1. If a company goes out of business, can I still collect against it?
Generally, we can collect from any business entity (and business owner if the business is a sole proprietorship or the individual is a general partner), as long as there are assets to pursue.
However, if a business files for bankruptcy, an automatic stay comes into place and prevents most collections efforts for a certain period of time. The automatic stay prohibits:
• Beginning or Collecting Law Suits;
• Collection Calls;
• Foreclosure sales; and
• Garnishment or levies.
This is why it is important to begin the collection process as soon as a payment issue arises.
2. Can I hold the property owner responsible although I was hired by another contractor?
No, unless you are an intended third party beneficiary to the contract between the property owner and the contractor and your rights have vested, or the independent contractor has assigned the right of payment to you.
Otherwise you will have to show that the property owner made some sort of promise of payment to you, and that you reasonably relied on that promise to your detriment (promissory estoppel).
3. How long do I have to pursue a debt?
In Florida, you may have up to 5 years to take action from the date of breach if the contract was in writing, and up to 4 years from the date of breach if the contract was oral. Additionally, when the remedy of specific performance is requested, you may only have 1 year to file a lawsuit from the date of breach. So don’t delay, call MLG today.
4. Should I file a lawsuit if a debtor breaches the terms of our credit agreement?
The answer depends on if you want to maintain a working relationship with the customer. If so, then you may want to do a “soft audit” and pursue an amicable collections procedure. However, if your account receivable has been sitting unpaid for quite some time, then you may want to file suit to protect your rights.
5. If awarded a Judgment through a civil action, what assets can I go after?
You may be entitled to the assets of the business entity when a business dissolves (secured creditors get even more priority.)
You may also be entitled to certain assets of the principals of the business, if the business was a sole proprietorship, partnership, or if the individual was a general partner.
6. How do I determine when an account should be placed for collections?
a. How many accounts do you have where you have left message after message and haven’t received a return call?
If this has happened to you, the debtor is avoiding contact. It’s time to begin the collections process.
b. How many accounts do you have where the debtor promised you payment, but you have only received a partial payment, or worse yet, no payment at all?
These are typical examples of broken promises. Since past behavior is often a predictor of future behavior, it’s highly unlikely that he or she will make good on their promises in the future.
c. How many accounts do you have where the payment you received was returned from your bank for non-sufficient funds?
Checks returned because of non-sufficient funds may present a red flag because the company 1) has an apparent cash flow problem; and 2) may seek to file bankruptcy in the near future.
d. How many accounts do you have where the debtor is now disputing the product or services that they received over 60 days ago?
This is a common tactic used by purchasers to buy time so that they can put off paying for the products or services that they have purchased. If this has happened to you, it’s probably time to begin the collections process, specifically to investigate whether the product or service was actually defective or if it just a delay tactic used by the purchaser.
7. How do you collect from the debtor once a Judgment is obtained?
You may put as lien on the judgment debtor’s business property;
You may seek wage garnishment (with certain limitations);
You may be able to file a lien on the judgment debtor’s property if the service rendered benefited the property;
If the business was operating as a sole proprietorship, partnership, or if the individual was a general partner, or if the corporation or Limited Liability Company was operating in such a way as to warrant piercing the corporate veil to attach the limited member’s assets.