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posted on 2018-03-12 by Don Leviton
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.
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posted on 2018-03-12 by Don Leviton
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.
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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.
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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.
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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.
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