other assets, such as business equipment, vehicles, and real estate, among others. There are other devices that can be employed depending on the nature of the debtor's assets.
The answer to this questions depends upon a number of factors including the age and size of the receivable and what it is for, whether the debtor is still engaged in business, whether the debtor has unencumbered assets, whether or not the debtor is a defendant in other litigation, and whether there are prior unsatisfied judgments against the debtor. In addition, the more information you are able to provide regarding the debtor, such as where the debtor banks, or the debtor's primary customers or clients, the better the chances of recovery.