Credit and Collection News : A Division of Elsos





RFP / RFI

Training

Blog


Credit and Collection News now lets you post comments and discuss all the relevant news on our newsletter. Check out what our readers are saying about the Credit and Collection Industry.

Browse by Category:

General


Browse by Month

March 2018
July 2017
June 2017
May 2017
April 2017
March 2017
February 2017
January 2017
December 2016
November 2016
September 2016
June 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
August 2013
December 2012
November 2012
October 2012
October 2011
September 2011
April 2011
October 2010
July 2010
March 2010
December 2009
October 2009
September 2009
July 2009
March 2009
January 2009
May 2008
0


Settling a Lawsuit

posted on 2018-03-12 by Don Leviton

 

So you find yourself in a lawsuit. You sued someone, or you got sued; it really doesn’t matter. You’re spending money or, if you’re involved as an injured party in a suit for damages, you are waiting for the compensation for your injuries. Regardless, you’re stuck in a time-consuming and less-than-pleasant process that may be costing you lots of money, and there is no certainty about the outcome. Maybe you’ll win, maybe you won’t; and, even if you win, you could really lose, given the money you’ve spent, the time you’ve wasted and the opportunities you’ve lost. All in all, not a good situation! Lawsuits cannot always be avoided, but opportunities to resolve them without a trial are always present. Federal and state courts provide vehicles for forcing litigants into mediation, where a reputable third party—a judge or someone skilled in mediating disputes—simply uses his or her skills to help the parties reach common ground. The mediator or settlement judge cannot force a settlement, but he or she can force the parties to engage in the process. Not every case will settle, but the opportunity to settle is always present, so long as the litigants are willing to consider risk, cost and time. Similar opportunities to settle before a suit is filed are also present. [ Related: Proven Strategies for Improving Collection Rates ] After almost 30 years of litigating and settling cases, I find the attorney-client relationship most severely tested when we discuss a possible settlement. “Whose side are you on?” “She’s not getting anything from me until some judge forces me to pay.” “Are you scared about trying my case?” I’ve heard all of these comments, and more, and often in the same conversation that includes questions like: “Why is this costing so much?” “When will this be over?” and “Can’t we get a continuance; I really want to join my family for our vacation?” Your attorney is on your side, but he or she would be a lousy advocate if the issue of settlement was not explored thoroughly. The settlement process provides several advantages. First, a settled case is a case that ends the monthly billing cycle for you. (The corollary, often lost, is the fact that a case that an unsettled case usually generates more fees for your attorney). Second, every case—and I mean every one—has its flaws! Rare is the case that isn’t better settled and resolved now. Finally, even when the settlement process does not result in a settlement, you and your attorney will surely gain insights into the other side’s case and you’ll often get a “free look” at what an experienced decision-maker thinks about yours. Before he went to work for the federal government in 1861, Abraham Lincoln was a very accomplished attorney. He also wrote a little about a variety of subjects, including the art of lawyering. About resolving disputes, he offered the following thoughts: “Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser—in fees, expenses, and waste of time. As a peacemaker, the lawyer has a superior opportunity of being a good man. There will still be business enough.” Interesting, in these words, is the fact that some 150 years ago, people involved with the litigation process were concerned about the same issues: cost, time and energy! There was no professional class of mediators in the 19th century, and court rules did not mandate participation in settlement conferences, but the rationale for resolving disputes without having a judge or jury impose a resolution on the parties was present then, just as it is now. Ah, but what about emotions? Lawsuits are not simply about money; they also involve righting wrongs and vindication. Sure, and attorneys appreciate the emotional aspects of your litigation experience! Not getting “your day in court” can be a very unsatisfactory outcome. In some cases, a trial may be the only satisfactory approach. But, and this is important, that “day in court,” when it occurs, can also result in a very unsatisfactory and costly outcome, and that outcome may occur long after you have processed and resolved the emotional issues. What’s the bottom-line takeaway? There are two: First, always give the notion of settling due consideration. Second, recognize the fact that by raising the prospects for engaging in the settlement process, your attorney has focused on your best interests, and not on his or hers. Information in this article is provided as a matter of information and education only. It is not intended to provide legal advice or counsel. Do not take action in specific cases without full knowledge of the facts, and competent legal advice from your attorney.




When Should You File Suit?

posted on 2018-03-12 by Don Leviton

 

A lawsuit is generally the last option that should be chosen in trying to resolve a dispute. This question of whether to file the lawsuit enters the mind of many people who are upset with a bad product or service, or breach of an agreement. In order to answer this question and make a decision, one must consider the following factors:

Potential Recovery

Calculation of expected recovery, if the lawsuit is won, is based on the best case and worst case scenarios. Expectations may not be realized. Not all damages may be recoverable. In case of breach of contract, the aggrieved party’s emotional distress is not compensated; loss of income, plus time spent, while involved with a claim or suit is not compensated; interest may or may not be recoverable. In most instances interest is only recoverable if provided for in a credit agreement or contract. Your attorney’s fees are probably not recoverable unless provided for in the credit application or contract. The amount of actual recovery in a lawsuit is unpredictable.

Attorney Fees and Expenses

Legal fees may be based on an hourly rate or contingency fee basis. An hourly rate depends on a lawyer’s experience, relationship with a client, desire to have repeat business, or volume of client’s business being given to that lawyer. Lawyers charge for each minute of their time spent on the case. Billable time can include, every telephone call to and from a client or any other party related to the client’s matter; meetings, legal research, writing of letters and briefs, time in court (which may be charged at a higher rate than for the office work), preparing legal documents, travel time or depositions (interrogations of parties and witnesses) are recorded and then billed to clients. Expenses connected with the case may reach such a level that further litigation may become counterproductive. Typical file expenses may include fees paid to the court for filing a suit; the sheriff for serving a party with a complaint and summons; a private process server or private investigator for finding a defendant or ascertaining a party’s criminal or financial background; interpreters for translation of documents or interpreting the testimony of a witness or a party speaking a foreign language; experts for giving professional opinions; copying of documents and photos, cameramen and photographers for videotaping and picture taking; court reporters for their attendance time and preparation of transcripts of the proceedings; and attorneys for transportation and lodging (for out of town meetings). On the other hand, a client does not incur such monthly charges if an attorney agrees to take the case on a contingency fee basis. Contingency fee means that an attorney is participating in the claim recovery, if any, on an agreed percentage. As a rule, such percentage fluctuates between 20% and 50% of the amount of recovery. An attorney may advance costs and expenses of litigation to be repaid upon settlement or adjudication or a claim. However, a client remains ultimately responsible for expenses under any of the above-discussed methods of payment.

Alternative Dispute Resolution (ADR)

There are many organizations and individuals who are willing to serve as a mediator, counselor, or a judge in a private or out-of-court proceeding. Sometimes it is less costly and faster to resolve any dispute through such intermediaries than to litigate in courts. Mediation involves a semi-formal or informal process of introducing evidence by parties. Parties may bring witnesses or documents to support their views and may hire attorneys to represent their interests at the hearings. Arbitration may be accomplished through government or private organizations, such as American Arbitration Association (AAA), JAMS, Endispute, and many others. Former judges or experienced attorneys hear the evidence and make binding decisions. The rules of the AAA or other adjudicating bodies are different and less restrictive than the rules of evidence adhered to by the courts. [ Related: From the Desk of Attorney Don Leviton: Resolving A/R Disputes ]

Collection on Judgment

After a long and victorious litigation, a winning party secures a judgment from an adjudicating tribunal. This piece of paper may or may not materialize into actual funds being transferred to the winner. Collection on a judgment is a separate legal process. Sometimes one may never recover the award if a judgment-debtor declares bankruptcy which would isolate that party from claims of creditors, including the judgment-winner or judgment-creditor; a judgment debtor dissolves its corporation and, adding insult to injury, opens a new company under another name; all assets of a judgment-debtor are under other parties’ names (relatives, friends, corporations, or business associates) and, therefore, that party becomes judgment-proof.

Piercing the Corporate Veil

If a business takes the protection of a corporation, LLC, in some instances the individual owners may be ultimately liable for their corporate debts, if it can be proved that the corporation or LLC is just a shell for the individual owners.This can happen where the owner uses the same checking account for personal and corporate debts, or there is no adherence to corporate formality.Most states require that corporations, LLC etc, follow certain rules such as holding annual meetings, keeping corporate minutes, resolutions, etc.This process of piercing the corporate veil is possible, and must it must be done in the courts. It can be a time consuming and expensive process.

Length of Litigation

Litigation is a slow moving process which may take months and, in most cases, years before reaching the trial stage. After filing a complaint there can be many delays caused by the judicial system and frustrating the parties. There are many reasons for delaying the proceedings, including an attorney that continually asks for continuance of a deposition or trial because of the attorney’s family emergencies or conflict of schedule; a party which has to be deposed or answer interrogatories is out of town; an expert witness is unavailable on the scheduled deposition or trial date; the file was recently transferred to another attorney who had no chance to prepare for trial; the suit was filed in a wrong venue and, must be transferred to another court; service on the defendant was improper and, thus, must be properly repeated again; a judge assigned to handle the case has left for vacation, or is sick, or temporarily transferred to another court, or is still busy with the preceding trials; a new defendant has been added and, consequently, time is needed to conduct written and oral discovery associated with that defendant.

Opposition

An opposing party’s financial, intellectual and legal wherewithal may affect a decision to initiate litigation. The opposing party’s ability to sustain a prolonged judicial process, the quality of their attorneys, and legal defenses may either encourage or stop the filing of suit.

Principle

Often people desire to punish an opposing party or change the law and, therefore, want no recovery. There are political, moral or social causes which prompt such a decision.

Time Consumption

Litigation is time consuming for the participants. A party must appear at depositions and at a trial. The trial may continue for at least a few days or even weeks. Preparation for a deposition and the deposition itself can take one or more business days. Mandatory arbitration, which in some states is part of a court-based judicial system, also will take about a day. Consultations and meetings with attorneys, as well as answering interrogatories (opposing party’s questions) and requests for production of documents, take many hours of business time. Loss of business time is translated into a loss of income.

Stress

Besides court appearances and testifying under oath at depositions, arbitration and trial, each participant is thinking and worrying about the case outcome at all times. Such incessant consumption of energy and emotional involvement may increase the daily stress of a person. Such psychological and mental drain takes a toll over the course of time.

Lawyers

Trust in the attorney’s abilities and rapport with that attorney are essential for cooperation, decision making and communication efforts. Experience in litigation of the matters at issue is important. One may present his own case in any court but the judges usually resent this “pro se” representation because “pro se” litigants are not familiar with the court and evidence admission rules. In small claims courts where the amount of recovery does not exceed a statutory limit set up by the legislature, for example $2,500 or $5,000, a plaintiff may not need an attorney.

Counterclaims

A complaint filed in court may trigger a counterclaim by a defendant against the plaintiff for another act related to the complaint. For example: a complaint by a company for payment for goods sold and delivered may trigger a client’s counterclaim or defense of warranty or defective goods. That is why a review of one’s own vulnerable points and background is needed in order to ascertain the level of risk in that regard. Any past wrongdoing may come to light in the court proceedings.

Loss of Suit

In case a lawsuit is lost, the losing party will still have to pay legal fees to his own legal counsel, unless there was a contingency fee agreement, plus file expenses, and the court costs of the opposing party. If a contract provides for payment of attorney’s fees of the prevailing party, then these fees also must be paid by the losing party. Name, reputation and prestige may also be affected by that legal loss. Disclosure of trade secrets may be forced upon a party by the court.

Administrative Remedies

Besides the court system, there are many other tribunals which may help an aggrieved party. In general, any problem may be addressed to the governmental agency responsible for or regulating that area of conflict. For example: the State’s Office of the Attorney General may help victims of violent crimes, antitrust violations, consumer fraud by businesses and individuals, etc.; a state’s Department of Insurance may be asked to secure payment from insurance companies vexatiously and frivolously delaying payment; and the Department of Labor may impose sanctions on employers in their disputes with employees.

Appeals

A party may appeal the trial court’s judgment to a Court of Appeals which may affirm, or remand the case back to the trial court for further proceedings, or to reverse a judgment. An appeal process may take a years. In case of reversal with remand, a trial can repeated. Costs will be increased proportionally. In case the trial court decision or judgment is affirmed, a losing party may try to appeal to the State or the U.S. Supreme Court but the chances of a commercial case being heard by the Supreme Court are very low. A prevailing party is accumulating interest on the trial court award. That interest is set by a state statute. In Illinois, for example, judgments earn annual interest at nine percent. Knowing all the deficiencies and advantages of the judicial system and practical aspects of the litigation process should help any person or legal entity to make a decision to settle, arbitrate, or adjudicate any claim. Sometimes a letter from an attorney or third party mediator may bring the parties to an amicable resolution of a dispute. It is not justice, but the fair and economic compromise of the parties’ positions that is the goal of such resolution. Information in this article is provided as a matter of information and education only. It is not intended to provide legal advice or counsel. Do not take action in specific cases without full knowledge of the facts, and competent legal advice from your attorney.




The 8 Biggest Debt Collection Myths Busted

posted on 2018-03-12 by Mikaela Parrick

 

Debt collection can be a taboo subject. There’s a lot of misinformation about debt collection floating around the internet, so we’re here to set the record straight. Here are the 8 biggest myths about debt collection busted:

Myth | You can pay the original creditor instead of the debt collector.

Other companies hire debt collection agencies to collect for them, called third party agencies. Or, they sell their debt to a collection agency, meaning the original creditor no longer owns the debt. Either way, the collection agency is contacting you for a reason and you cannot bypass them. The good news is, however, that most collection agencies make it as easy as possible to pay back a debt. Most offer several payment options, like an online payment portal or a payment plan.

Myth | Debt collections won’t impact your credit score if you pay it.

When a debt goes into collections, it has most likely already negatively impacted your credit score. When you refuse to work with a collector, it can cause further damage. It’s best to pay your bills on time and avoid collections altogether, but if you are contacted by a collector, just cooperate and pay or explain your situation. It’s a collector’s job to resolve debt, so they are most likely willing to work with you and figure out some options for how you can pay the debt.

Myth | If you avoid collectors, they’ll go away.

Avoiding collection calls will only make the situation worse and damage your credit score. Plus, collectors can help by giving you options to repay your debt. It’s best to cooperate with collectors and try to explain your situation.

Myth | The Fair Debt Collection Practices Act protects all debtors.

According to Investopedia, the Fair Debt Collection Practices Act (FDCPA) is “a federal law that limits the behavior and actions of third-party debt collectors who are attempting to collect debts on behalf of another person or entity.” In short, the FPCPA protects debtors from abusive, unfair or deceptive debt collectors. However, the FDCPA only protects consumer debtors, not commercial debtors. Although there are currently no federal laws controlling commercial debt collection, most states have statutes which govern commercial debt collection.

Myth | Smaller debts don’t go into collections.

While some agencies don’t bother with smaller amounts, others specialize in collecting smaller amounts of debt because it can add up over time to create good revenue. There’s no way to tell if a debt will go into collections or not. Basically, anything can go into collections and harm your credit score. It’s best to just pay what you owe.

Myth | Debt collectors only care about getting your money.

Debt collectors’ jobs are to resolve debt, not just collect it. They will work with you on payment plans, recommend programs to get out of debt. So, if you’re contacted by a debt collector, see what your options are and what they can do to help.

Myth | Hiring a collection agency is expensive.

Most collection agencies operate on a contingency-fee basis, meaning if they don’t collect, you don’t pay. Others will charge a flat fee. When you hire a collection agency you are hiring experts who can increase their sales by collecting more money for their customers.

Myth | Businesses that use collection agencies lose customers.

If you choose a good collection agency, you won’t lose customers. This would only be the case if the agency uses illegal tactics to collect debt, like threats or harassment.




The Hidden Value of Written-Off Receivables

posted on 2018-03-12 by Dennis Falletti

 

To determine the value of receivables written off to bad debt, you must first evaluate your current litigation policy. More specifically, the receivables that do not meet your litigation threshold. It is these accounts that have basically received a “free pass” from additional collection steps when the collection agency fails to recover. Since they were too small to sue, it is reasonable to say they have never heard from an attorney, nor felt the impending consequences or pressure to pay. Businesses are challenged daily to prioritize their cash flow and make tough decisions, like when do I sue to recover revenue and what balance size is it worth suing? [ Related:When Is Litigation the Answer? ] This “on the job training” prepares them for the collection calls they receive. Most know that if they hold out long enough, and the balance size is marginal most likely the collection agency will go away. They are educated enough to know that due to the balance size, they will never hear from an attorney. A typical balance threshold for suit is $15,000+ based on client surveys. However, due to the rising costs in litigation, bankruptcies, and unsatisfied judgments, many companies are increasing the threshold to even greater than $25,000. This policy creates a “sweet spot.” The “sweet spot” is balances that range from $1,000 to $14,999.99 representing accounts written off as too small to sue.

So what can be done?

The answer is this: Cases that have fallen into the “sweet spot” may have value. The value is determined by credit scoring and asset scrubbing, then placed with our law office contingency collection program. As written earlier, these debtors have never heard from an attorney, so placing them with our law office for collection calls will recover revenue thought lost. The method we use to maximize your return on investment in time and to ensure the revenue return is to score the written off cases. Scoring will enable you to determine those that have money to pay and are still in business. After all, since they are still in business after a year or so, it is obvious they could pay but have decided not to. For years, I have been recommending this action to clients and all have profited by this policy. Statistics show that “sweet spot” recoveries range from 14% to 24% depending on the nature of your portfolio. Every company could benefit from increasing their cash flow. This is a great way to start!




When is litigation the answer?

posted on 2018-03-12 by Dennis Falletti

 

To sue, or not to sue? That is the question. The odds are stacking up against corporate America when it comes to collecting past due accounts.

Is civil litigation worth your time?

Jim Cramer, CNBC host of Mad Money, often states that the cost of civil litigation in the U.S. is 2% of the annual Gross National Product. Many states have reduced a large portion of their courts’ operating budgets. Cities like San Francisco are predicting it could take up to five years to get a civil case to trial. Other California jurisdictions are not so crunched, but due to the backlog, courts are requiring mediation and settlement conferences before trial dates can be set. According to Joseph Hampton, shareholder lawyer in the office of Betts, Patterson & Mines, P.S., “Courts want insureds to win coverage disputes. Courts around the country apply the rule of ‘contra proferentem,’ interpreting any ambiguity in a contract against the person drafting it. Because insurance companies prepare policies, this rule applies.”

What is the result?

The advantage is shifting to the debtor. Often debtors invite and use litigation as a means to an end. They know through their attorney that if litigation is pursued, there are options and tactics they can use to their advantage. [ Related: 10 Tactics and Advantages Debtors Have When You File Suit for Debt Recovery ]

When do I sue?

Before approaching suit, make sure your collection agency or attorney completes a thorough asset investigation and provides you with a complete history of the debtor’s payment trend and nature. The report should include: State and federal tax lien information Pending litigation Bankruptcy information Unsatisfied judgments already in place Other collection actions being taken Secured creditor information Payment trends for the last six quarters Who they are paying and not paying Additionally, review the collection notes on the case checking for dispute information not addressed. Be sure to have them check the court costs in the jurisdiction where suit will be filed. Is the court backlogged? Do they require a company witness in person and for which proceedings? What are the costs associated to file suit, too pursue judgment and the costs too purse enforcement? Is a counter suit possible? Are all contractual details and documents available? Is the company really in business? Having this this information will enable a fact based decision increasing your odds for successful and profitable litigation. Return on investment is the focus point. Losing money on litigation is not an option. [ Related: From the Desk of Don Leviton: Proven Strategies for Improving Collection Rates ]





« previous 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 next »