Debt Collection for Businesses
Business owners sometimes encounter difficulties in collecting debts. Whether it’s a company farther up the supply chain, a valued customer, or a tenant, parties that are delinquent on payments can seriously disrupt your daily operations.
If your efforts to collect a debt are unsuccessful, you have a few options:
- Hire a collection agency – Collection agencies can be effective, but there are some risks involved in working with these companies. If a collection agency doesn’t have an “errors and omissions” insurance policy and it employs overly aggressive collection tactics, your debtor could sue the agency for violating fair collection laws, and you might be liable for hiring the agency.
- Write off the debt as a loss – With small debts, it may not be worth your time or effort to continue pursuing payment. Debt-related business losses may be tax-deductible, too.
- Sue the debtor (if you’re a sole proprietor/independent contractor) – You can’t individually sue a debtor if your company is structured as a corporation. But you can pursue this option if you’re a sole proprietor or independent contractor. Suing a debtor may be necessary if the debt is significant, but it can be a timely and costly process.
- Hire a business attorney to collect the debt for you – An experienced business law attorney knows how to pursue the money you are owed without violating state or federal debt collection laws. Often, a request for payment on law firm stationary is motivation enough for debtors to pay promptly. And if they don’t respond, an attorney can advise you on the next course of action.
Lusk Law, LLC, has represented numerous business owners and landlords who needed help collecting debts. If you need help collecting a debt, contact us today for a consultation: 1-443-535-9715.
Bill Payment and Debt Collection
Depending on the type of business you own, you may need several types of contracts that dictate how, when, and in what manner you expect to be paid for your goods or services. Simplifying payment methods – such as accepting PayPal payments or electronic transfers – can reduce delays that often accompany the processing of paper checks. Still, seriously delinquent debts are probably not due to procedural issues.
Contracts should state penalties for late payments (such as fees, or termination of a business-customer relationship). When clear expectations are included in your contract, debtors can’t later claim they were ignorant of their obligations.
Sole proprietors and independent contractors would be wise to either have clients pay up front for goods and services or to at least make a partial payment before work begins. Contractors – especially those in the construction industry – often have difficulty getting clients to pay on time. Sometimes, clients will attempt to avoid payment by saying the work performed was inadequate or inferior. Keeping good records and documenting work throughout a project may be helpful in countering claims of substandard work.
Legal Remedies for Delinquent Debts
When repeated demands for payment elicit no response, suing the debtor may be the only way to recoup the money you are owed. Cases involving less than $5,000 may be filed through Small Claims Court, which is a division of The District Court of Maryland. Cases involving more than $5,000 but less than $30,000 may be filed in the Circuit Court and District Court; cases involving more than $30,000 must be filed in Circuit Court only.
When the court enters a judgment in favor of the plaintiff, the plaintiff may then petition the court for:
- Levy/lien – This is when the defendant’s actual property (such as land, or a vehicle) is sold, and the proceeds from the sale are transferred to repay the debt owed to the plaintiff.
- Writ of garnishment – This court order allows the defendant’s bank to release account funds for the purpose of repaying a debt, but the defendant may ask the court to exempt $6,000, per MD Ann. Code §11-504(b)(5).
- Garnishment of wages – The court may order a portion of the defendant’s regular income to be garnished until the debt is paid in full.
Representing Your Interests
Lusk Law, LLC, knows your time is valuable. If you choose us to handle your debt collection, you can count on us to do everything possible to resolve the matter quickly, without going to court. And if litigation becomes necessary, we will work diligently to get the results you want.
Contact us online, or call us at 1-443-535-9715, to ask about our debt collection services for businesses.
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