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Bankruptcy: What to do when a debtor threatens or files for bankruptcy?

Most credit managers at one time or another have heard a debtor threaten to file for bankruptcy if legal action is vigorously pursued. Knowing what a bankruptcy is and what your options are as a creditor can help clear up the mysteries surrounding this seemingly complicated process. What is bankruptcy? Bankruptcy is a form of relief available to individuals and corporations pursuant to Article I, Section 8 of the United States Constitution which grants to Congress the power to establish "uniform laws on the subject of bankruptcies throughout the United States." The Bankruptcy Code and Rules are governed by the laws set forth in the United States Code, which Code includes the Bankruptcy Code. Generally, bankruptcy provides an individual with a fresh start, allowing them to discharge all unsecured debts, or an opportunity for the individual or company to reorganize their debt in the hopes of paying their creditors a reduced amount over a prescribed period of time as set forth in their bankruptcy plan. What are the typical types of bankruptcies? Chapter 7 - Liquidation - A Chapter 7 is the simplest and one of the most common forms of bankruptcy in which the non-exempt assets are sold by a court appointed trustee who then pays all unsecured creditors a pro-rata dividend based upon the amount of funds recovered from the sale of the debtor's assets. If the Chapter 7 debtor is an individual, the bankruptcy proceeding generally ends with the debtor being granted a discharge. If the Chapter 7 debtor is a corporation, the bankruptcy proceeding ends with a dissolution of the corporation or business. Chapter 11 - Reorganization - Typically a Chapter 11 is used by corporations or extremely high net worth [...]

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Pre-Litigation Considerations: I want to sue, so now what happens?

You're tired of broken promises and you're ready to file suit. What is involved in filing suit? How much does it cost? How long does it take? Answers to these questions and more. You have received your last broken promise and you have decided that now you want to proceed with suit against the debtor. What is involved in filing suit? How much does it cost? How long does it take? Is it worth the effort and expense? The first decision that will be made, in consultation with your attorney, is what type of action will be brought against your customer. The following are the most common causes of action for a typical collection account: Open Account - an open account is typically an account in which purchases are periodically made, with the intent that purchases will be totaled in a single account. A statement is then periodically furnished to the debtor. An open account tends to be one of the simplest and most cost effective methods of establishing an obligation. Other related forms of action include an action on an account stated which is generally defined as an agreement stated between persons who have had previous transactions, fixing the amount due in respect to the transaction and promising payment. Another form of action is that of goods sold and delivered. In an action to recover on a claim for goods sold and delivered, typically the plaintiff must prove delivery of goods and show either an agreement upon the sale price or that the amount claimed represents a reasonable value of the goods actually delivered. Breach of contract - In an action for breach of contract, the essential elements include the establishment of the valid [...]

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Proven Strategies for Improving Collectability

Numerous books and seminars promote various theories of collecting accounts receivable, but basic strategies are often the most effective. Many of these ideas may seem simple, but don't be deceived by their simplicity. When a collection account ends up in an attorney's office, I find many clients failed to take the following precautions. Establishing a written credit policy. Most companies do not have a written credit policy and those that do fail to adhere to the policy on a consistent basis. Getting to know their customer. While this appears to be a simple and basic element of any relationship, many clients do not know who their customer is. By that, I mean, is your customer an individual, a proprietorship, a partnership, or a corporation.? In our business world, many entities use fictitious names and acronyms for their businesses. It is important to clearly establish who is responsible for the obligation. This can become especially confusing when you are dealing with partnerships. Planning for the worst. Many clients fail to plan for problems before they happen and therefore, they fail to include necessary provisions for dealing with problems which may arise in the future. Planning for an account to be past due or planning for litigation is essential. Typically, most clients have a discount for early payment but fail to include provisions for attorney's fees, interest or late charges for a delinquent account. Delineating these provisions before an account becomes past due ensures that there are no misunderstandings later. Utilize personal guarantees when appropriate. Many new and unknown companies that do not have a credit history will attempt to avoid personal liability by establishing a corporate account. While the laws providing for corporate liability were clearly [...]

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7 Mistakes to Avoid when selecting a Debt Collection Attorney, Lawyer or Agency

Here's a quick guide to help you wade through the process of selecting a debt collection attorney, lawyer or agency. While they all might look the same there's a lot of differences that you need to know up front. Please feel free to use these questions - you might be surprised by the answers you receive. After each question we've given our response. If you still have questions or would like to talk to one of our licensed attorneys please feel free to contact us. 1. Are you required to sign a “retention” agreement? We require no retention agreements. We earn your business 1 claim at a time. 2.  Is “the firm” a real law firm, with real attorneys, or just debt collectors? All claims are handled by our licensed practicing attorneys. Why pay more for a collection agency when you can use a lawyer for less. Skip the collection agency and start with a law firm that can handle your accounts from start to finish. 3. What are your collection rates? Is there any fine print? Our rates are some of the most competitive in the industry, starting as low as 18% of what we recover. No fine print. If we don’t collect, you don’t pay a fee. 4. Is the firm experienced in commercial (B2B) collections? Our exclusive focus is on Commercial (Business) Collections. We don’t try to be all things to all people. Our managing attorneys have nearly 50 years of combined commercial debt collection experience. Our firm recently celebrated its 15th year of serving satisfied clients worldwide. 5. Is the firm qualified to give “true” legal advice? Can it protect my legal rights? Only an attorney or lawyer can provided legal [...]

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Does your credit application protect you ?

No matter how cautious you are in extending credit to your customers, in the end, the quality and contents of your credit application often determine how successful you will be in collecting your accounts. In fact, a good credit application can improve your chances of recovery before and after litigation. But what makes a credit application good? And are those elements present in your company's application? Get one out and let's see. Does Your Credit Application ... Clearly identify your customer? Before you extend credit, be sure you know who - or what - you're dealing with. Is the customer an individual, a proprietorship, a partnership, or a corporation? It's important to clearly establish who's liable for the obligation. Include credit terms that make provisions for attorney's fees, late charges, and interest at the highest allowable rate by law? Without such provisions in writing, you may not be able to recover them in the event of litigation Establish in specific terms when payment is due? For example, net (30) thirty days or COD. Leave no questions as to when payment is due. Force the debtor to defend any lawsuits on your home court? With this provision, your collection cases will be heard by a local judge or jury, in the locale where your company does business, saving you travel time and money. Include a personal guarantee? Many new and unknown companies without proven credit records will attempt to avoid personal liability by establishing a corporate account. This is OK, but it's critical that you also get a personal guarantee. Contact us for a free sample credit application

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