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10 Tactics and Advantages Debtors Have When You File Suit for Debt Recovery

It is well-known that litigation costs and business failures have been rising. Today, bankruptcies are at an all-time high, but even more startling is the increase in businesses that simply lock their doors and walk away. Adding to the problem are companies that were operating in the black, but now show too much red ink. The results of this is an increase in companies that are paying their bills slower, asking for extended payment plans, paying their preferred or secured vendors first, then picking and choosing who to pay and who not to pay. Statistics show that the average credit ratings of companies are declining and their “will to pay” is keeping pace. Adding to their burden is an aggressive move by the IRS and state authorities through increased audits resulting in (not anticipated) tax due with tax liens placed upon their business. Adding to the credit grantor’s misery is the fact that debtors are more educated today about who to pay, when to pay and who not to pay at all. This trend can be tracked to the source, which is the public media, social, advice from their attorneys or peer-based experiences. Too often we see debtor companies invite and use litigation as a means to an end. Debtor companies know that if litigation action is taken against them, they have a number of options and tactics they can use to their advantage.

What are those advantages?

1. Time

2. Money

3. Poor credit rating

4. Lack of a good credit risk management procedures

5. Sympathetic court system

6. Counter suits

7. Witnesses and depositions

8. Settlement on the courthouse steps

9. Judgments

10. Default judgments

How Much Bad Debt Do You Really Have?

It seems like a straightforward enough question. Any receivables manager should be able to answer it with a quick glance at a report or two. Unfortunately, the number at the bottom of the page is a lot like the tip of the iceberg. It’s what you don’t yet see that may end up doing the most damage.

Tightening up requirements

Annual credit risk assessments

Inside the Bitcoin Debt Crisis

When the bitcoin bubble bursts, there will be quite a few investors in debt. According to Cointelegraph, about 22% of bitcoin investors used borrowed money to purchase bitcoin. People are even taking out mortgages to buy bitcoin, in addition to using credit cards and equity lines. This means there’s a lot of people accumulating a lot of “bad debt.” Bitcoin is still so new and unregulated that these individuals are taking huge risks to invest, hoping to strike it rich. Many people, including the founder of another popular cryptocurrency dogecoin, are predicting the bitcoin bubble to burst… and soon. So when the value of bitcoin tanks, there will be massive amounts of debt left behind. Some are even drawing parallels to the 2008 housing crisis because people took on huge amounts of debt with the expectation that the housing marketing would boom, only for the bubble to burst. People were left with too much debt and not enough assets to cover it.

What is bad debt?

How much debt is too much?

Can I invest in bitcoin without going into debt?

1. Buy only what you can afford

2. Start with a small share

3. Do your research

4. Buy insured bitcoin

5. Buy low, sell high

6. Stay up-to-date on the market

Resolving A/R Disputes

What can be done to help resolve disputes and invoicing problems before they become collection issues? Sorting out legitimate disputes from those purely designed to avoid payment can be a challenge. By implementing several preemptive practices, you may be able to reduce both. Consistent follow-up with the buyer before the account comes due has long been recognized as a key to heading off problems before they develop into disputes that delay payment. Call the buyer when the goods should have arrived; ask if the shipment was received timely, if the quality is satisfactory, if your invoice is clear and correct. In addition to alerting you to any potential problems, these customer service contacts also serve to remind the buyer of his obligation. He also becomes aware that you are following his account and will take quick action to assure payment. [ Related: From the Desk of Attorney Don Leviton: Proven Strategies for Improving Collection Rates ] Requiring written purchase orders should also become part of your sales policy if your goal is to reduce problems and disputes. Having the details of the purchase in written form goes a long way toward helping to determine whether or not a customer has a legitimate complaint. These documents provide protection for both buyer and seller, and eliminate the error, misunderstanding and loss of confidence that often results when orders and their details are left to verbal agreement. Items such as price, quantity, terms of sale and warranties should all be clearly agreed upon and stated in the purchase order. Once received it is important that the purchase order be reviewed for errors or ambiguities. If these are resolved early on, problems can be avoided later on ensuring the cash flow process is uninterrupted. The following are specific account management steps that can be taken to reduce disputes: ●Set a policy that requires all disputes to be resolved within two business days. ●Work with billing to ensure that the invoices that are mailed are correct, effectively eliminating much of the dispute issue. ●Email the customer to find out if there are any discrepancies – before the due date of the invoice. ●Fax a copy of the statement to the payables person at those accounts where disputes occur frequently. Do this prior to the due date of the invoice. ●Call customers 10 days after large invoices have been mailed to identify potential disputes and get them resolved before the due date. ●Exchange invoice information with comments on all major accounts. ●Mail quarterly statements to help resolve small disputes and keep them from growing into a large amount. This information 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.

Proven Strategies for Improving Collection Rates

Taking a few safeguards can improve your success when collecting on your receivables. I have found that basic strategies are usually the most effective. In order to increase the effectiveness of your collection process, you should: 1. Have a written credit policyand follow it on a consistent basis. 2. Know your customer. Is your customer an individual, a sole proprietor, a partnership, or a corporation? Businesses often use fictitious names and acronyms for their businesses. It is important to clearly establish who is responsible for the obligation. 3. Plan for collection problems before they happen. Your credit agreement or application should provide for provisions for attorney’s fees, interest at the highest rate allowable and late charges for a delinquent account. In order to recover attorney’s fees, most courts require a written agreement signed by an authorized representative of the customer. 4. Use personal guarantees, especially when you are dealing with new companies that do not have a credit history and will try to escape personal liability by creating a corporate account. 5. Have a detailed credit application. All of the above, and more, should be contained in a comprehensive credit application 6. Obtain a security agreementthat can be used to create a lien on the equipment or merchandise sold to protect you in the event of a default or bankruptcy filing. 7. Keep all correspondence between you and your customer. Letters or emails received from your customers may admit the liability in question. Phone conversations should be followed up with a letter or email confirming the conversation. A letter or email received from your customer that you do not agree with should be responded to delineating the reasons for the dispute. Most importantly, once an account is in dispute and the customer has defaulted you must act quickly. The age of the account will be one of the main factors that will impact your ability to be able to collect. Statistics show that 90 days after the account is past due, you have less than a 75% chance of collecting it. The percentage quickly shrinks every passing month and after 12 months, there is only a 25% possibility of collection. [ Related: 8 Things to Expect From Your Collection Agency ] It is essential that accounts are closely monitored during the first three months of aging and an evaluation should be made without delay whether an account should be sent out for collection. Almost always, debtors will ask and creditors will afford a debtor a final opportunity to remit, hopeful that payment will be received the next day, or next week, or next month. This tactic is used by all debtors. Your most effective tool is acting promptly. The strategies discussed above will assist you in managing your accounts receivable and provide for increased collection success if and when the account is sent out for collection. 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.