Tips to successful collections: Foresight For the Creditors

As long as people engage in business whether for the sale of goods or the sale of services, there will be collection cases. A large number of debtors who do not pay are not the poor, but rather the "deadbeats" who can afford to pay but choose not to. When creditors come to see me about such cases, I always point out that a judgment against such debtors is only as good as the assets that are collectable. How do creditors learn about debtor's assets?

If you are giving credit to a business have the customer fill out a credit application Form listing credit references including banking institutions. The reason for this that if the customer has to be sued and judgment entered, its bank account being known can be seized by the creditor's attorney. If the customer is a corporation, try to get a personal guarantee by a corporate office. This way, if the corporation goes bankrupt you can proceed against the guarantor. Make sure you photocopy the checks you receive from the customer so that you confirm its banking institution or notice a change down the road in banks.

If you are giving a really large credit line, demand a UCC-1 lien be filed against the business' property and have a search done to see if there are previous liens filed. If business assets are sold as a result of a judgment, the first UCC-1 lien holder has the first rights to the proceeds of sale. 

If you are giving professional services such as Doctor or Dentist or an Accountant, make sure your new patient fills out an information sheet listing the name and address of the patient and spouse with their job addresses and telephone numbers. If the patient is a child, both parents should be listed. This is because spouses are liable for the necessary medical and dental debts of each other and parents for their children. If someone not in those categories says "I'll pay the bill," have them sign a written guarantee as oral guarantees are worthless. You can always tell your patient you need the spouse's work telephone in case of emergencies. The importance of the job information is that a salary can be garnished after a judgment is obtained. Make sure you photocopy checks you receive so you know where they bank.

If you are a painter, house contractor, roofer, etc, you have in addition to the above another right. If the customer does not pay your bill, you have within several months of completion, depending on which state, the right to file a mechanics lien against the premises giving you priority over any mortgage.

What happens if you already have a debtor but you didn't make a copy of that first check. They paid but now will not pay the balance? Relax-every banking transaction is required to be photocopied by Federal Law. Just go to your bank and tell them the date you deposited the check, the amount and who it was from and they will send you a copy for a nominal cost. 

Most of your debtors will pay and you will never have to use this information but for those few who will not, you will be aimed and ready to give your collection attorney the necessary information needed to collect a judgment.