Are You Owed Money? When You Should Consider Hiring an Attorney to Help

In a perfect world, every client, tenant, member of the supply chain, or debtor would pay their bills on time. When they don’t, businesses often expend a lot of effort trying to collect on unpaid debts, and the longer a debt is unpaid, the harder it becomes to collect.

You may not need an outside assistance with collection if you run a large company with the resources to pursue delinquent debtors. Most small businesses, however, can’t afford for their bookkeeper or small accounting staff to devote time to collections. If you’re struggling to collect unpaid debts, it may be time to hire an outside help.

Debt Collection Agency or Attorney?

Hiring a debt collector costs money, of course, but that’s a preferable alternative to collecting nothing on the outstanding debt.

Collection agencies usually charge a flat fee on any debt they collect. So, if your debtor owes you $10,000, and the collection agency fee is 30 percent, they will take 30 percent of whatever they are able to collect.

In some situations, you may be better off hiring an attorney. Some debtors are highly motivated to resolve delinquencies when they receive a demand letter on law firm stationery. An attorney can also help you with formal legal proceedings in obtaining a judgment against the debtor. Once a judgment is obtained, the attorney can assist you with seizing the the debtor’s property, or a portion of their income, for the purpose of satisfying a debt.

Collecting Debts from Friends and Family

Unfortunately, generous people sometimes end up in the unenviable situation of pursuing friends and family for unpaid debts. Friends and family who promise to repay personal loans may shirk their obligations, creating a tense situation.

If you’ve tried diplomatic methods of getting someone to repay a personal loan and had no success, you may wish to hire an attorney. The trust in the relationship has already been damaged, and getting legal help won’t make it any worse. If anything, having an attorney pursue the debt may reduce conflict, as you won’t be dealing directly with the person who owes you money.

The Importance of Solid Contracts

Whether lending money to a friend or communicating expectations to a business associate, a good contract is the best way to protect your interests when debts become delinquent.

A contract should state when a payment is considered late, what the immediate penalty is (including late fees and interest), where disputes will be handled and if the prevailing party is entitled to attorneys fees. If you’re willing to assume a risk in lending money to friends or family, they should be more than willing to sign a formal and binding agreement about their obligation to repay you in a timely manner.

Lusk Law, LLC, specializes in helping private individuals and business owners avoid litigation when possible, and we actively represent our clients in court when litigation is necessary. Our experienced attorneys have provided legal counsel and representation to entrepreneurs in Frederick County, Howard County, Montgomery County, Baltimore County, Baltimore City, Carroll County, Washington County, Anne Arundel County, and other counties throughout Maryland. If you need help collecting a debt – or with any other legal issues related to your business – contact our firm to set up your initial appointment.

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